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UBS Warburg Cuts Estimates for ImClone Systems


The Food and Drug Administration does not accept ImClone Systems' (IMCL) Biologics License Application for Erbitux, a treatment for colorectal carcinoma. In response, UBS Warburg cuts its earnings estimates and price target on the stock.

Analyst Geoffrey Harris says the FDA response cited deficiencies in the documentation of inclusion criteria and the determination of response as the primary reasons for the rejection. He says approval of Erbitux will be delayed by at least six months.

As such, this pushes back the revenue stream for the drug to 2003 from 2002. He cuts his $0.13 '02 EPS estimate to a $0.66 loss per share, $0.62 '03 EPS to $0.40 EPS, and $1.65 '04 EPS to $1.38 EPS. He cuts $75 price target to $62. While he is disappointed by news, he does not believe this changes the ultimate potential for Erbitux. He maintains a buy rating.

Separately, Merrill Lynch downgrades ImClone stock to long-term buy from strong buy. Analyst Eric Hecht says the FDA action against the company always raises concern about the risk factors with biotech companies. He says the rejection could be serious, and require additional trial data; however, it is also possible that after a re-analysis of the radiologic data that the application could be accepted.

Because of the delay, uncertainty of application, and associated milestone payments for partner BMY

, Hecht is moving to a more cautious long-term rating. He maintains a near-term buy rating, and hopes this is a temporary setback.


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