ImClone Systems posts 3rd-quarter loss on $50 million patent lawsuit settlement charge
Associated Press
2007-10-26 06:20 AM
ImClone Systems Inc. reported third-quarter results that missed Wall Street expectations Thursday, and Chief Executive John Johnson said though the biotech company has resolved its most serious issues, challenges lie ahead as it aggressively pursues expanded use of cancer drug Erbitux.

ImClone reported Thursday it swung to a third-quarter loss on higher operating costs, including a $50 million (euro34.94 million) charge for a patent lawsuit settlement. The company lost $916,000 (euro640,156) , or 1 cent per share, compared with profit of $57.3 million, or 65 cents per share, during the year-ago period.

Revenue slipped to $147.5 million (euro103.08 million) from $150.7 million in the 2006 quarter.

The results missed estimates of analysts polled by Thomson Financial, who expected profit of 28 cents per share on revenue of $149.7 million (euro104.62 million).

In a conference call, Johnson said ImClone faced serious issues during the past year, including big leadership changes, a competitive threat from a new cancer therapy and a weakened partnership with Bristol-Myers Squibb Co. But, he believes, "ImClone is now in a vastly improved position for future growth."

Still, much is riding on pending approvals and ongoing studies for Erbitux.

"We certainly have a lot of work ahead of us, not only in terms of seeking regulatory approval and continuing to evaluate Erbitux in early-stage colorectal lung and head and neck cancers, but to expand the use of Erbitux in other indications," said Dr. Eric Rowinsky, the company's chief medical officer.

ImClone is expecting Food & Drug Administration decisions in the first half of 2008 on the drug's use as an initial treatment for colon, head and neck cancers.

"However, until these events occur, which will enable reimbursement and allow for sales force promotion, we do not anticipate realizing significant commercial impact," said Michael Bailey, senior vice president of commercial operations.

Sales of Erbitux rose 23 percent to $351.4 million (euro245.58 million) during the quarter. The company partners with Bristol-Myers Squibb to sell the drug in the U.S. and Germany's Merck KGaA internationally and receives royalties on sales. Royalty revenue for Erbitux sales rose 12 percent to $87.9 million (euro61.43 million) but license fees and milestone revenue fell 45 percent to $19.2 million (euro13.42 million).

During the quarter, the company recorded a $50 million (euro34.94 million) charge to settle a patent dispute with the Massachusetts Institute of Technology and Repligen Corp. over Erbitux. The total settlement agreed to in September was $65 million (euro45.43 million).

Including the charge, quarterly expenses rose 72 percent to $160.7 million (euro112.31 million). Research and development costs swelled as the company converted a manufacturing facility.

In July, ImClone amended an agreement with Bristol-Myers for Erbitux, increasing Bristol's commitment to Erbitux development by up to several hundred million dollars, ImClone said. The companies plan to conduct additional midstage and late-stage studies on the drug.

In a note to investors Thursday, Cowen and Co. analyst Eric Schmidt said, "The most important factor for ImClone's share price continues to be the quality of data from the FLEX trial in NSCL (non-small cell lung) cancer. Convincingly positive FLEX data could open a $1 billion-plus opportunity for Erbitux."

The FLEX trial is evaluating Erbitux as a first-line treatment for patients with NSCL cancer.

JPMorgan analyst Geoffrey Meacham said the quarter was solid, excluding the litigation charge, but believes shares will see only modest upside as a result.

"Without a clear catalyst to support Erbitux reacceleration given the modest benefit seen in the CRYSTAL trial, and the negative results of the SWOG and BMS-099 trials, we remain neutral on ImClone shares," he wrote in a note to clients.

ImClone shares rose 33 cents to $44.04 Thursday.


AP Business Writer Damian J. Troise contributed to this report.

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