New Start For Embattled ImClone

Clinical trial results for an experimental cancer drug, set to be released Sunday, are expected to a mark new beginning for ImClone Systems Inc. after 18 months spent mired in scandal.

Doctors have long heralded Erbitux despite ImClone's problems, and analysts have said it has blockbuster potential. Published reports Friday said physicians who have seen the clinical data, to be presented at a medical conference in Chicago, claim it confirms Erbitux's effectiveness in treating colon cancer.

Merck KGaA, ImClone's German partner, has already said it plans to use the trial results to file for approval to sell Erbitux in Europe. It is unclear, however, if the data will be the foundation for a second try at U.S. approval.

Still, ImClone stock has been steadily rising in the weeks leading up to the American Society of Clinical Oncology meeting. On Friday, ImClone stock rose more than 21 percent or $5.04 a share to close at $28.50 on the Nasdaq Stock Market.

However, ImClone stock is still far below the $70 a share range it was trading at in Dec. 2001 before the U.S. Food and Drug Administration rejected ImClone's application for Erbitux — despite indications the drug worked — saying the trial was sloppily conducted.

The rejection led to an insider trading scandal in which ImClone founder and former CEO Sam Waksal pleaded guilty to various charges, including fraud, and threw the stock into a tail spin. Waksal will be sentenced in June; the investigation continues and has ensnared Waksal friend and domestic doyenne Martha Stewart.

Merck KGaA, which isn't related to New Jersey-based Merck & Co., has rights to Erbitux outside North America and shares them with ImClone in Japan. It said it could begin selling Erbitux early next year in the European Union and as soon as this year in Switzerland.

Merck, ImClone, and Bristol-Myers Squibb, which owns 20 percent of ImClone and has rights to co-promote Erbitux, all declined comment ahead of Sunday's meeting.

Whether the FDA will accept Merck's data as a basis for an application will be a matter of negotiation between the agency, ImClone and Bristol-Myers. At the earliest, Erbitux could be launched in the United States in early 2004 — if the FDA accepts Merck's data.

Either way, strong results will validate the drug.

"This is a critical meeting for ImClone," said Cory Kasimov, an analyst with Ryan Beck & Co. "There's been so much manipulation with this drug. (Investor) sentiment can change on Sunday."

Bristol-Myers also has plenty riding on the data. It has already written off more than $1 billion of its up to $2 billion investment in ImClone and is counting on the drug to bolster its spotty pipeline. In recent meetings, Bristol-Myers chairman Peter Dolan has cited Erbitux as a future growth driver.

The drug giant needs a blockbuster badly. It is the subject of three government investigations for having to restate three and a half years worth of sales and earnings because of an inventory glut created by generous sales incentives.

"Everything, every piece of good news, is important to them (Bristol) at this point," said Robert Hazlett, an analyst at SunTrust Robinson Humphrey.

Doctors who have treated patients with Erbitux have long been proponents of the drug and complain ImClone's travails have kept it from the desperately ill.

"I hope the FDA will consider the (Merck) data. Lives are at stake," said Dr. Louis Weiner, chairman of the department of medical oncology at Fox Chase Cancer Center in Philadelphia. "There is a perception of a sleaze factor around the company. But that isn't the drug's fault and it isn't the patients' fault."

Even if Erbitux is eventually approved, its blockbuster potential has been called into question as competition has emerged because of the lag in approval. Genentech Inc. has said its experimental colon cancer drug Avastin extends patient survival and will be releasing specifics at the meeting over the weekend.

Kasimov doesn't believe Erbitux and Avastin will compete with each other and said future testing may show they work well together.

But in May Standard & Poor's downgraded ImClone stock to "sell" from "hold" because of its price, uncertain approval of Erbitux and the threat from Avastin. In a report, analyst Frank DiLorenzo said Avastin could relegate Erbitux as the "odd man out."

He added, "considering the company's (ImClone's) checkered past and the potential emergence of Avastin as a major, targeted anticancer therapy with significant results, we see no reason to speculate on ImClone."