By Jim Shrine

Senior Staff Writer

ImClone Systems Inc. and Merck KGaA, partners since 1990, agreed to collaborate on a second cancer product in a deal worth more than $90 million.

"This takes away all future financing risks for the company and allows the world to concentrate on how well we do in commercializing C225, which I think will be one of the most important new biological products in the treatment of cancer," said Samuel Waksal, president and CEO of New York-based ImClone.

"It will make ImClone a leader in the field of biological oncology," he told BioWorld Today.

The deal is focused on ImClone's cancer product, C225, a monoclonal antibody that inhibits activity of the epidermal growth factor receptor (EGFr). Phase III studies with the drug will begin in the next few weeks, Waksal said.

ImClone expects to receive $12 million from Darmstadt, Germany-based Merck in a few weeks, and $30 million by the end of 1999, Waksal said. Another $30 million is tied to filing and approval, and will come in the form of equity purchases at a significant premium. The final $30 million is in the form of a credit line for a manufacturing facility to produce C225.

EGF-positive receptors are implicated in more than one-third of all solid tumors, meaning the drug has an enormous market potential, Waksal said. Data released in October from a Phase Ib/IIa trial combining C225 and radiotherapy showed 100 percent tumor regression in 14 of 16 squamous cell head-and-neck cancer patients, and more than 50 percent regression in one patient. Response had not been assessed in the remaining patient.

The C225 collaboration gives Merck exclusive rights to develop and commercialize the product outside North America, except in Japan where the companies will co-develop it. The German company will fund development outside North America, and ImClone will get double-digit royalties on those sales, Waksal said. ImClone controls worldwide manufacturing of C225 and will sell it to Merck.

Deal Expands Longstanding Relationship

Merck and ImClone have been collaborating for eight years on development of the cancer vaccine BEC2, an anti-idiotypic monoclonal antibody that has been tested in malignant melanoma and small-cell lung cancer patients. BEC2 is in Phase III studies in the U.S. and Europe.

The BEC2 deal, potentially worth more than $65 million, was restructured a year ago to include the purchase of $40 million of convertible ImClone stock over five years. Merck agreed to fund worldwide development of BEC2, and in return gained co-marketing rights in North America.

The new deal limits Merck's position in ImClone to 19.9 percent of the company. As of Sept. 30, ImClone had $47.5 million in cash and 24.3 million shares outstanding.

Waksal, in explaining the choice of a partner for C225, said ImClone has "a very strong existing relationship with Merck in the BEC2 area. Merck is trying very hard to get into the oncology field, being very aggressive in that area. Their new CEO, Bernhard Scheuble, is transforming that company into becoming a major European pharmaceutical presence. [Merck's] strong desire to grow an oncology business makes [it] a very strong partner for Europe."

A series of C225 pivotal studies is planned, with the first beginning in the next several weeks, Waksal said. One involves the drug plus radiation therapy versus radiation alone in squamous cell head-and-neck cancers. Another combines C225 and cisplatin against cisplatin alone in metastatic squamous cell cancers. A third combines C225 and chemotherapy agents in patients who failed chemotherapy in squamous cell cancers.

Another trial expands a study in renal cell carcinoma by adding cytokines to the treatment, and another, in pancreatic cancer, will combine C225 with Indianapolis-based Eli Lilly and Co.'s chemotherapy drug, Gemzar. During the next year, studies will begin in squamous cell cancers of the lung and in colorectal cancer, Waksal said.

He said all the studies are designed to support approval filings, with some applications targeted for 2000 and others for 2001.

"Our intention in doing this deal was to keep North American rights for our shareholders," Waksal said. "That was the most critical thing. Every biotech company out there that has given up half or more of the U.S. did it because it had to do that to get the money. Why would one give up the most lucrative pharmaceutical market in the world? If you can do it the other way around, that's where you want to be."

ImClone's stock (NASDAQ:IMCL) closed Tuesday at $9.812, down $0.687. n