ImClone, BMY change deal
Partners in cancer drug development renegotiate economic terms of Erbitux deal.
March 5, 2002: 7:04 p.m. ET
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NEW YORK (CNN/Money) - Biotech ImClone Systems said Tuesday it has renegotiated the economic terms of its development deal with Bristol-Myers Squibb for cancer drug Erbitux at softer terms than originally demanded by the drugmaker.
Bristol-Myers will also co-lead the approval process for Erbitux in the wake of ImClone's difficulties with the Food and Drug Administration.
In addition to taking a $1 billion equity stake in the biotech, Bristol-Myers originally agreed to pay ImClone $1 billion in milestone payments: $200 million at the start of the deal, $300 million at submission of a Biologics License Application, and $500 million upon approval of Erbitux.
Instead of the second milestone payment, Bristol-Myers (BMY: Research, Estimates) will now pay $140 million in cash now and $60 million in one year.
If Erbitux is approved, Bristol-Myers will also split the third milestone payment, with $250 million upon approval of a first indication and another $250 million upon approval of a second indication.
The companies are currently looking for approval for Erbitux to treat colorectal cancer, but are also collecting data on treatment for head and neck cancer.
Under the new agreement, ImClone will receive a distribution fee based on a flat rate of 39 percent of North American revenue and the deal will run through 2018.
In the original agreement, ImClone (IMCL: Research, Estimates) said it was guaranteed a "significant share of product revenues."
In early February Bristol-Myers demanded ImClone renegotiate the terms of the original agreement after the FDA decline to accept the Erbitux application because of problems with the data.
Bristol-Myers originally wanted complete control of the approval process, the elimination of milestone payments, fewer restrictions on selling shares of ImClone, and the removal of ImClone CEO Sam Waksal and COO Harlan Waksal until the drug was approved.
ImClone was hit with a barrage of class action suits alleging Waksal made misleading statements about Erbitux's approval process and the company is also the target of informal federal investigations.
But ImClone stood its ground, and both companies met with the FDA in Feb. 26, where regulators said they would accept more data on Erbitux, saving the companies from conducting new clinical trials.
ImClone and Bristol-Myers now play to submit data collected by European drugmaker and strategic partner Merck KGaA. 
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