ImClone shares plunge, FDA delays drug Ok

Shares of ImClone Systems Inc. fell nearly 16 percent on Monday after regulators said they would not accept the biotechnology company's application to sell its eagerly awaited colon cancer drug, Erbitux.

While the company's chief executive, Sam Waksal, told investors he doesn't believe ImClone will need to conduct new trials to get approval, analysts said the likely delay in launching the drug is a blow.

The company had hoped to launch the drug, projected to be a blockbuster, as early as next May. That could be pushed back six months or more, and the drug may not hit the market until the first quarter of 2003, according to Scott Brown of Raymond James & Associates Inc. in a report.

The rejection of ImClone's application by the U.S. Food and Drug Administration comes three months after drugs giant Bristol-Myers Squibb Co. agreed to pay $1 billion for a 20 percent stake in ImClone to gain access to Erbitux.

The FDA's demands of ImClone could cause a slowdown in the flurry of biotech mergers and acquisitions of the past few weeks, as potential acquirers, eager for late stage compounds to fill their pipelines, take harder looks at the paperwork supporting them.

``I think that the FDA's request for more information from ImClone reflects its increasing scrutiny of clinical data,''​ saidJennifer Chao, an analyst at Leerink Swan. ``Companies making biotech acquisitions will have to be that much more diligent in reviewing clinical data before making the acquisition.''​ImClone's shares fell $8.79, or 15.9 percent, to $46.46 on Nasdaq. Bristol-Myers' shares fell 80 cents, or 1.5 percent, to $51 on the New York Stock Exchange.

Erbitux is one of the most promising drugs to emerge from the biotech pipeline, analysts say, and while it may be delayed, few expect it to be rejected. The drug is one of a new class of drugs designed to block a protein found on the surfaces of many types of cancer cells.

``The regulatory delay does not have any effect on the core thesis that Erbitux is a blockbuster drug,''​ said Jason Kantor, an analyst at J.P. Morgan who has a ``buy'' recommendation on ImClone's stock.

Erbitux is designed to be used in combination with a chemotherapy called irinotecan.

An independent radiology group tested patients in ImClone's trial and recorded improvement in their condition. The FDA is dissatisfied, however, with the documentation that should back up these results.

``We didn't understand the importance of making sure we documented the pathway of how the doctors reached their conclusions,''​ said Harlan Waksal, ImClone's chief operating officer. ``We felt the conclusions would be enough. But clearly the documentation and the pathway are equally critical.''​

Waksal said the company has the documentation, the X-rays proving their claims, and won't need to conduct more trials.

``This is the classic example in grade school of getting the right answer but not showing your work,''​ said J.P. Morgan's Kantor.

The company believes it can resubmit its application by the end of March. It is particularly hopeful now that it has Bristol-Myers on board.

''We're working extremely closely with our partners and they are very much involved in the decision making,''​ said Waksal. ``We are going to be relying very heavily on them for their experience and for the fact that they have a large number of people who can be put on this project to get it turned around quickly.''​

Still, analysts came out in force to cut their price targets and, in some cases, their ratings.

UBS Warburg's Geoffrey Harris cut his 12-month price target to $62 from $75, but maintained a ``buy'' recommendation on the stock. Eric Hecht at Merrill Lynch cut his recommendation to ''long-term buy'' from ``strong buy.''

Analyst Douglas Lind at Morgan Stanley cut his price target to $60 from $76 but maintained an ``outperform'' rating on the stock. Scott Brown at Raymond James reduced his rating to ''underperform'' from 'market perform.'

J.P. Morgan's Kantor lowered his price target to $70 from $82