Is Another Setback in Store for ImClone?

Updated from 7:16 a.m. EST

ImClone Systems (IMCL Quote), 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. ...