ImClone Onward

On Friday biopharma comeback kid ImClone Systems (Nasdaq: IMCL  ) announced its third-quarter financial results.  

U.S. sales of lead drug Erbitux were flat year over year after taking away $9 million worth of wholesaler restocking. But the numbers were up 14% in the U.S. over Q2's weak results as the drug took back market share previously lost to Amgen's (Nasdaq: AMGN  ) Vectibix. Almost all the Erbitux year-over-year sales growth of 23% in the quarter came from sales outside the U.S.

Backing out a $50 million litigation settlement, operating income fell 36% in the quarter due to rising drug production costs. Ignoring that litigation cost would have brought diluted earnings to $0.57 a share for the quarter compared to $0.65 in Q3 of 2006. This year's numbers were helped by a lower share count and last year's by an insurance payment.

Just as with last quarter's earnings numbers, the current financials are not the best aspect of ImClone. What has re-excited the market about Erbitux's future is the possibility of a new label expansion into lung cancer treatment, after last month's announcement of positive study results in testing Erbitux on first-line metastatic non-small cell lung cancer.

There's also the potential for Erbitux to be approved next year in early stage colorectal, and head and neck cancers following the conclusion of positive clinical trials earlier this year.

Erbitux is becoming entrenched as a treatment of choice in situations such as late-stage colorectal cancer. Health institutes and other drugmakers like Array BioPharma (Nasdaq: ARRY  ) are testing other drugs in combination with Erbitux, which will further solidify its position as more data confirms the drug's uses.

Erbitux won't have the same amount of clinical trial data -- from tens of thousands of subjects -- that Genentech's (Nasdaq: DNA  ) Avastin has, but it will still be among the leading solid tumor targeted therapies in terms of available data on its use. As ImClone's management stated in conference call, even incremental improvements in the Erbitux label make the drug "more resistant to competitive erosion."

ImClone is not my favorite drugmaker in the biopharma space, but it experienced a solid first nine months of 2007. Except for other possible setbacks in the court battle over some key Erbitux patents, things are looking up for ImClone. 


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