ImClone rejects partner's demands
Firm, Bristol-Meyer spar over control of cancer drug
By Angela Zimm , Bloomberg News, 2/13/2002
NEW YORK - ImClone Systems Inc. rejected partner Bristol-Myers Squibb Co.'s demands to
remove top executives and hand over control of their stalled cancer drug, Erbitux.
Bristol-Myers is considering legal and business options and will decide after a meeting with
regulators Feb. 26, chief executive Peter Dolan told ImClone in a letter. Earlier, Bristol-Myers, the
largest maker of cancer drugs, threatened to walk away from their partnership if ImClone rejected
its terms.
The partners are fighting over potential profits from Erbitux and which should lead the effort to get
the drug approved by the Food and Drug Administration. The agency, which refused to consider
Erbitux in December, will outline at the Feb. 26 meeting what steps ImClone must take to get the
drug accepted for review.
''The FDA meeting may clarify a lot of things, such as the cost and the time it will require to go
ahead with the drug,'' said Jordan Schreiber, manager of the Merrill Lynch Healthcare fund, which
owns ImClone shares. ''It may also show how much money each company has lost or stands to
lose.''
ImClone shares have dropped 70 percent since Dec. 28, when the FDA refused the Erbitux
application. Bristol-Myers, which agreed last year to pay up to $2 billion for a stake in ImClone
and a share in rights to Erbitux, last week presented demands for restructuring the agreement to
ImClone chairman Robert Goldhammer. The terms include a bigger share of profit from Erbitux and
canceling $800 million in payments to the biotechnology company.
ImClone sees no need to renegotiate their agreement, Goldhammer said in a letter to Dolan
following a meeting of a committee of ImClone directors Monday.
''Bristol-Myers's demands to change the terms were so onerous that a committee of ImClone's
board couldn't in good conscience accept those terms as fiduciaries,'' said Kris Jenner, a fund
manager at T. Rowe Price, which owns shares of Bristol-Myers and ImClone. ''It was a set of
demands that couldn't be accepted by people with any common sense.''
Goldhammer's letter invited Dolan to meet with ImClone's senior management ''to explore ways in
which the company ... can work most effectively to obtain FDA approval'' of Erbitux. That
suggested to some analysts the door may still be open for negotiations.
''I think there's some middle ground,'' said Frank Borriello, an analyst for the BB Biotech fund,
ImClone's third-largest shareholder. ''Bristol-Myers really can't walk away from its investment. That
would be a big blow to Bristol-Myers to do that.''
ImClone had previously expected Erbitux's approval in mid- 2002. The FDA will probably require
additional studies of Erbitux, and that may delay approval until at least 2003, some investors and
analysts have said.
The FDA hasn't released details on its reasons for not considering ImClone's Erbitux application.
The Cancer Letter, a Washington oncology newsletter, reported that the FDA had concerns that
some patients didn't meet criteria for participating in the study and that the company didn't provide
enough information on Erbitux's side effects.
The House Energy and Commerce Committee started a probe last month to find out whether
ImClone hid flaws in company research from investors and cancer patients. The company is also
under investigation by the Securities and Exchange Commission and the Justice Department, and
faces numerous shareholder lawsuits.
Bristol-Myers told ImClone in its letter that it would continue to collect clinical data and information
for the Feb. 26 FDA meeting and would also advise ImClone on ''the best approach to take with
the FDA.''
''The question is, how hard-nosed is Bristol Myers going to be?'' Schreiber said. ''There's a good
chance they'll come back with a velvet fist. I think there will be some exchange on whether they're
willing to talk further, but they'd be very hard-nosed in discussions.''
The FDA delay has reduced the chance Erbitux will be first on the market among a new class of
cancer drugs, analysts said. That may reduce its commercial prospects against competing
experimental drugs such as AstraZeneca PLC's Iressa, and Genentech Inc.'s and OSI
Pharmaceuticals Inc.'s Tarceva.
Robert Mayer, head of colon cancer research at the Dana-Farber Cancer Center in Boston and an
investigator in an Erbitux study, said he believes the drug works and is frustrated with the
companies' financial wrangling.
''Instead of pulling a group of us together and rolling up our sleeves and saying, `Let's find out how
to do this' and do it, there are business issues that are being resolved first,'' Mayer said. ''We all
need to move ahead.'' |
