WASHINGTON - The Waksal brothers era at ImClone Systems Inc. is over, following the resignation of Harlan Waksal Monday as chief scientific officer and director.
"We hope ImClone is free of the negativity at this point in time, but how the stock will perform will hinge on both the near-term and long-term future of Erbitux," Cory Kasimov, an analyst with Ryan Beck & Co. in New York, told BioWorld Today. "Investors may perceive it as a positive, that neither of the Waksal brothers is with the company, but then again, it is the Waksal brothers who got Erbitux to the point it is today."
Harlan took over as CEO after his brother, Samuel, was arrested in June 2002 on a series of charges related to insider trading, securities fraud and bank fraud surrounding activities associated with colorectal cancer candidate Erbitux (cetuximab). Harlan stepped down as CEO in April, accepting the position as chief scientific officer. (See BioWorld Today, May 1, 2003.)
At the same time, Robert Goldhammer resigned as chairman and decided against seeking re-election to ImClone's board. On Thursday he resigned as director.
Under his employment contract Harlan, 50, a medical doctor, had 90 days from being demoted as CEO in April to resign with a severance package, if he could cite a good reason. The reason was that his role in the company was diminished. The separation vests Waksal's 666,666 unvested options at a strike price in the $50 range. He also receives a cash payment of $4.1 million, plus dental, health and life insurance coverage.
Meanwhile, Samuel Waksal is expected to begin his seven-year, three-month sentence on Wednesday. He was convicted in June and initially ordered to report to prison July 2, but a dental problem delayed his entry date three weeks, his spokesman told BioWorld Today. (See BioWorld Today, June 11, 2003.)
The company's stock has been on a wild ride since Samuel Waksal told about 800 conference call listeners in late December 2001 that the FDA had rejected the Erbitux rolling biologics license application because it was missing "the train of documentation from the raw data to the conclusions." (See BioWorld Today, Jan. 2, 2002.)
ImClone's stock (NASDAQ:IMCL) closed Monday at $35.16, up 93 cents. In the last year and a half, the stock has traded between the low $60s and about $5.
ImClone temporarily traded under the symbol "IMCLE" after the company failed to file its 2002 annual report and its first-quarter report with the SEC. The Nasdaq National Market on July 10 reverted the symbol to "IMCL" after the company filed its reports.
"If you look at how the market is reacting today, I think right now it may be incorrectly assuming that Harlan's departure has something to do with the prospects of the drug," Kasimov said early Monday, when the stock was dropping slightly. "I don't think that's the cause whatsoever. I think this is more of a follow-up to what was announced several months ago when Harlan was demoted from CEO and the chairman of the board was demoted as well."
Kasimov believes Erbitux will make it to market. "Right now, it is more a question of when in my mind. Personally, I think that given the clear activity of the drug, the relatively benign safety profile, the fact that it's going after a refractory patient population that has failed standard of care, and the current environment at the FDA in getting oncology products targeting unmet medical needs onto the market, I do believe the drug will be approved," he said.
Erbitux is a monoclonal antibody designed to target and block the epidermal growth factor receptor. The receptor is expressed on the surface of certain cancer cells in multiple tumor types.
ImClone's European partner, Merck KGaA, of Darmstadt, Germany, in early July filed an application for Erbitux marketing clearance in Europe. ImClone and partner Bristol-Myers Squibb Co., of New York, previously said they intend to file a second BLA in the U.S. during the second half of this year. (See BioWorld Today, July 8, 2003, and June 3, 2003.)
Merck representatives in June presented data at the American Society of Clinical Oncology meeting in Chicago demonstrating that Erbitux in combination with irinotecan slowed progression of the disease by more than four months, shrinking tumors by 50 percent or more in 22.9 percent of patients.
Fallout From Lawmakers Still Uncertain
When the House Energy and Commerce Committee opened an investigation into ImClone's business practices surrounding the development and failure of Erbitux, several members were publicly appalled that Samuel Waksal had received unprecedented positive press on the candidate well in advance of submitting the BLA.
Furthermore, when the application was rejected, Samuel Waksal did his best to downplay the intensity of the FDA's rejection. The depth of the problems with the BLA didn't begin to surface until the Cancer Letter, a Washington trade publication, reported excerpts from the FDA's correspondence with ImClone.
Members of the House committee, including Chairman Billy Tauzin (R-La.), were irritated that ImClone had "hyped" its stock based on apparent exaggerations about the Erbitux clinical trials. (See BioWorld Today, June 18, 2002.)
Lawmakers maintained that while the Waksals were gaining financially on the hype, FDA reviewers were finding flaws in the BLA but were prohibited by federal law from discussing those problems publicly. The committee questioned whether the rules should be changed.
Alvin Lorman, a partner in the law firm Foley & Lardner in Washington, told BioWorld Today that Congress could change the law by way of legislation, or the FDA likely could change it through the rulemaking process.
"The question is, should the FDA be in a position to publicly contradict false claims about products it's reviewing," Lorman said. "Certainly there are circumstances in which they could probably do so, but one also needs to remember that there are a lot of resources that would need to be devoted to monitor the situation."
He added: "It seems to me that it would be within the agency's authority to say that where a company divulges what otherwise would be trade-secret information about pending applications that the agency would be free to release the underlying documentation or the letter to which it refers. If a company talks about a letter it received from the FDA and describes and characterizes it as opposed to simply saying, We got the letter,' if they characterize the contents of the letter, I think it would be entirely within the FDA's power to say that they would be in a position to release the entire letter."