Is Another Setback in Store for ImClone?

Updated from 7:16 a.m. EST

ImClone Systems (IMCL Quote - Cramer on IMCL - Stock Picks), hammered for months after a rejection by federal regulators set off an insider trading scandal, may be facing another setback for its make-or-break cancer drug, Erbitux.

ImClone shares have lost 85% of their value since Dec. 28, when the Food and Drug Administration rejected the company's application for Erbitux, chiding the biotech for sloppy work that obscured the drug's efficacy. That ruling set off a cascade of damaging disclosures that forced former ImClone CEO Sam Waksal to plead guilty to some charges of insider trading on Oct. 15, and have ensnared lifestyle guru Martha Stewart, a Waksal friend, in the controversy over her sales of ImClone stock.

Now, the European clinical trial of Erbitux that ImClone has counted on may have failed, according to two sources who have been in contact with European doctors participating in the study. The study, conducted by ImClone's German partner, Merck KGaA, is largely complete, save for a final audit of data, and the negative results, albeit preliminary, are not likely to change, these sources say.

Merck strongly denies that its Erbitux trial is running into trouble. "This is definitely not true," says Dr. Bernhard Ehmer, Merck's head of oncology. "The clinical data cutoff for the study is at the end of the year, but an analysis won't be completed until the first quarter of 2003."

ImClone's Trials Erbitux efficacy questioned

As part of its Oct. 24 release of third-quarter results, Merck CEO Bernhard Scheuble reiterated strong support for Erbitux. "With months of negative news swirling around [Erbitux] and our U.S. clinical partner, I want to emphasize that Merck remains fully committed to this drug. Our phase III clinical trial remains on track and data analysis is expected in the first quarter. We plan to file our European application in the second quarter."

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