Erbitux study could broaden FDA label for ImClone, Bristol

NEW YORK (CNNMoney.com) -- New study results could broaden the use of colon cancer drug Erbitux, but analysts have mixed opinions as to whether this means a boost in sales and royalties for ImClone and Bristol-Myers Squibb.

ImClone (up $1.39 to $30.61, Charts), the New York-based biotech that produces Erbitux, and Bristol-Myers Squibb (up $0.00 to $26.21, Charts), the New Jersey-based drug giant that markets it in the U.S., announced on Wednesday that a late-stage study showed Erbitux is effective in slowing the progression of colon cancer in patients who have not been previously treated.

ImClone's share price jumped more than 4 percent on the news, while Bristol shares were largely unchanged.

The companies are expected to reveal data from the study at the annual conference of the American Society of Clinical Oncology in Chicago in June.

The study results are important, because Erbitux is currently approved by the Food and Drug Administration only for colon cancer patients who were unsuccessfully treated with chemotherapy before trying Erbitux.

But if Erbitux is approved by the FDA as a "first-line" treatment, then it could increase sales for Bristol-Myers and royalties for ImClone, according to David Witzke, analyst for Bank of America. Erbitux is ImClone's only product.

Witzke wrote in a published note today that "the results will likely support label expansion of Erbitux in the U.S." That means that the FDA will most likely give this expanded use its official approval.

Witzke said that an expanded FDA label could mean an additional $300 million in annual sales for the franchise.

This could provide a substantial benefit to the companies behind the drug. Erbitux sales totaled $485 million in the first nine months of 2006, according to Bristol. The majority of this went to Bristol-Myers, while 39 percent went to ImClone in the form of royalties. ImClone royalties totaled $213 million during the first nine months of 2006.

But Eric Schmidt, analyst for Cowen & Co., believes that the study results will not have a significant impact on sales in a market that is currently dominated by Genentech's (down $0.89 to $83.80, Charts) Avastin. Schmidt said that the Erbitux study used a type of chemotherapy that is no longer widely used by doctors, while Avastin is backed by strong data and dominates 70 percent of the market. Avastin sales totaled $1.3 billion during the first nine months of 2006.

"Avastin has taken the world by storm in the last couple years and has done a good job entrenching itself in the first-in-line market," said Schmidt. "I doubt that [Erbitux] will take any market share from Avastin."

Schmidt expects to see a stronger study from Amgen (down $0.35 to $70.92, Charts), the world's biggest biotech in terms of sales, when it releases data later this month comparing its new drug Vectibix to Avastin and chemotherapy.

The analysts quoted in this story do not own any shares of ImClone.

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