ImClone accused of downplaying FDA concerns over cancer drug

By Paul Elias The Associated Press
Wednesday January 09, 2002

SAN FRANCISCO — Angry shareholders have filed at least four lawsuits this week against ImClone Systems Inc., which allegedly had more trouble with its experimental cancer drug than it previously acknowledged. 

Also, analysts have downgraded their views of the stock of the fledgling drug company, which was hoping to make a big impression Wednesday at a major biotechnology investor conference. 

Instead, ImClone has been doing more damage control, particularly since The Cancer Letter on Friday published passages from a confidential Food and Drug Administration document explaining why the agency declined to review ImClone’s application to market its much-anticipated colon cancer drug Erbitux. 

The industry newsletter said the Dec. 28 FDA letter suggests the agency’s concerns were more extensive than ImClone executives disclosed during a Dec. 31 conference call with analysts. 

Chief executive Samuel Waksal plans to address the issue Wednesday at the 20th Annual J.P. Morgan H&Q Healthcare Conference in San Francisco, where ImClone’s FDA trouble has been a hot topic among the 5,000 analysts, investors and competitors. 

“We believe the company was forthcoming,” said Chief Operating Officer Harlan Waksal, Samuel’s brother. “We made very clear this was a refusal-to-file letter. It’s the most dramatic letter you can get from the agency.” 

The company’s stock plummeted from $55.25 a share on Dec. 28 to close at $36.85 on Tuesday. Shareholders lost $650 million on the first trading day after ImClone revealed the FDA rejection. 

“As analysts we are trained to be skeptical,” said Jason Zhang of Stephens Inc., which downgraded ImClone’s stock on Jan. 2 and again on Tuesday. “But I think in this case we are little bit surprised.” 

J.P. Morgan, among others, also downgraded its stock outlook. 

“We believe the details disclosed in The Cancer Letter article suggest additional deficiencies in ImClone’s biological license application (BLA) beyond those already disclosed by the company in its conference call on Dec. 31,” J.P. Morgan said in a research note. 

The analysts said they came away from ImClone’s Dec. 31 conference call thinking the New York-based company simply had problems with documentation. The Erbitux application was its first with the FDA. 

That problem was supposed to be remedied in part by the experience of Bristol-Myers Squibb Co., which four months ago invested $1 billion for a 20 percent stake in ImClone. The giant drug manufacturer also agreed to pay ImClone another $1 billion in three installments upon the achievement of certain milestones of the Erbitux development and approval process. In exchange, Bristol-Myers gets to share Eribitux revenues with ImClone. 

A Bristol-Myers Squibb spokeswoman did not return a telephone call Tuesday requesting comment. 

Harlan Waksal said ImClone still expects the FDA to approve the cancer drug once the company addresses all the agency’s issues. According to the newsletter, the FDA said ImClone’s key clinical trial was not “adequate and well controlled.” The FDA also said it needed more data. 

“This is a bump in the road and we plan to overcome this,” Harlan Waksal said Tuesday. 

Harlan Waksal declined to say when he expects FDA approval. Before receiving the FDA letter last month, the company had hoped for approval by the middle of this year. 

In the meantime, ImClone will have to defend itself in court. 

The New York law firm of Stull, Stull & Brody sued Monday in federal court in Manhattan alleging ImClone executives “knew, or recklessly disregarded, that its FDA application was preliminary, incomplete and premature, and had little chance of approval, yet represented otherwise to the investing public.” 

At least three other law firms filed class-action shareholder suits Tuesday. 

Harlan Waksal declined to comment on the suits.