Another management shakeup at ImClone Systems Inc. ends with President and CEO Harlan Waksal, brother of former CEO Samuel Waksal, stepping aside in connection with an internal review related to the company's failure to withhold $60 million in taxes on executive stock options.
Harlan Waksal isn't leaving the company that he and his brother founded. Instead, he'll stay on as chief scientific officer with responsibility for research, clinical, regulatory, quality assurance and manufacturing. Meanwhile, Samuel Waksal, who pleaded guilty to bank fraud, securities fraud and other related charges, is expected to be sentenced in New York June 3.
Two days before Samuel Waksal will learn his fate, Merck KGaA, ImClone's European partner in the development of the cancer drug Erbitux, is scheduled to present data from a pivotal Phase II trial of 330 patients with irinotecan-refractory colorectal cancer at the American Society of Clinical Oncology in Chicago. (See BioWorld Today, Nov. 4, 2002, and March 31, 2003.)
"Certainly, this [scandal] has nothing to do with Erbitux itself, but people aren't investing solely in the drug when they buy ImClone stock - they are investing in the entire company," said Brian Rye, analyst with Raymond James & Associates Inc. in Nashville, Tenn. "But this sort of thing just seems to pop up every once in a while with ImClone. For whatever reason, they seem to have some problems from a reporting standpoint. They've been unable, at this point, to file the 10-K on time, and as part of their internal investigation, they have uncovered tax liabilities going back to 1995."
ImClone's stock (NASDAQ:IMCLE) closed Wednesday at $18.28, down 35 cents. ImClone delayed filing its 2002 Form 10-K because of its inability to finalize its audited financial statements, leading Nasdaq to change ImClone's trading symbol from "IMCL" to "IMCLE."
The company has been inching up from a low point of $5 about a year ago, when Samuel Waksal and home decorating executive Martha Stewart were making headlines for allegedly selling stock just days before the FDA said it wouldn't accept the Erbitux rolling biologics license application. (See BioWorld Today, Jan. 3, 2002; Jan. 27, 2002; and Feb. 28, 2002.)
ImClone investors and colorectal cancer patients are now waiting for June 1, and so far, all signs from Merck's headquarters in Darmstadt, Germany, indicate that the data are good. The drug is partnered in the U.S. with Bristol-Myers Squibb Co., of New York.
"If the data from the Merck study is exceedingly good, the folks at ImClone and Bristol-Myers may feel that they don't need to provide anymore [to the FDA] than the Merck study itself," Rye said. "Then you will see them try and file later this summer. If the data are encouraging, but maybe not a slam-dunk, then we think they might wait until some additional data becomes available later this fall."
Based on ImClone's press release, it's difficult to say who will be in charge when those decisions are made.
Now that the company has gone through two CEOs in less than a year (Samuel Waksal resigned last May before he was arrested), ImClone named David Lynch acting CEO. Lynch is the company's senior vice president, finance and chief financial officer, and also has taken on the responsibilities of chief administrative officer. He's now in charge of finance, control and compliance, human resources, communications and information technology, sales and marketing and the legal and business development departments.
Meanwhile, Robert Goldhammer resigned as chairman and decided not to seek re-election to the board, but will serve out his term as a director.
ImClone issued a statement saying, "The company's current difficulties led the independent members of the board of directors to conclude that a change in leadership was appropriate. The company has commenced a search for a permanent chief executive officer. ImClone Systems will continue to benefit from Harlan Waksal's scientific leadership in his new role as chief scientific officer."
After receiving the refuse-to-file letter from the FDA in late December 2001, ImClone went back to work and has since submitted two protocols to the FDA for randomized Phase III trials for second-line metastatic colorectal cancer. The company also has a Phase II single-arm study with data expected later this year.
Rye said ImClone might be able to pull together an application that works for the FDA.
"My concern is that they don't have an infinite amount of time," Rye said. "In fact, it's a fairly competitive space because there are other companies out there working on drugs that target the same specific receptor, called the EGFR."
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.
AstraZeneca plc is awaiting approval of its EGFR, Iressa, for non-small-cell lung cancer; Abgenix Inc. and partner Amgen Inc. are studying ABX-EGF, a humanized monoclonal antibody in monotherapy and combination therapy trials in non-small-cell lung, colorectal, kidney and prostate cancer; and OSI Pharmaceuticals Inc., Genentech Inc. and F. Hoffmann-La Roche Ltd. are studying Tarceva, a small-molecule inhibitor, in lung and pancreatic cancer.
Rye said his second concern is that ImClone is a development stage company that financially needs Erbitux approval. The company will receive an 8 percent to 9 percent royalty on European sales from Merck.
In a press release dated March 31, ImClone said it had enough cash to operate through March 2004. The company received a $60 million payment marking the one-year anniversary of its amended agreement with Bristol-Myers Squibb. (See BioWorld Today, March 7, 2003.)