ImClone's Erbitux flunks new cancer trial

BOSTON (Reuters) -- ImClone Systems Inc. said Tuesday that a late-stage trial of its cancer drug Erbitux failed to extend survival in patients with pancreatic cancer, sending its shares down more than 7.5 percent.

Erbitux, which is already approved to treat colorectal cancer and head and neck cancer, and generated worldwide sales of $1.1 billion in 2006, is ImClone's sole product and the company had hoped to win approval for it to treat a new type of cancer. But pancreatic cancer is notoriously difficult to treat and while investors had hoped for positive data, they had not banked on it.

"It would have been wonderful if it had been able to work in this setting, but I don't think that Wall Street was widely assuming success in this tough to treat disease," said Brian Rye, an analyst at Janney Montgomery Scott LLC.

The 700-patient trial compared Erbitux in combination with Eli Lilly & Co.'s chemotherapy Gemzar, or gemcitabine, with gemcitabine alone in patients whose cancer could not be surgically treated or had spread to other parts of the body.

Even so, ImClone said it was not giving up on the disease, which accounts for about 6 percent of all cancer deaths - or about 32,000 a year. It plans to test the drug in combination with Genentech Inc.'s (up $0.05 to $82.69, Charts) cancer drug Avastin, either with or without gemcitabine.

"While we are disappointed with these results we still believe Erbitux holds promise in pancreatic cancer," Alex Denner, chairman of ImClone's executive committee, said in an interview.

ImClone (down $2.65 to $39.70, Charts) is also testing the drug in other cancer types, including lung cancer, and expects to have data from a late-stage lung cancer trial around the end of the year. "Generally people have low expectations for that trial," Denner said, "But if it turns out to be positive, it could be a huge market for Erbitux."

The gains have also been fueled by setbacks for Amgen Inc.'s (down $0.11 to $57.08, Charts) rival drug Vectibix, which investors had once thought would devastate Erbitux.

ImClone stock has risen nearly 50 percent since the beginning of the year on a string of positive news about Erbitux, most recently that it improved survival when combined with chemotherapy in metastatic head and neck cancer.

Still, some analysts think the latest news could shift sentiment away from Erbitux and lead to additional weakness in the company's shares over time.

"While today's result won't alter the competitive dynamics between Erbitux and Vectibix, the negative trial will reverse what has been a string of positive data points and call into question Erbitux's efficacy outside of its two approved tumor types," Eric Schmidt, an analyst at Cowen & Co., said in a research note.

New York-based ImClone and its partners Bristol-Myers Squibb Co (up $0.13 to $27.79, Charts). and Merck KGaA (up $0.25 to $45.90, Charts) of Germany are hoping they will gain market share in the colorectal cancer market by winning approval for the drug to be used in earlier stages of the disease.

Like Vectibix, Erbitux is currently approved only for patients who have failed other therapies.

The pancreatic trial was conducted by the Southwest Oncology Group.

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