ImClone stock surges on Amgen's bad news

NEW YORK (CNNMoney.com) -- The biotech ImClone's stock price surged Friday following some bad news about its competitor Amgen's cancer drug Vectibix.

Vectibix, approved by the Food and Drug Administration in late 2006 as a colon cancer drug, failed an experiment to treat a wider population with patients with earlier stages of the disease, Amgen said Thursday. The test results blow the drug's chances at becoming a more competitive drug in a bigger market, analysts say.

ImClone's (up $4.22 to $38.10, Charts) stock price shot up as much as 18 percent, while Amgen's (down $2.84 to $57.63, Charts) price fell as much as 5 percent.

"Vectibix's downturn is Erbitux's gain," said Jim Reddoch of Friedman, Billings, Ramsey in a note to clients.

"We expect near-term momentum in ImClone as investors will likely view failure to the [Amgen] trial as a positive for Erbitux, as it removes a near-term overhang on the stock," wrote Bear Stearns analyst Akhtar Samad, in a note to clients.

Amgen, the biggest biotech in the world in terms of annual sales, tested Vectibix in conjunction with chemotherapy and the Genentech (down $2.40 to $82.88, Charts) drug Avastin, only to find that patients were likely to live longer if they did not take Vectibix, the company said.

"Patient safety is Amgen's top priority," said Dr. Rober Perlmutter, executive vice president of Amgen research and development, in a press release. "For this reason, we have decided to discontinue Vectibix treatment in the [experiment with Avastin and chemotherapy] while we complete additional analysis of these preliminary results."

This could help sales for ImClone's colorectal cancer drug Erbitux, which now faces less competition as the biotech tries to spread into wider markets for treatment, such as pancreatic cancer, analysts say. Erbitux is currently approved as a drug for colorectal cancer, and cancer of the head and neck.

"We think this is a positive for ImClone, in that Erbitux may now have less competition in growing into earlier lines (i.e., bigger markets) of colon cancer," said Reddoch of FBR in his note. The analyst also said Erbitux could add $300 million in annual sales if its experiments as a pancreatic cancer treatment prove to be successful.

The analysts quoted in this story do not own shares of company stocks mentioned here, though Bear Stearns and FBR seek business with them.