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DBL%20Hendrix%20small.png College chemistry, 1983

Derek Lowe The 2002 Model

Dbl%20new%20portrait%20B%26W.png After 10 years of blogging. . .

Derek Lowe, an Arkansan by birth, got his BA from Hendrix College and his PhD in organic chemistry from Duke before spending time in Germany on a Humboldt Fellowship on his post-doc. He's worked for several major pharmaceutical companies since 1989 on drug discovery projects against schizophrenia, Alzheimer's, diabetes, osteoporosis and other diseases. To contact Derek email him directly: Twitter: Dereklowe

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« As Goes ASCO. . . | Main | Cue the Music »

June 7, 2004

Vox Populi

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Posted by Derek

I wasn't planning on returning to this topic today, but tonight's e-mail seems to deserve a speedy reply. Says a loyal reader, one "Busterbuckeye":

You gave me a very impolite back hand slap in the above referenced blog. . .(on May 12) I posted in response to your April 28 blog in which you quoted Travers with approval: "Travers did indeed estimate Erbitux revenues at "peak" based solely on its one current crc indication. Your own April 29 response admits at least the possibility of other indications. After careful thought and perhaps after this coming ASCO, I invite you to reconsider adopting Travers' "peak" revenue estimates, and perhaps one of us (sic) my dine on crow."

In light of IMCL's ASCO data on Head & Neck, nsclc, and pancreatic cancer, you should be prepared to abandon Mr. Travers "peak" estimates and apologize for your rude treatment. . .

Let's take these points one at a time, skipping (for the moment) the back of the hand. Charley Travers of the Motley Fool did run his numbers based on the colon cancer indication. And in my April 29th post, "Yahoots", I did mention the possibility of other indications.

But take a look at the context in which I mentioned them. Here's the key part:

". . .don't let those shimmering waves of greed blind you to the facts: in their clinical trials, Imclone, BMS, and Merck-Darmstadt carefully picked the tumor types that would be expected to give the most robust response. That's how you get a drug approved, by going to the agencies with the best data you can get. Erbitux has already been tested in the areas where it's likely to gain the most market share and make the most profit."

Head and neck cancer, for example, is one of those carefully picked areas I was referring to. There's a good chance of a therapy targeted against EGFR showing efficacy against that kind of tumor, and it's an underserved patient population (although not an especially large one.) That's why they picked it for the clinical trial. It's not a new indication out of the blue.

So, let's remedy the situation. The numbers I linked to in yesterday's post speak of an SG Cowen estimate of a "$150 million market" for Imclone in head and neck cancer. It's unclear if that's the total market size, or the net to Imclone after they pay their royalties to BMS and Merck-Darmstadt. Let's be generous and say it's the latter. And let's double that figure, just to get in that optimistic frame of mind.

So, adding another $300 million means that it doubles the sales numbers that Travers estimated. The trouble is, by his figures, Imclone stock was already between 50% and 100% overvalued when he wrote his piece, and it's gone up more since then.

I'm prepared to modify my views, then: instead of saying that Imclone is that much overvalued, I'll put on my rose-colored glasses and say that under current conditions, it's valued about where it should be at its peak sales - a few years from now, mind you. Now, Imclone can pick up some sales in the more competitive NSCLC market, and some in pancreatic cancer too (a small market, but a cruelly underserved one.) But long before then, you Imclonites will have pushed the stock price up to take care of that slack, too. Hey, what am I talking about? You'll have the share price up there next week at this rate. Sell!

From a drug-company perspective, you're working on the assumption that everything will go perfectly. There will be no safety problems in any of these new indications, and no manufacturing or regulatory hitches. And you're choosing not to think too much about other new compounds hitting the market over the next few years. Some of them will take some market share, you know. For one thing, they won't cost $10,000 a month.

Now for the last point, that "apology" for "rude behavior". It's not happening. For one thing, my behavior was the expression of an opinion about the stock price of Imclone, and of those people who are willing to pay it. If you've made money on Imclone, that should be all the compensation you could ever want. I've lost money on them, myself, and believing that I'm right is of only limited consolation in such situations.

I have my opinions; you have yours. You don't have to read (or comment on) mine, and I probably wouldn't read yours on a salary. Perhaps you should start an Imclonocentric blog of your own - you'd probably get more traffic than I do, considering the fanatic following the company has.

Comments (3) + TrackBacks (0) | Category: Business and Markets | Cancer


1. dee watts on June 9, 2004 9:56 PM writes...

have you ever been wrong before?

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2. Mike on June 9, 2004 10:00 PM writes...

Wonderful. Stocks go up as long as there are still incorrect skeptics.

Let's just address H&N.

a) newly diagnosed patients per year are NOT the only target market. That market is most living with H&N which was not eradicated surgically.

b) 30% of patients now already take only RT and not chemo, despite the fact that chemo has proven survival benefits here. It is because the chemo regime also have proven harsh toxicity.

To imagine that the market for Erb is hence only some subset of this 30% is silly----a significant number of those taking chemo now may decide to switch to Erb on account of a significantly greater quality of life.

The real issue though is that the H&N results will accelerate marketing in colorectal, a significantly larger market.

The idea is that good cancer drugs tend stay looking good across multiple trials. Physicians will now assume that the 2nd line Erb trials in CRC will probably give survival or TTDP benefit.

I'm sure you would have similarly predicted a maximum $250 million/year market for Rituxan, as quite a number of people did upon its introduction. At present, Rituxan is the single largest selling drug for Genentech, giving $1.5 B/yr---and more overseas (but that goes to Roche, as MabThera). And that's almost all for one disease, Non_hodgkin's lymphoma (which is really many different related diseases).

CRC plus H&N are much bigger (but there is more competition too).

And Icahn is cashing in some, but not all of his stake. If he thought it were dangerously overvalued he would have sold it all.

You obviously have "lost money on Imclone"....sounds like you had a bad experience in the past (as many others had).

Take another look

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3. mike on June 10, 2004 12:26 AM writes...

You lost money but I make money in imclone. No wonder you advise everyone sell this stock.

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