West Coast Editor

The high-stakes game continues.

Like the smaller player in a lively pre-Valentine’s Day tennis match, ImClone Systems Inc. lobbed the ball back into Bristol-Myers Squibb Co.’s court early Tuesday, responding with a polite “no, thanks” to the pharmaceutical giant’s demand to change the terms of their deal regarding FDA-stalled Erbitux (cetuximab) for colorectal cancer.

Bristol-Myers responded later in the day, saying it was “extremely disappointed” but pledging to continue as a partner for now. No promises were made for later.

New York-based Bristol-Myers said it is “considering our business and legal options with respect to our relationship with ImClone, but will wait until after the FDA meeting [Feb. 26] to determine what further actions we may take.”

Wilson Grabill, director of corporate affairs for Bristol-Myers, wouldn’t specify what those further actions might be.

“We’re sticking to what we said in the statement,” he told BioWorld Today.

Wall Street awaits Bristol-Myers’ ultimate move, which could leave ImClone, also of New York, open to find a new development mate, or allow the biotechnology firm to find its own way.

“I think it’s unlikely that Bristol will pull out,” said Patrick Mooney, analyst with Thomas Weisel Partners LLC in New York. “Shareholders would have a screaming fit. If they believe in the potential of Erbitux, which they do everybody does they’re going to have to work out their differences with ImClone. A lot of what they said was public posturing.”

Bristol-Myers probably can’t get out of the deal “unless ImClone willfully acted to withhold information, and there’s no indication ImClone has done that,” he added.

The restructuring as proposed by Bristol-Myers would have taken clinical and regulatory matters out of ImClone’s hands, altered “senior management” at the firm until Erbitux is approved, expanded Bristol-Myers’ rights to intellectual property related to the drug, and lifted some of the restrictions on Bristol-Myers’ ability to resell ImClone shares. (See BioWorld Today, Feb. 7, 2002.)

But, in a letter to Peter Dolan, chairman and CEO of Bristol-Myers, ImClone said a team of independent directors assembled by the board “concluded that there is no need, nor would it be in the best interests of [ImClone stockholders], to renegotiate the terms.”

The letter added that ImClone “very much look[s] forward to continuing” under the existing deal, “and especially the continued significant involvement” of Bristol-Myers in ongoing talks with the FDA, which six weeks ago turned down the rolling biologics license application for Erbitux. (See BioWorld Today, Jan. 3, 2002.)

Dolan’s reply declares that ImClone’s view of what has happened with Erbitux so far is fundamentally unlike Bristol-Myers’.

“As you know, since the FDA’s issuance of [the refusal-to-file letter], Bristol-Myers has provided significant resources and support to ImClone in an effort to respond to the FDA’s concerns,” Dolan wrote. “These resources and support have been provided to ImClone even though we have no contractual obligation to provide them. Indeed, our agreement expressly provides that the initial [BLA] filing is ImClone’s responsibility.”

When disclosed, the ImClone/Bristol-Myers deal was hailed as a “landmark,” because of its potential $2 billion worth. Since the FDA rejection, ImClone’s stock has tumbled and the House Energy and Commerce Committee and the Oversight Investigations Subcommittee have asked for records and interviews related to clinical research on Erbitux. (See BioWorld Today, Jan. 28, 2002.)

The changes asked by Bristol-Myers probably would have meant CEO Sam Waksal and his brother, Chief Operating Officer Harlan Waksal, stepping aside, analysts said.

ImClone has touted the treatment as a potential billion-dollar drug, and the FDA knows it, Mooney said.

“How do you get to be a billion-dollar drug? Off-label use,” he said. “The FDA can’t stand it when you promote off-label use. There’ve been other people who have promoted it, and the FDA slams the door.”

Mooney, who is confident about ImClone as a company and Erbitux as a drug, said approval would probably require at least one Phase III trial with survival as the endpoint.

ImClone, however, “did one questionable Phase II trial,” an objective response study with a surrogate endpoint of tumor shrinkage, he said.

“It’s highly unlikely [Erbitux] will be approved without an adequate and well-controlled clinical trial,” Mooney said. “That’s something ImClone doesn’t have now in any indication, much less colorectal cancer.”

ImClone’s stock (NASDAQ:IMCL) closed Tuesday at $17.65, up 82 cents. Bristol-Myers’ shares (NSYE:BMY) ended at $45.38, up 21 cents.