Investors in ImClone Systems ( IMCL) Wednesday seemed to shrug off the
move by Bristol-Myers Squibb ( BMY) to gain greater control over the experimental cancer drug Erbitux and oust, at least temporarily, ImClone's two top executives. One possible reason: Forcing ImClone's CEO Sam Waksal and COO Harlan Waksal to resign might help ImClone regain a small measure of credibility with Wall Street, but it does little to change the fact that there's a great deal of work to be done before Erbitux is approved, if ever. And to some biotech mavens, the draconian demands made by Bristol-Myers on Tuesday -- implying that the drug giant wears the white hat in this debacle because it was misled by ImClone -- smells a bit disingenuous. Both companies own a piece of the problem and have something to gain from working together. Bristol-Myers conducted its own due diligence on Erbitux before it inked the ImClone deal, so the cancer drug's problems were either ignored or missed entirely. Either way, Bristol-Myers looks just as guilty as its partner, which it's now slamming publicly. Shares of ImClone closed down $1.53, or 9.01%, to $15.45 Wednesday; while Bristol-Myers was off 90 cents, or 2.06%, to $42.80. Bristol-Myers and ImClone executives are not talking publicly, other than what's been released so far. Bristol-Myers wants complete control over efforts to get Erbitux approved by the Food and Drug Administration, and is seeking to rework the economics of its existing $2 billion ImClone partnership. ImClone says it's reviewing the drugmaker's proposals and will respond soon. Let the posturing and negotiations begin. "I think this is just some games both sides are playing right now," says Jason Zhang, biotech analyst at Stephens. "It doesn't really change anything with the drug because, at the very minimum, a new clinical trial is going to be needed." Zhang doesn't see a decision on Erbitux's approval before late 2003 or early 2004. He rates ImClone a neutral, although he sees the possible temporary resignation of the Waksal brothers as a short-term positive because it would assure investors that Erbitux is in more capable hands. Stephens doesn't have a banking relationship with ImClone. competing drugs already undergoing testing. Another hedge fund manager, short ImClone, agrees that Bristol-Myers is certainly culpable in the Erbitux mess, but it still probably holds the upper hand. After all, it's ImClone and its executives, not Bristol-Myers, which is the target of three governmental investigations and countless shareholder lawsuits. "I don't think Sam and Harlan Waksal are going to step down voluntarily. So at some point, ImClone's board is going to have to make a decision," he says. "Is it better for shareholders if we dump Sam and Harlan Waksal and get Erbitux back on track, or do we stick by these guys and step into the void?" A question investors are clearly waiting to be answered.