Commentary: Patience, Biotech Investors, Patience

Scientists want to see progress, but Wall Street wants to see blockbusters

By Catherine Arnst

Samuel D. Waksal's resignation on May 22 as CEO of embattled biotech firm ImClone Systems Inc. (IMCL ) has done nothing to bolster the company's stock. In part, that's because he was replaced by his brother, Dr. Harlan W. Waksal, formerly the COO. Switching one Waksal for another hardly signals a significant change, since both were responsible for the problems that led to the Food & Drug Administration's rejection of their experimental cancer drug, Erbitux. More important, though, investors remain concerned about the drug itself: ImClone's stock, which was at 25 on Apr. 1, has been hovering near 10 ever since the latest Erbitux results were released May 19.

The decline may seem surprising given that the news wasn't particularly negative. But it wasn't all positive, either, and ambiguous results for cancer drugs almost always spark a sell-off. That's unfortunate for the biotech industry, since most results are mixed.

ImClone's latest troubles are also a sign of the disconnect between scientists and investors. The researchers attending the mid-May American Society of Clinical Oncology meeting were encouraged by the same results that sent numerous stocks spiraling down. "We are getting a much better understanding" of how to treat the disease, says Dr. Larry Norton, a leading breast-cancer specialist at Memorial Sloan-Kettering Cancer Center in New York. Oncologists, he says, see the new compounds as one more weapon in their limited arsenal against cancer.

So why the disappointment on Wall Street? Investors want to see cures, or at least potential blockbusters, and many biotech execs have not been shy about promising to deliver such goods. But progress in medical science is incremental, and cancer is a particularly tough disease to crack. To truly understand the research, investors will have to get their minds around nuance. "When I try to explain the significance of the clinical-trial data to clients, I tend to get blank looks," says Sanford C. Bernstein & Co. analyst Catherine J. Arnold. "There are so many variables you have to understand before you can decide if a study is positive or negative." Besides, one study is rarely enough to make--or break--a new drug.

Take AstraZeneca PLC's Iressa, a potential competitor to Erbitux. Data released at ASCO showed the drug reducing tumors in 10% of lung-cancer sufferers. "These results are as good or better than other medicines that have been tested in a comparable group of patients," said Dr. Mark Kris of Sloan-Kettering. But some investors were disappointed that the results weren't as strong as those of an earlier trial in which 18.7% of patients had tumor shrinkage. In the second trial, however, the patients were much sicker, so getting a response at all is significant.

Shareholders are looking for oncology's version of a home run: proof that a drug can prolong life. But experimental drugs are tested on only the sickest patients. Against such advanced disease, doctors are happy to shrink the tumor because it's proof that the drug has an effect. They are hopeful that the same drug given to patients early on would bring greater benefits.

The latest data on Erbitux demonstrate just how tough it is to prolong life. A 123-patient trial against head and neck cancer, funded by the National Cancer Institute, found that Erbitux combined with chemotherapy shrank tumors in 23% of patients, compared with 9% of those on chemo alone.

However, the trial was meant to measure survival, and on that score, Erbitux failed. Patients receiving the drug lived an average of 9.19 months, almost the same as the 7.96 months for the chemo-alone group. "This didn't prove the drug doesn't work," said lead investigator Dr. Barbara Burtness of Yale University. "Everyone involved is motivated to continue studying it."

Both Iressa and Erbitux represent progress against cancers for which there are no effective drugs. But neither is likely to be a magic bullet. Shareholders and executives alike might be better off setting their sights on a treatment for cancer, not a cure.

Arnst covers science from New York.

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