ImClone Systems (NASDAQ:IMCL) released its second-quarter results, which showed slower-than-expected sales growth with its lead cancer-fighting compound, Erbitux.

The U.S. sales numbers for Erbitux were known in advance, thanks to marketing partner Bristol-Myers Squibb's (NYSE:BMY) release of its earnings numbers last week.

Worldwide sales of Erbitux increased a healthy 16% year over year in the quarter, to $319 million, although U.S. sales of the drug were down slightly. This is a problem for ImClone -- its royalty revenue from the drug rose only 5%, since ImClone receives a larger royalty rate on U.S. sales from Bristol-Myers than it does on international sales from partner Merck KGaA.

Even with the slightly increasing royalty revenues, overall revenues were flat for the quarter versus 2006 and net income fell 14% due to higher tax rates. Diluted GAAP earnings fell to $0.36 a share

The metastatic colorectal cancer treatment space is getting more crowded, and ImClone wasn't the only biopharma with a compound directed against this disease to feel the effects of more competition. Its closest competitor, Amgen's (NASDAQ:AMGN) Vectibix, experienced a quarter-over-quarter sales drop. Overall use of EGFR inhibitors like Erbitux for metastatic colorectal cancer fell 5% versus the first quarter of 2007.

Even though sales of Erbitux took a fall in the U.S. this quarter, they may be improving in the future. In June, the FDA accepted ImClone's supplemental Biologics License Application (sBLA) filing to improve the Erbitux label. There are also plans in the future to submit data to get the drug indicated as a second-line or first-line colorectal cancer therapy. Bristol-Myers and ImClone also agreed to initiate studies of the drug into a host of new cancer indications. If ImClone wants to return to a period of sustained top-line growth in the U.S., expanding the use of Erbitux into new cancer indications will be vital.

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Fool contributor Brian Lawler does not own shares of any company mentioned in this article. The Fool has a disclosure policy.

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