ImClone's Future Gets Brighter

Moving its Erbitux drug into the lung cancer market should translate into a big jump in revenue and profitability for ImClone Systems(IMCL - Cramer's Take - Stockpickr).

Just how big? Answering that question is a challenge at this point, but I did throw some very rough numbers into a spreadsheet and came up with this:

Assuming that Erbitux can generate $1.2 billion in U.S. lung cancer sales by the end of 2012, that feeds another $480 million into ImClone's top line. Valuing that at six times sales equates to another $2.9 billion in ImClone market value.

Discounting that $2.9 billion in future market cap by 20% gets you just over $1 billion in present value, or about $12 to $13 a share in additional market cap, based on ImClone's 86 million shares outstanding.

These calculations are all just back-of-the-envelope, and I'm sure that some of my assumptions are off base. I don't have a detailed ImClone financial model at my disposal either, so scoping out exactly how resurgent Erbitux revenue translates to earnings per share is out of my reach.

My goal, simply, is to give a general feel for how lucrative a survival-boosting lung cancer drug could be for ImClone.

Let's quickly recap: German drug maker Merck KGaA announced earlier Tuesday that its so-called Flex study of Erbitux plus chemotherapy increased overall survival vs. chemotherapy alone in patients with advanced non-small cell lung cancer. These patients had not previously received any chemotherapy treatment. No more details from the study were provided.