West Coast Editor

In a move that seemed to surprise few industry observers, Bristol-Myers Squibb Co. said it wants to restructure the potential $2 billion deal with ImClone Systems Inc. regarding the FDA-stalled Erbitux (cetuximab) for colorectal cancer.

ImClone, which found itself at the center of a storm when the FDA refused to accept the rolling biologics application for Erbitux, has promised to “respond in due course” to Bristol-Myers’ proposal.

Both companies issued terse press releases ImClone’s merely two lines and neither could be reached for comment.

The restructuring as put forth by New York-based Bristol-Myers would take clinical and regulatory matters out of ImClone’s hands, change “senior management” at the firm until Erbitux is approved, expand Bristol-Myers’ rights to intellectual property related to the drug and lift some of the restrictions on Bristol-Myers’ ability to resell ImClone shares.

“The initial shot has been fired over the bow by Bristol,” said Brian Rye, analyst with Raymond James & Associates in St. Petersburg, Fla., who predicted ImClone will agree with “some, if not all, of the terms.”

For ImClone to try going ahead on its own would be “very foolish,” and for the company to believe it could garner another pharmaceutical partner is “delusional,” he said.

“I don’t know that another pharmaceutical company would even want to be associated with this situation,” Rye said. “I don’t think ImClone has a whole lot of alternatives at this point.”

The news of Bristol-Myers’ potential takeover of regulatory matters might be good for Erbitux, but it hardly represents a vote of confidence for New York-based ImClone, which has seen its stock plummet and shareholder lawsuits fly as controversy mounts over what the company did wrong with its BLA, and who should have known. Most recently, the House Energy and Commerce Committee and the Oversight Investigations Subcommittee asked for records and interviews related to clinical research on the drug. (See BioWorld Today, Jan. 28, 2002.)

Bristol-Myers, asking for changes in management, probably wants CEO Sam Waksal and his brother, chief operating officer Harlan Waksal, to “remove themselves from the equation for the time being, until the drug is approved,” Rye told BioWorld Today. “They have not explicitly done that. It’s just a logical assumption that people are making. And how many precedents are there for that? I’m not aware of too many.”

Kenneth Kulju, analyst with Credit Suisse First Boston in New York, was traveling and could not be reached, but said in a research note that more clinical trials probably will be required for approval of Erbitux, which will set back resubmission until sometime in early 2003, with commercialization unlikely until 2004.

“Owing to advancing [cancer] programs at AstraZeneca [plc], we also believe that ImClone and Bristol have lost first mover’ advantage in this emerging class of anticancer agents,” Kulju wrote. AstraZeneca, of London, has a variety of compounds in the works for a number of cancers.

The bottom-line numbers don’t look especially favorable for an ImClone negotiation advantage from this point forward. Kulju said in his note that the value of Bristol-Myers’ holdings in ImClone has declined from about $1 billion in mid-December to about $300 million now, and Bristol already paid about $200 million for licensing rights to the Erbitux product line. First Boston’s adjusted sales forecasts for Erbitux are about $270 million in 2004, ramping to about $540 million in 2005.

Rye said ImClone stands to lose “most if not all the $800 million in milestone payments that Bristol owes them.”

Bristol-Myers is not the only disappointed party, he added.

“A lot of cancer patients and their families were very excited [about getting Erbitux on the market sooner],” Rye said. “This is unfortunate and outright sad.”

Is there an upside?

“I would argue, even though the whole sector’s down, it’s a good message,” he said, noting that pharmaceutical companies still are dependent on biotechnology firms, even if the former will be more likely to “do their homework” before entering a deal.

“Bristol is acknowledging they still have confidence in the drug, and they need a blockbuster cancer drug in their portfolio,” Rye said. “The drug is viable. It has demonstrated some very impressive results.”

ImClone’s stock (NASDAQ:IMCL) closed Wednesday at $15.45, down $1.53. Bristol-Myers’ shares (NYSE:BMY) ended the day at $42.80, down 90 cents.