One among the flood of earnings reports this week was Imclone. Their 3Q earnings press release was one of those good news/bad news documents familiar to readers of the financial pages. Revenues weren't too bad, with higher royalties coming in, although there was a decline in manufacturing revenue which was blamed on lower prices being paid by Bristol-Meyers Squibb for Imclone's sole product, Erbitux. As they hastened to add, though, "Purchases by Bristol-Myers Squibb are timed at their discretion to accommodate forecasts and safety stock needs, and are not necessarily indicative of historical in-market sales or future sales expectations." They'd better hope so.
If you go back to their second quarter 10-Q statement, though, you won't find much mention of these things in the "Outlook" section. They do point out that the price of Erbitux for the partners has gone down, but there's no mention of the possibility of BMS deciding not to buy much of it for a while.
At the same time, expenses were higher than expected. The biggest component of the increase was under the R&D heading. In Imclone's words: "the increase is principally attributable to expenses associated with clinical supplies sold to the Company's partners which are reimbursed as a component of collaborative agreement revenue." Unless they somehow have the clinical supplies of Erbitux completely separated out financially from the commercial ones, this would seem to mean that they're spending more money to deliver the drug to their partners, and getting less back for it.
Imclone has a special place in my heart. Since their return from the grave, I've written about them several times, and today's earnings report prompted me to revisit a few of those posts. Back on April 28 of last year, I wrote: ""Today's buyers can only hope for people who can't do math to come along and relieve them of their shares. More likely, the mathematically impaired are already in there buying right now, which will gradually limit the target audience for a profitable resale to either pretechnological tribesmen or the crews of recently arrived UFOs." Very intemperate of me. IMCL shares were heading toward $70 at the time.
After an incoming burst of testy e-mails, I followed up the next day with these conciliatory words: "Go on and hold that IMCL, guys, go ahead and mortgage the house to buy some more. Maybe you'll watch it go to $150; stupider things have happened. But I think that the odds are that you're going to wish you'd taken your profits in 2004."
I revisited the company and its never-boring stock on June 6: "Even with sizable market penetration, I still think that Imclone stock is no bargain at 70-odd dollars a share. Mind you, that's what it was on Friday. It'll be worth taking a look during Monday's trading to see what it's been inflated to since this news came out. My advice to IMCL shareholders continues to be: cash in and run laughing to the bank." Another round of peeved comments and mail messages followed.
The stock, I should mention here, peaked in early July of 2004, a bit shy of $90/share. Altitude sickness set in, though, and I said later that month, as the price fell steeply through the $60s: "In light of all this, I'd like to take a moment to address the Imclone-boosting stock cult, those few of them who might have read this far, anyway. Get out. Take the money and run. The alarm bell has sounded, and more than once. If you bought Imclone when it was in the dumper, you've had a great run. Celebrate and cash in! But if you bought it when I was ranting on the subject back in late June, you're in the red, and I fear that it's going to be even worse in the long run. Flee!"
I really hope that someone took that advice. It's been just about exactly a year since Imclone's stock was as high as $50. It wandered through $40 this spring. Today it finished up at just short of $34. And do you know something? I still wouldn't buy it. I'm not telling everyone to run away screaming, but there have to be better places to put your money. The price they're getting for Erbitux is not going to improve much. They're trying for new markets, such as head and neck cancer, but these are small ones, and you have to figure that there's off-label use going on already in these areas. And every year there's more competition from cheaper therapies which may well be as good or better. Would someone who owns IMCL please tell me why they do?