Washington Editor

In an effort to stave off future complications, ImClone Systems Inc. signed a pair of patent licensing deals related to two of its antibody products - the marketed drug Erbitux and a still-investigational product, IMC-11F8 - and now will start paying additional royalties.

In one agreement, the New York company gained rights to the Cabilly patents of Genentech Inc., U.S. Patent Nos. 4,816,567 and 6,331,415. They relate to chimerizing antibodies and the co-expression of immunoglobin chains in the manufacturing process.

At the same time, ImClone acquired rights to the Morrison patent of Centocor Inc., U.S. Patent No. 5,807,715, which relates to the expression of immunoglobins in lymphocytic cells. All those patents cover various aspects of antibody technology. Simultaneously, ImClone gained use rights to epidermal growth factor receptor antibodies in certain treatment regimens through a license to the Hudziak patent of Genentech, U.S. Patent No. 5,770,195.

"The reason we executed these deals is not because we believe we infringe on any of these patents," David Pitts, an ImClone spokesman, told BioWorld Today. "But we felt that the agreed-upon royalty amounts represented an appropriate business expense to eliminate uncertainty and to avoid potential litigation."

Erbitux is an IgG1 monoclonal antibody approved for use in refractory, EGFR-expressing metastatic colorectal cancer, and IMC-11F8 is a fully human, EGFR-targeted antibody in Phase I. Concurrent with executing the patent deals, ImClone reported full-year earnings for the period ended Dec. 31, revealing $260.8 million of Erbitux sales in the U.S. From those sales, booked by Bristol-Myers Squibb Co., ImClone received a 39 percent royalty.

But ImClone owes royalties of its own, calculated on the total North American sales figure recorded by BMS, also of New York.

For Erbitux's use in combination with anti-neoplastic agents, ImClone previously owed royalties on North American sales to Sanofi-Aventis Group and the University of California. Sanofi-Aventis, of Paris, has a patent that allows for the combination of Erbitux and anti-neoplastic agents, while the university has the product's original discovery patent.

After its latest licenses, ImClone now has a total gross royalty obligation of 12.75 percent, divided between Sanofi-Aventis and the University of California, as well as South San Francisco-based Genentech and Centocor Inc., of Malvern, Pa., a subsidiary of Johnson & Johnson. Just how that 12.75 percent is divided is not being disclosed, Pitts said.

That rate is effective from Feb. 24 of last year, shortly after Erbitux received FDA approval, and ImClone receives reimbursements for a portion of those expenses to result in a net royalty expense of 8.25 percent. After the first quarter of next year, the gross expense will decrease to 9.75 percent and the net expense will decrease to 7.25 percent.

For monotherapy use of Erbitux, gross and net royalty expenses will be reduced because certain licenses are not applicable. ImClone said that as a condition of the agreements, it would not publicize certain terms such as enumerated royalty payments.

Royalty expenses from the fourth quarter of last year include adjustments required to bring estimated royalty expenses through the first nine months of the year in line with actual obligations. For sales outside North America related to Erbitux manufactured in the U.S., expenses will be passed through to ImClone's partner Merck KGaA, of Darmstadt, Germany, as a component of cost of goods for commercial product.

ImClone's full-year total revenues reached $388.7 million, compared to $80.8 million a year earlier. Its full-year net income totaled $113.7 million, compared to a $112.5 million net loss last year. The company closed the year with $919.7 million in cash, cash equivalents and available securities.

On Wednesday, its stock (NASDAQ:IMCL) gained $3.24 to close at $40.69.

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