ImClone Jumps, and the Biotech Sector Surges

Updated from 11:41 a.m. EDT

ImClone Systems (IMCLE Quote) got a boost Tuesday morning when the company received a $6 million payment from Germany's Merck KGaA for achieving a manufacturing milestone under the firms' license agreement for the prospective cancer treatment Erbitux.

After receiving the payment, ImClone issued 334,471 common shares to Merck at a 10% premium. In December 1998, Merck KGaA licensed the right to develop Erbitux outside the U.S. and Canada and the co-exclusive right to develop the drug in Japan.

Last month, Merck received approval from the German state regulatory authority in Darmstadt to import Erbitux made at ImClone's facilities in Somerville, N.J.

Shares of ImClone were climbing $2.63, or 13%, to $22.48 in Nasdaq trading. Since the start of the year, ImClone's share price has doubled.

The company is certainly grateful to be making headlines for Erbitux, considering that for much of 2002, ImClone's appearance in the news often centered on a insider-trading scandal that led to the resignation of then-CEO Sam Waksal and also ensnared home and lifestyle expert Martha Stewart.

Just weeks ago, Harlan Waksal, who took over as CEO following his brother's departure from the post, and Chairman Robert Goldhammer quit in connection with a federal tax probe.

Adam Feuerstein, a columnist for TheStreet.com's sister site RealMoney.com, reported recently that sources familiar with Erbitux said the drug's performance in a European clinical trial was more positive than preliminary results had initially indicated. Erbitux's development has created substantial interest among global health care industry observers and investors.

The drug, a potential treatment for colon cancer, was rejected by the Food and Drug Administration in December 2001 after regulators refused to accept ImClone's approval application. ImClone is also seeking European approval for Erbitux through partner Merck KGaA, which has been conducting its own clinical trials.