After ASCO, Whither ImClone?
Adam Feuerstein
06/02/08 - 07:52 AM EDT
CHICAGO -- Where does ImClone Systems-IMCL stock price go from here?
That's the most pressing question on many biotech investors' minds as Monday trading looms after a very busy weekend of new Erbitux clinical data at the American Society of Clinical Oncology (ASCO) annual meeting.
Let's dive directly into all things ImClone. Like I did with my ASCO ImClone preview, I've put together my own Q&A below:
ImClone's Stock Price: Up or Down?
Wow, you're not wasting any time putting me on the spot, are you? Alright, I say ImClone shares are headed lower, but not by much, at least in the short term. [The stock closed Friday at $43.58.]
Down? Erbitux is the new player in lung cancer. That's huge for ImClone. Why is the stock going to be down?
If I were writing an ImClone headline for the ASCO conference this year, it would be this: KRAS negative (or uncertainty) trumps FLEX positivity.
Look, the FLEX data were positive and yes, there is money to be made for Erbitux in lung cancer (as I'll detail later) but coming out of this ASCO weekend, investors are worried more about the KRAS gene situation and how it may cut sales of Erbitux in colon cancer.
This whole FLEX business is confusing, can you explain it to me in terms I can understand?
Sure, figure it like this. Colon or lung cancer patients with a normal KRAS gene are eligible for Erbitux treatment; patients with a mutated KRAS gene won't get Erbitux. The split in colon cancer -- where it will matter most in the short term -- is basically 60% normal KRAS, 40% mutated KRAS.
So, you're telling me that for 40% of colon cancer patients Erbitux is now off limits?
Yes, and that's going to take a bite out of ImClone's existing colon cancer sales. CEO John Johnson acknowledged that fact last night during the company's investor meeting. I've also heard that Bristol-Myers Squibb-BMY, ImClone's marketing partner, is making cautious statements as well.
Wait a sec, it's not like all doctors are testing for KRAS now and the Food and Drug Administration hasn't even mandated the gene test yet. It's ridiculous to think that ImClone is going to lose 40% of its colon cancer revenue overnight. Investors are totally over-reacting.
True, to a point. The effect that KRAS status plays on response to Erbitux is not new, but the message was really hammered home at ASCO this year. It was probably the biggest headline coming out of the meeting. Moreover, patients with mutated KRAS might be harmed by Erbitux therapy. The evidence is far from conclusive on that point, but the question was raised repeatedly.
Let me tell you, insurance companies are watching and they're going to be all over KRAS testing. Think about it, if an insurance company can use a $500 or even a $1,000 gene test to potentially save $50,000 or more in Erbitux therapy, they're going to do it, and fast.
You told me that 60% of colon cancer patients have a normal KRAS gene, so why can't ImClone gain more market share for Erbitux in these patients to outpace any lost sales from KRAS mutant patients?
ImClone can, and probably will, boost market share in patients who respond better to Erbitux. These patients might also stay on Erbitux longer, too -- a good thing. Unfortunately, I think Erbitux sales will go down before they go up, which is what many investors are focused on right now.
Can ImClone make a big dent in the first-line colon cancer market? Right now, they only have about 4% market share, but the data from the Crystal study shows conclusively that Erbitux is a great drug for first-line colon cancer patients with normal KRAS. First-line therapy is where the really big money can be made in cancer, right?
ImClone may pick up some first-line colon cancer patients, but I don't think doctors are going to be convinced in overwhelming numbers to switch from Genentech's-DNA Avastin, which dominates this market right now. The Erbitux data are not as good as Avastin's.
Another possible concern for ImClone is the re-emergence of Amgen's-AMGN colon cancer drug Vectibix. To date, Vectibix hasn't been a factor, but it's an EGFR inhibitor like Erbitux and works better in KRAS normal patients.
All the dynamics around KRAS and ImClone's colon cancer business are confusing. How can I figure out how it will play out?
You can't, and to be honest, most analysts and institutional investors haven't figured it out either. The entire situation is in flux. Uncertainty is not ImClone's friend, which is why the stock is going to have trouble making significant gains until there is clarity with KRAS and colon cancer.
Let's talk about something happier, like the FLEX data and Erbitux's blockbuster opportunity in lung cancer. Surely, this is where ImClone eats Genentech's lunch, right?
The lung cancer doctors I spoke with this weekend were unanimous in their opinion that the FDA will approve Erbitux as a lung cancer drug based on the strength of the FLEX study data.
Avastin, however, is not in any danger of losing to Erbitux, at least not right away. After the FLEX data were presented to the ASCO crowd Sunday, Harvard Medical School lung cancer expert Dr. Thomas Lynch got up on the podium and said Erbitux should be used only in lung cancer patients who are ineligible for Avastin.
As the official ASCO discussant of the FLEX data Sunday, Lynch's conclusions will carry a lot of weight with doctors.
Before ASCO, you said Erbitux could be a $500 million drug in lung cancer, perhaps even more. Do you still feel that way?
I do, with the caveat that ImClone will have to use lung cancer sales to offset some lost revenue from colon cancer. I wasn't thinking about that before ASCO.
In your FLEX story Saturday, you said the statistics around the study were weak. How will that effect how doctors treat lung cancer patients?
If you don't mind me quoting myself, I said , "A simple way to think about this would be to compare the FLEX survival benefit statistics to a grade of C-minus or D -- still passing but just barely."
I'll stand by that comment after seeing the actual FLEX data presentation Sunday afternoon. ImClone got lucky with FLEX because a few patients going the other way could have made this a negative trial.
Even Harvard's Lynch, the discussant of the FLEX trial, called the hazard ratio of the study (a statistical measure of the study's robustness) "marginal." He also said that the cost of Erbitux therapy is not worth the five weeks of overall survival benefit in lung cancer. That was an interesting comment to make from the ASCO podium, although he ultimately said that the drug should be used in Avastin-ineligible patients, so he sort of contradicted himself.
I've seen quotes in other media stories from ImClone chief medical officer Eric Rowinsky saying that Avastin is only used in one of five lung cancer patients and that Erbitux could be used in the other four patients. Doesn't that make Erbitux better than Avastin in lung cancer?
Rowinsky told me the same thing. He's a smart guy, but he's an ImClone guy, so understand he's giving you the company spin. Based on my conversations with lung cancer doctors this weekend, Erbitux will be used primarily in patients with squamous cell lung cancer, which accounts for about 25% of patients.
In the longer term, Erbitux might be able to beat Avastin head-on for some patients, but the data need to be more convincing. And don't forget, doctors are also getting more comfortable with Avastin in lung cancer, too. It's not like Genentech's market share is stagnant or decreasing either.
Alright, so you think ImClone's stock is heading lower, how disappointing after all that build-up.
I wouldn't be too upset. ImClone faces some short-term challenges but the lung cancer opportunity is exciting. Let's face it, Erbitux succeeded where many other drugs have failed.
I really think that ImClone's stock price is going to be range-bound for awhile. The bulls and bears each got something out of this ASCO weekend. The stock will be down, it will be up, but it's probably going to trade in a relativity narrow range for a while.
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