Shares of

ImClone Systems

(IMCL)

sank more than 17% this morning after a cancer newsletter said the company is having more serious problems with its experimental cancer drug, Erbitux, than previously disclosed.

The Cancer Letter

, a Washington, D.C.-based newsletter, claims to have obtained a leaked copy of the "refuse to file," or RTF, letter sent by the Food and Drug Administration to ImClone late last month. The letter details the concerns and problems regulators have with the approval application for Erbitux.

Based on the negative disclosures in

The Cancer Letter

, JP Morgan downgraded ImClone Monday to market perform from buy. The firm now believes that ImClone will not be able to refile its Erbitux application in the first half of the year, as the company predicts. Instead, the application will be delayed until late in the year due to the need for additional clinical information.

Shares of ImClone are off $7.79, or 17.9%, to $35.70 per share in recent trading.

On its Dec. 31 conference call, ImClone executives said that FDA regulators sent the RTF letter because the Erbitux application was missing certain "train of documentation" information needed by regulators to accept the filing. ImClone said it would be able to answer the FDA questions by the end of the first quarter, leading, hopefully, to an approval of Erbitux in the fall.

But

The Cancer Letter

says it has a copy of the nine-page RTF letter, and the problems are more serious, involving the structure of the Erbitux clinical trials.

TheStreet.com

has obtained a copy of the Jan. 4 issue of

The Cancer Letter

, which details the contents of the RTF letter.

The RTF letter states that the pivotal clinical trial for Eributex was not "adequate and well controlled," according to

The Cancer Letter

. Every patient in the trial was given a combination of Erbitux and irinotecan, also known as CPT-11, an existing chemotherapy drug. But in its RTF letter, the FDA concludes that the trial was not designed to "demonstrate the contribution of CPT-11 to the regimen," according to

The Cancer Letter

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. The RTF letter also suggests that new clinical trials would be required to provide more robust data proving the efficacy of Erbitux and its suggested dosing, according to

The Cancer Letter

.

Furthermore, the FDA, in its RTF letter, is concerned about protocol violations in the clinical trial, specifically the fact that ImClone only reported on the deaths of three patients who died within a month of their last Erbitux treatment. The FDA found 21 patients who died within a month of their last Erbitux treatment, according to

The Cancer Letter

.

It is impossible at this point to verify the veracity of

The Cancer Letter

disclosure. The newsletter's authors contacted ImClone CEO Sam Waksal, who said, "The exchange between the agency and us is right now a confidential exchange, because we are working with the agency to try and put together a response that allows us to move forward with our BLA. We didn't release the letter, so whatever you have, you have from an illegitimate source." Company officials could not be reached for further comment Monday.

But if

The Cancer Letter

does have a correct copy of the RTF letter, it suggests that ImClone executives have not given investors and Wall Street analysts a full picture of the Erbitux problems.

According to

The Cancer Letter

, the RTF letter from the FDA clearly states that new Erbitux studies will be needed, something that Waksal has denied.

The pivotal trial was not "adequate and well controlled," the RTF letter states, according to

The Cancer Letter

. "Because we have determined that the current study is not adequate and well controlled and that the robustness of the overall response rate is less than is stated in the study reports, you will need to conduct additional studies to provide this evidence."

The FDA then goes on to suggest a randomized and controlled clinical trial that would compare Erbitux by itself to a combination of Erbitux and irinotecan in patients who can be documented to have failed prior irinotecan treatments, according to

The Cancer Letter

.

The RTF letter is signed by Karen Weiss, director of the FDA Division of Clinical Trial Design and Analysis, and Kathryn Stein, director of the Division of Monoclonal Antibodies.