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The decimation of Clovis Oncology (CLVS) - Get Clovis Oncology, Inc. Report on Monday reminds investors -- and not in a good way -- of Imclone Systems minus Martha Stewart, the 2001 insider trading scandal that grabbed headlines for a while. As with Imclone, the Clovis mess could have a long-lasting, negative effect on the entire biotech sector.

For those too young to remember, ImClone, in 2001, was cruising towards FDA approval of its targeted colon cancer drug Erbitux. Investors loved the stock. But the feel-good story ended abruptly in late December of that year when the U.S. Food and Drug Administration rejected Erbitux, citing ImClone's failure to provide adequate documentation of the drug's response rate in a pivotal clinical trial. Exacerbating a bad situation, ImClone had known about the FDA's concerns with Erbitux but kept the news secret from the public.

Investors were incredibly angry about ImClone's Erbitux deception. They punished the stock and CEO Sam Waksal, who went from being a Wall Street biotech hero to a total zero (and eventually a federal prison inmate, to boot.) Worse yet, the ImClone debacle was a stain on the credibility of the entire sector.

Clovis' sharp fall on Monday is an uncomfortable ImClone deja vu.

The company disclosed on Monday that the efficacy of rociletinib, as measured by tumor shrinkage response rates in lung cancer patients, was actually far lower than previously presented. The FDA, in the middle of reviewing rociletinib, has asked for more clinical data on the drug. An approval decision on rociletinib will likely be delayed well into next year, Clovis admits.

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Like ImClone, Clovis kept the bad news about its lung cancer drug hidden from investors until FDA action compelled the company to make the information public.

Clovis CEO Pat Mahaffy was highly respected, even loved, by investors because he'd made them wealthy when he sold his previous company Pharmion to Celgene (CELG) - Get Celgene Corporation Report . Investors flocked to Clovis, in part, because of the trust and goodwill created by Mahaffy. To Wall Street, Mahaffy was the aggressive and smart biotech executive who was running circles around his slower, stodgier lung cancer competitor, AstraZeneca (AZN) - Get Astrazeneca PLC Sponsored ADR Report . Mahaffy's lung cancer drug was better than AstraZeneca's, or so investors were led to believe.

But like Waksal, Mahaffy is learning that Wall Street credibility is ephemeral when you screw up badly. AstraZeneca's lung cancer drug Tagrisso was approved on Friday. With the new delay, Clovis' rociletinib probably won't reach the market until the middle of next year. The lowered rociletinib response rate suggests the drug is inferior to AstraZeneca's Tagrisso.

The biotech sector might shake off the Clovis blow up if it was a singular event, but it's not. We're in the midst of a presidential election in which biotech and pharmaceutical companies are being vilified for using the high price of drugs to profit off sick people. Valeant Pharmaceuticals (VRX) remains a battleground. Biogen's (BIIB) - Get Biogen Inc. Report base multiple sclerosis drug franchise is a mess, forcing the company to lay off employees. Amicus Therapeutics (FOLD) - Get Amicus Therapeutics, Inc. Report , Zafgen (ZFGN) - Get Zafgen, Inc. Report and even the beloved gene therapy player Bluebird Bio (BLUE) - Get bluebird bio, Inc. Report have all suffered setbacks in recent months.

The last thing the biotech industry needs is another hit to its credibility among Wall Street investors. Clovis isn't helping.

Adam Feuerstein writes regularly for TheStreet. In keeping with company editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.