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ImClone plummets amid probe
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January 18, 2002: 5:16 p.m. ET
Shares plunge as House looks into insider selling, lack of due diligence.
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NEW YORK (CNN/Money) - A U.S. House of Representatives panel said Friday it will investigate ImClone Systems Inc.'s clinical research for its well-publicized cancer drug Erbitux because of "serious concerns."
Nasdaq halted trading in the stock for news dissemination Friday. Upon reopening, ImClone (IMCL: down $8.93 to $21.15, Research, Estimates) shares plummeted almost 30 percent.
The House Energy and Commerce Committee sent a letter to the Food and Drug Administration, ImClone and Bristol-Myers Squibb (BMY: down $0.75 to $47.94, Research, Estimates), which bought a 20 percent stake in the company for $1 billion, seeking information on the process leading up to the FDA's rejection of an approval application for the drug on Dec. 28.
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After receiving a "refuse-to-file" letter from the FDA in response to its application for Erbitux, the company held a conference call saying the application was missing certain "train of documentation" information needed for acceptance, according to the letter.
"Refuse-to-file" letters are non-public documents containing trade secret or confidential commercial information.
A Jan. 4, 2002, report in the Cancer Letter detailed excerpts of the RTF letter, which contained a list of "concerns that went far beyond record keeping," the letter stated. The FDA's concerns included Erbitux's effectiveness in combination with Campostar, another cancer drug, and the number of patient deaths following treatment with Erbitux.
The company reported that only three patients died within a month of their last Erbitux treatment. The FDA found that 21 patients died within a month of their last use, according to the letter.
Complicating the company's Erbitux application and subsequent reaction is cases of insider selling. ImClone's chief operating officer, Harlan Waksal, shed 700,000 company shares at about $71 per share, or a total of $50 million, weeks before the FDA issued the RTF response, the letter stated.
The New York-based company submitted its application for Erbitux on Oct. 30, 2001. A day before, company executives sold a combined 2.1 million shares to Bristol-Myers Squibb for $150 million, as part of its agreement to market Erbitux with Bristol-Myers.
ImClone's chief executive, Samuel Waksal, sold 814,674 shares and Harlan Waksal sold 776,450 shares on Oct. 29, more than 20 percent of each of their holdings, and the first sale by either executive since the mid-1990s, the letter stated.
The House committee made a series of requests from the FDA, ImClone, and Bristol-Myers, including all records of communication between ImClone and the FDA, a list of the Bristol-Myers employees involved in the due diligence review of its agreement with ImClone, and the most current regulations concerning the FDA disclosure of non-public information to the Securities and Exchange Commission. 
-- from staff and wire reports
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