West Coast Editor

Faced with leveling sales of the oncology drug Erbitux, along with a recent setback in efforts to expand the label into lung cancer, plus competition from Amgen Inc.'s Vectibix and Genentech Inc.'s Avastin - not to mention an ongoing patent lawsuit - ImClone Systems Inc. and U.S. collaborator Bristol-Myers Squibb Co. are expanding their Erbitux collaboration by "several hundred million dollars."

Details are sketchy, but the companies said in a press release after the market closed Friday that all development costs will be paid by New York-based BMS up to a certain threshold, and anything beyond would be shared by both firms, according to a predetermined (but not disclosed) ratio.

The news signals a patching of the once-troubled partnership. For more about the amended deal, analysts were looking ahead to the conference call today on second-quarter earnings.

BMS already has made it known that Erbitux sales dropped 6 percent in the second quarter to $162 million - well under the Wall Street consensus of $176 million and even below Houston-based Stanford Group's more conservative estimate of $167 million.

Last week, though, Thousand Oaks, Calif.-based Amgen noted that sales of drugs targeting the epidermal growth factor (including Erbitux and Vectibix) declined 5 percent quarter to quarter. Thomson First Call analysts forecast ImClone earnings of 31 cents per share, with revenue of $146 million for the quarter.

Han Li, analyst with Stanford Group, wrote in a research report Monday that he expects more detail on the co-development threshold during the earnings call, and "we will also focus on any contractual changes to the copromotion of Erbitux which may improve ImClone's merger and acquisition perspectives."

Erbitux (cetuximab), cleared by the FDA for colorectal and head and neck cancer, will under the new terms be the subject of more money to finance Phase II and Phase III trials that could widen the label not only into lung cancer but tumors of the brain, breast, bladder, gastric system, pancreas and prostate.

Earlier this month, BMS and ImClone, also of New York, said Erbitux, tested with a taxane plus carboplatin in non-small-cell lung cancer, missed the primary endpoint of progression-free survival in the 600-patient, nonpivotal Phase III study, but hit the secondary endpoints, including response rate. Full data are expected to be unveiled at the International Study of Lung Cancer meeting next month in South Korea. (See BioWorld Today, July 13, 2007.)

Erbitux has been waging war in the marketplace with Vectibix (panitumumab), approved for colorectal cancer, and with South San Francisco-based Genentech's VEGF inhibitor Avastin (bevacizumab), cleared for colorectal and NSCLC.

Last year's global sales of Erbitux - partnered with Merck KGaA, of Darmstadt, Germany, in Europe - totaled $1.1 billion. Hopes had been high for the NSCLC trial with Erbitux, since another EGFR drug, Tarceva (erlotinib), from Melville, N.Y.-based OSI Pharmaceuticals Inc. and Genentech, has shown some utility against the difficult cancer.

A trial is slated to begin in September in the patent claim made by Repligen Corp. and the Massachusetts Institute of Technology, which allege that ImClone used their patented technology without a license. Last month, the U.S. District Court in Massachusetts issued sanctions against ImClone, based on Repligen's charge that the firm tried to intimidate a witness in the case.

ImClone and BMS entered the record Erbitux deal in September 2001, and the value was set at almost $2.2 billion. Things began to go bad the following year, when the FDA spurned the rolling biologics license application for the drug. An insider-trading scandal with Erbitux at the center landed former ImClone CEO Samuel Waksal in jail, along with his friend, the home-decorating maven Martha Stewart. (See BioWorld Today, Sept. 20, 2001, and June 13, 2002.)

Under the terms, BMS bought 14.39 million shares of ImClone at $70 each, agreeing to provide as much as $900 million in development milestone payments. The $900 million has been paid, but ImClone will recognize the intake over the 17-year period of the deal. Of the amount, $550 million has been recognized so far, including $29.2 million in the first quarter of this year. BMS pays all costs of distribution in the U.S., and the two companies split costs in Japan.

ImClone's stock (NASDAQ:IMCL) closed Monday at $33.45, down 11 cents. BMS' shares (NYSE:BMS) ended the day at $31.46, up 71 cents.