Washington Editor

ImClone Systems Inc.'s stock fell 18.9 percent Wednesday even though the firm turned a profit on Erbitux sales and said it intends to request FDA approval of the drug in head and neck cancer.

ImClone's stock (NASDAQ:IMCL) fell $15.29 to close at $65.44.

Jim Reddoch, an analyst with Friedman, Billings, Ramsey & Co. in Arlington, Va., released a research note downgrading New York-based ImClone, saying near-term expectations for Erbitux are priced into the stock, and pushing out the supplemental biologics license application in head and neck cancer is "a negative in a catalyst-driven market."

Erbitux (cetuximab) is approved in combination with irinotecan to treat patients with epidermal growth factor receptor (EGFR)-expressing metastatic colorectal cancer who are refractory to irinotecan-based chemotherapy and for use as a single agent in the treatment of patients with EGFR-expressing metastatic colorectal cancer who are intolerant to irinotecan-based chemotherapy. The product won FDA approval in February. (See BioWorld Today, Feb. 17, 2004.)

Partnered with Bristol-Myers Squibb Co., of New York, in the U.S., and Merck KGaA, of Darmstadt, Germany, in Europe, Erbitux is a genetically engineered version of a mouse antibody that contains both human and mouse components.

In its first full quarter on the market, Erbitux sales were $71.4 million, which translated into royalties of $28 million for ImClone. Erbitux sales were largely in line with recently revised Street expectations, and well ahead of Friedman, Billings, Ramsey's estimate of about $55 million, Reddoch's note said. ImClone also received about $700,000 in royalties from Merck. (First-quarter Erbitux sales were $17.5 million, of which ImClone received 39 percent, or $6.8 million, from BMS.)

In recent weeks the Street's expectation for Erbitux sales had crept up to $75 million, Reddoch said. "Like Genentech's Avastin [a first-line therapy for colorectal cancer], there was probably some pent-up demand in the Erbitux sales number," the note said. "We believe ImClone is unlikely to quantify pent-up demand, the extent of second-line vs. third-line use, or monotherapy vs. combination use."

As of June 30, ImClone had about $995 million in cash and cash equivalents. Total revenues for the second quarter ended June 30, were $71.5 million compared with $17.9 million for the second quarter of 2003 and $109.6 million in the first quarter of 2004, ImClone reported.

Operating expenses for the second quarter of 2004 were $44.1 million, compared with $51.7 million in the second quarter of 2003, and net income for the second quarter of 2004 was $24.3 million, with basic earnings per share of 31 cents and fully diluted earnings per share of 29 cents. Those numbers compare with a net loss of $34.8 million in the second quarter of 2003, or 47 cents per share.

Regarding Erbitux, ImClone and BMS said they established a plan with the FDA for filing a supplemental BLA to seek approval of Erbitux as a single agent and in combination with radiation in squamous-cell carcinoma of the head and neck.

The partners expect to submit an sBLA in the second quarter of 2005 and will request priority review at that time.

The sBLA may include a randomized, international Phase III trial (IMCL-9815) conducted by ImClone and Merck presented at the American Society of Clinical Oncology meeting in June that examined the impact of combining Erbitux with radiation on locoregional control and overall survival in 424 patients with locally advanced head and neck cancer.

Another possible inclusion is a multicenter Phase II trial (EMR-016) conducted by Merck and presented at the ASCO meeting that evaluated the response rate of Erbitux as a single agent in 103 patients with advanced recurrent and/or metastatic cancers not suitable for further local therapy and who have failed platinum-based chemotherapy.

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