Shares of ImClone Systems Inc. surged more than 23 percent Wednesday on news the biotech company has settled its public feud with Bristol-Myers Squibb Co. over the handling of a $2 billion deal to co-market a highly touted experimental cancer drug.
ImClone agreed Tuesday to accept less money and revise its profit-sharing agreement with the drug titan, which was also given management of a key committee assigned to shepherd the drug Erbitux through the regulatory process.
ImClone agreed to accept $100 million less than the $800 million the drug titan owed the small New York-based biotechnology company to share Erbitux’s future profits once approved by the Food and Drug Administration.
Bristol, also based in New York, agreed in September to pay $1 billion for a 19.9 percent stake in the company, plus a $200 million signing bonus. It also promised another $300 million when the FDA accepted the drug’s application and an additional $500 million once the agency approved it to treat colorectal cancer.
Now, Bristol will pay ImClone $140 million once the new agreement is signed and another $60 million on the signing’s year anniversary. Bristol also agreed to pay the $500 million, but in two installments.
ImClone also agreed to give Bristol 61 percent of North American Erbitux sales.
“We are confident that we will now be able to move forward in our partnership with ImClone Systems for the development of Erbitux,” said Peter R. Dolan, chairman and chief executive officer, Bristol-Myers Squibb.
A month ago, Bristol was threatening to walk away from the deal after ImClone was rocked by waves of bad news over its handling of the FDA application. On Dec. 28 the FDA deemed ImClone’s application incomplete and refused to even review it.
The rejection was followed by at least two dozen class action suits filed by angry shareholders that accused ImClone of misleading them about the drug’s chances for FDA approval this year.
Three separate federal investigations were launched and ImClone’s stock price tumbled from as high as $73.83 a share in December to as low as $14.87 a share last month.
The companies announced the agreement after the close of the markets Tuesday. In trading Wednesday on the Nasdaq Stock Market, ImClone stock rose $4.81 to close at $28.63. Bristol shares rose $1.79, or 3.7 percent, to close at $50.22 on the New York Stock Exchange.
Bristol has already written off $735 million of its ImClone investment.
On Feb. 26, things began turning around for the estranged couple after they met with the FDA. After the meeting, ImClone said the FDA may allow it to use data from a European trial conducted by another marketing partner to support efforts to gain approval of its star drug. Investors had feared the FDA would require ImClone to begin a new trial for the drug that has received high praise from a number of doctors and patient advocates.
Erbitux has been widely hailed as a major advance in the fight against cancer because it targets diseased cells while leaving healthy ones alone. Doctors believe it could be useful in fighting several types of cancer.
Erbitux was given a priority review at the FDA, a fast track reserved for breakthrough therapies.
“To have these issues resolved is great news for both companies and cancer patients,” said Jim McCamant, an analyst with Moors & Cabot. McCamant and other analysts estimate Erbitux could ring up more than $1 billion in annual sales a few years after it’s approved.
“The key now is how quickly it will get approved,” McCamant said.
Analysts said Erbitux’s launch probably would be delayed until 2004 if the European trial data is used. If another trial is required, Erbitux probably would not hit the market until at least 2005.
Part of the revised agreement calls for Bristol senior vice president Andrew Bodnar to oversee a joint ImClone and Bristol team tasked with “implementing a single clinical and regulatory plan for Erbitux,” according to a joint statement.
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