The worst could be yet to come, but ImClone Systems Inc. last week felt the initial sting of a court decision favoring an Israeli firm, Yeda Research and Development Co., that claimed sole ownership of a patent covering the use of monoclonal antibodies in combination with neoplastic agents as cancer therapy.

In a word, Erbitux.

Partnered with Bristol-Myers Squibb Co. and approved for colorectal cancer, as well as head and neck tumors, scandal-plagued Erbitux (cetuximab) is the subject of a patent that ImClone licenses from Sanofi-Aventis Group. But, according to the court's decision, three Yeda scientists are the sole inventors.

ImClone immediately made known its plan to appeal - and sued Yeda back. Almost as quickly, Amgen Inc. licensed the disputed patent from Yeda to protect panitumumab, Amgen's up-and-coming competitor for Erbitux, due for approval in colorectal cancer this month. Recently brand named Vectibix, the monoclonal antibody panitumumab, like Erbitux, is an epidermal growth factor receptor antagonist to be used with chemotherapy and therefore also falls under the patent.

Downplaying the court decision, ImClone provided a partial peek at its arguments to come. The company remarked in a prepared statement that Yeda's scientists "long ago abandoned any rights they may have had in the invention by failing to file their own patent application" and said officials will "consider [ImClone's] marketing and intellectual property position in conjunction with the appeals process to determine the long-term impact, if any, on the company's operations."

Nicholas Groombridge with Weil, Gotshal & Manges, lead attorney for Yeda, shrugged off the appeal.

"We haven't had a chance to study it in detail, but at first blush it appears to be an attempt to revisit the issues," he told BioWorld Financial Watch. "Our preference would be to find an amicable resolution," rather than continue with more costly court action, he added.

ImClone hardly needs more expenses. About a month ago, the firm gave up plans for a merger, partnership or outright sale and chose to go it alone. No bids worth taking came in, and the decision to stay independent put more of a dent in the company's stock (13 percent) than the Erbitux court ruling.

None of the parties involved with Erbitux wants the product off the market. Sales could hit $1 billion this year, and ImClone gets a 39 percent royalty from partner BMS in the U.S. and 9.5 percent from Merck KGaA overseas.

But ImClone, if appeals fail, could be hit with a license fee plus back royalties and future royalties paid to Yeda (licensing arm of the Weizmann Institute of Science in Israel) - it also would lose important protection for flagship Erbitux, and the Yeda patents would "cease to be a weapon in ImClone's arsenal," noted Groombridge. "It's not so much that they're going to get hit with some catastrophic demand for royalties," he told BioWorld Financial Watch.

U.S. District Judge Naomi Buchwald's decision minced no words. At the end of 140 pages, she called the evidence "clear and convincing" that several Weizmann scientists are the sole inventors of the patent.

If ImClone didn't need any more bad news, neither did BMS. Canadian drug-maker Apotex Inc. flooded the market with a generic version of Plavix (clopidogrel), the blood thinner partnered with Sanofi, before BMS could get a court order stopping the sales less than a month after Apotex launched the product. BMS' CEO Peter Dolan was shown the door in the snafu, which could trim the firm's bottom line by as much as $600 million.

David Kies, chairman of ImClone, may face a fate similar to Dolan's. ImClone's shareholders put billionaire Carl Icahn and his nominees on the board, and Icahn promptly wrote a sharply worded "Dear David" letter to Kies, asking him to step down and raising several sore issues.

"When you offered me a directorship at ImClone in August, we discussed, and I thought you indicated, that you would not continue to be [chairman]," Icahn wrote in the letter, which became part of an SEC filing. "I also told you that it would be a mistake to give the interim CEO [Joseph Fischer] a long-term contract, given that he has little or no expertise in biotech companies. I asked that you at least allow the new board to make this decision. Nevertheless, without warning, ImClone entered into a multimillion dollar contract with the interim CEO."

As a director at ImClone, Icahn asked Kies again, "for the good of ImClone and its stockholders," to step down, given the "sorry record of the company under your watch." ImClone, Icahn charged, "has been without effective leadership for almost three years."

A disservice was done not only to shareholders but to cancer patients "by ImClone's apparent passivity in pushing to start appropriate trials in first-line colon cancer and other indications," Icahn said. "Rumors abound about employee dissatisfaction and probable defections. Your regime has failed the test."

Icahn wrote that he believed Kies bypassed "a number of opportunities" to settle the Yeda patent lawsuit.

"Now the suit has been lost," the letter concluded. "The time has come for you to peacefully pass the baton to a successor who will be able to bring strong leadership back to ImClone. If you fail to do so, you will have thrown down the gauntlet and we will have to react accordingly."

Kies sought the high road. Also in SEC paperwork, Kies called for "the productive discussion of the many business matters facing the company," and welcomed Icahn's opinions. Decisions, Kies said, "are best made by the full, elected board, ideally in a face-to-face meeting, and not through a needlessly antagonistic and deliberately public debate." To keep fighting in the open, Kies wrote, could "[harm] the reputation of the company, undermine employee morale and reduce shareholder value."

It might be too late to avoid that.

As ImClone's battles continue internally, the external fight over the Erbitux patent seems likely to last a while. Groombridge seems to agree with Icahn, at least about the way Yeda's claim should have been approached.

"Had we been on the other side, we would have taken it quite seriously," he said.

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