German drugmaker

Merck KGaA

said Thursday it remains confident it will submit an approval application in Europe for the experimental cancer drug Erbitux in the first half of 2003.

In a statement, Merck said the guidance is based on an ongoing internal analysis of its pivotal clinical trial of Erbitux in 330 patients with advanced colon cancer. A final analysis of the study by an outside independent group of experts will be completed in March 2003.

Merck spokeswoman Phyllis Carter says data from the study will not be made public until the next annual meeting of the American Society of Clinical Oncology, which kicks off on May 31, 2003.

Merck licenses Erbitux from

ImClone Systems

(IMCL)

, which is also seeking to get Erbitux approved in the U.S., a process that has been delayed since last December.

ImClone will receive royalty payments from Merck based on European sales of the drug if and when it's approved there. But neither Merck nor ImClone is saying whether data from Merck's European study will help ImClone refile its own Erbitux application with the Food and Drug Administration by early next year.

"We're pleased that Merck remains optimistic about meeting the European regulatory requirements for filing an Erbitux marketing application in the first half of 2003, and we look forward to supporting them in those efforts," said ImClone spokesman Andrew Merrill, declining to speak about ImClone's own plans for the drug.

The 330-patient study conducted by Merck tests Erbitux, by itself, against a combination of Erbitux and the chemotherapy drug irinotecan. In October,

TheStreet.com

reported that this study

failed, based on sources familiar with the study's initial results. These sources, in contact with European doctors involved in the study, said there was no statistically significant difference in response rates between the two arms of the study.

Merck's Carter said she had no specific results from the study, but that Merck is leaving open all of its options regarding an Erbitux filing. Simply put, that means Merck may seek approval of Erbitux either as a stand-alone colon cancer treatment or in combination with chemotherapy, depending on the final data from its study.

ImClone can't be as flexible. ImClone has committed itself to seeking initial U.S. approval for Erbitux as a combination therapy. In order for the biotech company to refile its delayed Erbitux application quickly, the Merck study must show a clear advantage in patients receiving a combination of Erbitux and irinotecan, compared with patients taking Erbitux alone.

"My guess is that in Merck's Erbitux study, the monotherapy arm comes out as good as the combination arm, but in Merck's mind, that won't be viewed as a negative because it will file Erbitux as a monotherapy," says Stephens biotech analyst Jason Zhang. He rates ImClone underweight and is not changing his rating because he doesn't believe the Merck data will help ImClone refile its Erbitux application in early 2003. Zhang's firm doesn't have a banking relationship with ImClone.

As reported by

TheStreet

, ImClone is already readying a

backup plan to refile Erbitux as a stand-alone therapy. The company, along with partner

Bristol-Myers Squibb

(BMY) - Get Report

, is conducting a 250-patient study in the U.S. that tests Erbitux as a monotherapy in advanced colon cancer patients. Results from this study should be ready by the third quarter of 2003. If positive, ImClone could refile Erbitux to the FDA by the end of 2003 or early in 2004.

ImClone shares were up 87 cents, or 7.7%, to $12.16 in recent trading.