Revisiting Erbitux's European Data

Sources familiar with Erbitux, the cancer drug being developed by ImClone Systems (IMCLE - commentary - Cramer's Take) and German drugmaker Merck KGaA , say the drug's performance in a European clinical trial is more positive than preliminary results had initially indicated.

Erbitux's development and subsequent launch has roused enormous anticipation among global health care industry observers and investors. The drug, a potential treatment for colon cancer, was rejected by the U.S. Food and Drug Administration in December 2001 after regulators refused to accept ImClone's approval application.

While suffering a setback here, ImClone is also seeking European approval for Erbitux through partner Merck KGaA, which has been conducting its own clinical trials. Last October, Merck officials denied a story by TheStreet.com that quoted sources familiar with the European trial who said the preliminary results were not impressive. These sources have now changed their opinions, based on knowledge of the final study results. The Merck data on Erbitux, which they had previously characterized as negative, now appear to be positive.

Merck is expected to release the results of the European clinical trial at the American Society of Clinical Oncology annual meeting in June, and maintains that Erbitux could be available in Europe next year.

Given the high costs -- but also the potential payoff of developing a significant new drug -- ImClone's push to salvage a victory for its cancer drug despite high-profile setbacks is not surprising nor unprecedented. Like Novartis (NVS - commentary - Cramer's Take), which won approval in 2001 for Gleevec, and AstraZeneca (AZN - commentary - Cramer's Take), which announced FDA approval for its Iressa on Monday, ImClone is seeking a new way of fighting cancer. Erbitux is designed to switch off mechanisms within the body that fuel the uncontrolled growth of tumors without causing the toxic side effects of current chemotherapy drugs. These targeted cancer drugs, if approved for multiple forms of cancer, have the potential to yield billions of dollars in sales.

Much of Merck and ImClone's potential financial bonanza from Erbitux may depend on the results of the European trial.

The Merck study, in 330 colon cancer patients, has two separate arms. Half of the patients received Erbitux alone, and the other half was given a combination of Erbitux and chemotherapy. So far, Merck has said that the completed analysis of the study was "positive," but it has not revealed how the two trial groups performed relative to each other. This is important information because ImClone intends to use the Erbitux data gathered by partner Merck in its European trial to get the drug refiled with the FDA.

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Adam Feuerstein writes regularly for RealMoney.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send your feedback.