ImClone bid sparks biotech rally

By Ransdell Pierson - Analysis

NEW YORK (Reuters) - Bristol Myers Squibb's (BMY.N) bid for long-time cancer-drug partner ImClone Systems IMCL.O on Thursday sparked a biotech rally, but it might be premature to assume a wave of other biotech deals will soon follow.

The American Stock Exchange Biotech Index .BTK rose 4.1 percent on news of Bristol's $4.5 billion (2.26 billion pounds) offer for ImClone, amid a sharp downturn for the broad stock market. The index has risen 14 percent in the past year, compared with a 14 percent decline for the Dow Jones industrial average.

Thursday's winners included other U.S. biotechs that have partnerships with larger drugmakers, including Amylin Pharmaceuticals Inc (AMLN.O), which co-markets widely used diabetes treatment Byetta with Eli Lilly (LLY.N). It soared 15 percent to $31.55.

OSI Pharmaceuticals (OSIP.O), whose Tarceva pill for lung and pancreatic cancer is sold in partnership with Genentech Inc DNA.N> and Roche Holding AG (ROG.VX), rose 5.3 percent to a new 52-week high of $52.63.

"Today's rally is more of a knee-jerk reaction," said Rodman & Renshaw analyst Mike King, with the Bristol bid suggesting to investors that other biotech companies might soon be scooped up by partners or unrelated suitors.

Roche last week offered to pay almost $44 billion in cash for all outstanding shares of Genentech, its U.S. partner, furthering the impression an upsurge of deal making may be underway.

King said Roche, which already owns a majority stake in Genentech, wants its remaining shares because a collaboration between the two drugmakers on a number of lucrative medicines is set to end in 2014.

Bristol said it wants to acquire ImClone -- with which it now splits Erbitux sales -- to bolster company revenues ahead of looming generic competition for Bristol's blockbuster Plavix blood clot preventer.