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November 20, 2006
Sell! (It's Not Just Me)
Since I mentioned a little while ago that I'd gone short Imclone stock (at $29 and change), it was heartening to see Gretchen Morgensen make the exact same case against them in the New York Times on Sunday. (Subscriber link). The article makes much of the company's recent patent troubles, and the competition for their lone drug, Erbitux:
But neither the new competition from Amgen nor the legal ruling on the Yeda matter seems to worry the hopefuls who have bid up ImClone shares in recent weeks. These speculators also appear undaunted by results earlier this month from a drug trial in patients with midstage colorectal cancer. ImClone had hoped that the trial would show a survival benefit; it did not.
Two analysts, at Merrill Lynch and Citigroup, predicted that the trial results would mean stagnant market share for Erbitux and growth prospects for Vectibix. Both analysts rate ImClone a “sell.” Bristol-Myers Squibb, which owns 17 percent of ImClone, said in its most recent quarterly filing that Yeda might seek damages for infringement on past Erbitux sales and royalties on future sales of the drug. If Yeda licenses its patent to other companies, Bristol-Myers acknowledged that new competition for Erbitux would arise, but added that it was too early to tell what impact such a development would have on its business.
Investors are going to have to catch up with therapeutic reality here: Erbitux is a drug of limited utility. All cancer drugs are, unfortunately. "Cancer" is a catch-all term for hundreds of distinct disorders of cell division and growth, and no one drug is likely to be efficacious across much of that range. Even in its best applications, though, Imclone's drug is only fair-to-good. Meanwhile, progress in the field (though incremental) is very real, and every slightly better compound that comes along is going to capture a lot of market share.
So when I hear Carl Icahn going on about how he wants the company to step up its marketing efforts, I have to roll my eyes. The thing is, to some extent cancer drugs market themselves. They already sell much more than a purely rational calculation would predict. That's because many clinicians try them all, against all sorts of things, no matter what the label says. And it's not like no one's heard of Imclone or Erbitux, so there's only so much that a whiz-bang selling campaign can accomplish. Icahn is trying to apply the lessons he's learned from other industries to pharmaceuticals, a tempting idea that has sent more than one R&D-based organization rolling off the edge of the table.
I know that I've linked to this post of mine several times - it's the one where I talk about all the times I've told people to sell Imclone. But you know, it's been good advice. After all, I took it myself, and I didn't even own the stock. . .
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