As Eli Lilly celebrates winning the battle to acquire ImClone Systems in the biggest deal in its 132-year history, some analysts are saying that the $6.5 billion, $70 per share all-cash acquisition smacks of desperation as the Indianapolis-based firm looks to stave off the effects of forthcoming patent expirations.

Investors do not seem overly pleased and while the stock recovered a little yesterday, Lilly shares have been battered amid concerns about the price being paid. However, the firm’s chief financial officer Derica Rice says the firm is “very comfortable at this stage with our ability to finance this transaction," despite the present credit crisis.

Nevertheless, there are concerns that the US patent expiries looming on Lilly’s two biggest blockbusters – the antipsychotic Zyprexa ((olanzapine) and the antidepressant Cymbalta (duloxetine) in 2011 and 2014, respectively – will not be compensated for by what ImClone can offer with its oncology agent Erbitux (cetuximab). The latter is currently indicated for metastatic colorectal cancer and the treatment of squamous cell carcinoma of the head and neck.

Sanford Bernstein analyst Tim Anderson is a bit concerned and issued a research note saying that Lilly should be able to increase earnings per share by around 10% between now and 2010. However he wrote that “until investors gain more comfort about the company's growth prospects beyond this period, however, its earnings performance in the intermediate-term may not matter much".

However other analysts have been quick to praise the actions of Lilly chief executive John Lechleiter in his bid to create a "true oncology powerhouse" and expand the firm’s biotechnology efforts.

Indeed some observers believe that the winner in all this could turn out to be Bristol-Myers Squibb, whose $62 per share bid to buy the 83% stake in ImClone it does not already own had been dismissed by the latter’s chairman Carl Icahn as “absurd”. B-MS is set to collect around $1 billion in cash from the Lilly purchase, while continuing to collect massive royalty cheques from Erbitux, which it co-promotes in North America.

What will be particularly interesting now could be the battle over the rights to ImClone’s pipeline, especially the Erbitux follow-up IMC-11F8. B-MS chief executive James Cornelius said his firm holds “long-term marketing rights” on the compound, a claim ImClone disputed, so a court battle could soon be in the offing.

$62 million Zypreca settlement with states
Meantime, Lilly has agreed to pay $62 million to resolve investigations involving 32 US states and the District of Columbia related to its marketing activities for Zyprexa.

Robert Armitage, Lilly's general counsel, said "we believe all of the parties involved share an interest in putting this dispute behind us," though the firm denies that it has acted in a fraudulent manner when promoting the drug. However the company added that it will “undertake certain commitments regarding Zyprexa for a period of six years” relating to promotional practices, dissemination of medical information” and “funding of continuing medical education and grants” related to the drug.

Lilly has also agreed to provide the states' attorneys general with information related to compensation made to healthcare professionals who have received more than $100 annually for “promotional speaking or consulting” regarding Zyprexa in the USA.