By Randall Osborne

West Coast Editor

With a rolling biologics license application already in the works for its lead product, IMC-225, ImClone Systems Inc. entered a potential $2 billion agreement with Bristol-Myers Squibb Co. to help develop and promote the cancer drug.

The first $1 billion comes in the form of development milestones: $200 million at the signing of the deal (which must be cleared under the usual conditions, including the Hart-Scott-Rodino act); $300 million when the BLA for IMC-225 is completed and submitted, ¿which should occur sometime in November,¿ said ImClone¿s president and CEO, Samuel Waksal; and $500 million upon FDA approval of the drug.

At the same time, Bristol-Myers, of Princeton, N.J., also is buying about 14.4 million shares of New York-based ImClone for $70 each, which is about 20 percent of ImClone¿s outstanding shares, adding about another $1 billion to the arrangement ¿ and current stockholders are selling those shares.

ImClone¿s stock (NASDAQ:IMCL) closed Wednesday at $56.60, up $6.59, or 13 percent. Bristol-Myers¿ stock (NYSE:BMY) ended the day at $56, down 49 cents.

¿It¿s a landmark deal for the industry,¿ Waksal told BioWorld Today. ¿This has never, ever been done. We¿re not diluting the company at all.¿

IMC-225, a monoclonal antibody to target and block the epidermal growth factor receptor, has been studied against pancreatic, head and neck, and colon cancers in separate Phase II trials, data from which were disclosed this year. Phase II studies also are under way in non-small-cell lung cancer. (See BioWorld Today, May 15, 2001.)

In Phase III trials, the drug is being tested with chemotherapy and separately with radiotherapy, as a first-line treatment for head and neck cancer. Phase III studies are starting ¿right away¿ in pancreatic, colorectal and ovarian cancers.

¿We don¿t have any costs anymore,¿ Waksal said. ¿All the costs are borne by [Bristol-Myers]. It¿s a huge burden off our burn,¿ he added, declining to estimate the numbers.

ImClone will contribute 50 percent of the costs of Phase IV follow-up trials, he said, but that¿s all.

In June, ImClone began its rolling BLA application for IMC-225, which was granted fast-track status in February for irinotecan-refractory colorectal cancer. A rolling application lets the company submit its BLA in sections, if certain FDA criteria are met.

Waksal called IMC-225 ¿the most important new drug in the history of oncology,¿ and vowed that it would ¿be on the market next year¿ in the colorectal indication. During a conference call Wednesday, Waksal said he was confident the drug will be evaluated at the February meeting of the FDA¿s Oncologic Drugs Advisory Committee.

Bristol-Myers said that teaming up with ImClone is part of its plan to double sales and earnings between 2000 and 2005, but is the move part of a larger plan?

Waksal told investors that, under the terms of the agreement, ¿If [Bristol-Myers] at anytime wants to speak to us, they have to talk to us about purchasing all the equity at once.¿

He declined to speculate further about what might happen, nor has Bristol-Myers tipped its hand. ¿What you can take home is that they said they have a long-term strategic interest in ImClone,¿¿ Waksal said.

Anthony Butler, analyst and co-head of global pharmaceuticals for Lehman Brothers in New York ¿ which advised Bristol-Myers in the deal ¿ said the pharmaceutical company likely does not have a buyout of ImClone in its crosshairs.

¿I think if they had that in mind, they would have done it,¿ Butler said. ¿You wouldn¿t pay that kind of money for 100 percent of the company if all you got was IMC-225. This will allow for the current development of ImClone¿s [anti-vascular endothelial growth factor] antibody. If that comes to fruition, there may be some additional rationale.¿

Butler told BioWorld Today the ¿polypharmacy¿ approach will work well for some large firms in post-genomic times ¿ as in the case of the oncology leader Bristol-Myers.

¿You could increase the potential sales of one or more products by using them in combination,¿ he said. ¿You have the opportunity to continue working on a small molecule, but you probably got the protein approved sooner, because you don¿t have to putz around with the chemistry. This is an example of how that can pan out. It¿s much more than just acquiring a product.¿

IMC-225, though, is the focus of the deal, and Waksal said ImClone has not yet hired a sales force.

¿Now, our commercial hiring in the future [is what] we¿ll be looking at,¿ he said. ¿Meanwhile, what we have the ability to work with is the greatest sales force out there,¿ comprising 240 people.

What¿s more, ImClone gets a 39 percent fee off net sales in the U.S. and Canada, ¿which is unbelievable,¿ Waksal said, noting that Bristol-Myers had forecast sales as high as $1.5 billion in the fifth year. In Japan, costs and profits are split evenly.

¿We manufacture the drug and sell it to [Bristol-Myers] at a small profit,¿ Waksal said.

Butler said part of the money from the deal will help with manufacturing, and ¿potentially excess capacity¿ could give a boost to the anti-VEGF work, putting ImClone on the surer footing it needed before Bristol-Myers cast its vote in what Butler said is the largest product deal ever done between a pharmaceutical firm and a biotechnology company.

Butler said ImClone was ¿in a bit of a conundrum. They had to have a marketing partner. There would have been serious doubts.¿ The commercial aspect of the deal runs through at least 2018.