The Odyssey Of A Cancer Drug

How ImClone overcame scandal and FDA objections to get Erbitux to market

Harlan W. Waksal had just landed in Telluride, Colo., for a ski vacation with his family when he got a call on his cell phone that he can only describe as "bittersweet." Erbitux, the cancer drug that Dr. Waksal spent the past decade developing as a co-founder of ImClone Systems Inc. (IMCL ), had finally won approval from the Food & Drug Administration on Feb. 12.

But Waksal couldn't celebrate with his ImClone colleagues; he had resigned last July. Nor could he share his joy with his brother and ImClone co-founder Samuel D. Waksal. Sam is currently serving seven years in a federal prison for insider trading, and Harlan's cell phone is not one of the phone numbers he is allowed to call.

Still, says Harlan, "I feel vindicated. I am elated that we were able to bring a new cancer drug to patients. I'm disappointed about the fact that it took so long. And I'm sad that I wasn't at the company that has been such an important part of my life for 20 years."

A similar stew of emotions has gripped virtually everyone connected with Erbitux, a drug that has gained more fame for its role in a series of corporate scandals than for its efficacy against cancer. Ever since the FDA refused to consider ImClone's first application on Dec. 28, 2001, the company has staggered through insider trading and tax scandals, ricocheting share prices, congressional hearings, management changes, and constant questions about whether the drug really works. The final indignity: Erbitux played a leading role in Martha Stewart's trial for obstruction of justice, related to her sale of ImClone stock on Dec. 27, 2001.

TRUE BELIEVERS. ImClone survived all the turmoil for only one reason, according to newly named CEO Daniel S. Lynch: "Everyone at the company really believed that this drug worked." For that reason ImClone managed to hang on to all of its senior staff, and employee turnover held at a low 2% to 3% the past two years. Lily W. Lee, vice-president for regulatory affairs, acknowledges that "there were times when we all thought about leaving, or when our close friends would say, 'Don't you think you should get out?"' But, she says, "everyone was focused on getting the drug to the patients. All the rest was just noise."

It wasn't supposed to be so hard. In 2001, Erbitux, an antibody that blocks cancer cell growth, was a biotech star. A clinical trial found that Erbitux shrank or stabilized tumors in 22.5% of patients with advanced colon cancer, a strong result for a cancer drug. That September, Bristol-Myers Squibb Co. paid $2 billion for a 20% stake in ImClone and a share of the U.S. marketing rights. ImClone filed its application for approval a month later.

But by early December, the FDA was losing enthusiasm. Sources close to the application process say there was a split at the agency, which at that time had no director. Some staffers disagreed with the design of ImClone's clinical trial because it tested Erbitux only in combination with standard chemotherapy. There was no "control arm" that tested the drug alone.

When the FDA rejected the application on Dec. 28, Lee says the ImClone team was stunned by the number of objections. Most letters refusing a filing run a page or two and are never made public. "A nine-page refusal-to-file letter is pretty daunting," says Lee. On top of that, the letter was leaked to the press in January. "That letter rewrote the history of our interactions with the FDA, and when it became public it made it seem as though the company had been dishonest," says Harlan.

The appearance of dishonesty was only heightened in the spring when it came out that Sam Waksal had tried to dump all his ImClone stock on Dec. 27, after an FDA staffer leaked that the application would be refused. Even before his panic became public, Bristol-Myers was not sure it wanted any part of the mess. Lynch, who had arrived at ImClone as chief financial officer in April, 2001, had been a key negotiator in the original deal with Bristol. In January, 2002, he had to head off Bristol's efforts to renege. His attitude: "The deal was a deal." ImClone agreed to accept slightly lower payments from Bristol, but that was it.

"HAIL MARY PASS". After a meeting with the FDA in February, 2002, Bristol decided it was worth its while to embrace Erbitux. "There was a lot of discussion about where to go from there, but all of our attention was focused on the fact that the refusal-to-file letter never questioned whether the drug was effective," says Dr. Andrew G. Bodnar, Bristol's senior vice-president for strategy.

The relationship between the two partners remained chilly for some time, however. ImClone stayed firmly in charge of the application process, and an ImClone source says Bristol "mocked the approach we were taking. They called it our 'Hail Mary pass."' That approach was to base a new filing on a 329-patient trial of Erbitux in Europe, run by Merck KGaA of Germany. Merck was testing Erbitux alone in half the patients and in combination with chemo in the other half, giving the FDA the control arm it wanted. "It's hard to say whether Bristol was in agreement with the Merck study," says Lee, "but the FDA was."

Publicly, ImClone was getting raked over many different coals. Sam Waksal resigned as CEO in April, 2002, and was succeeded by Harlan. In June, Sam was arrested for insider trading, and he pleaded guilty in October. "Everyone was under incredible stress, but I was extremely impressed with the ability of the ImClone people to compartmentalize," says Dr. John Mendelsohn, a co-discoverer of Erbitux and president of M.D. Anderson Cancer Center in Houston. At Bristol, according to Bodnar, "we just kept saying, 'It's the drug, stupid."'

Harlan, who headed up the approval process, says he met every week with ImClone staffers in an effort to bolster morale. "I encouraged them to ask any questions they wanted." ImClone also set up a system that allowed employees to ask questions anonymously.

Bolstering investor confidence was a lot harder. By September, 2002, ImClone's stock had sunk to $5.24, from more than $70 a share a year earlier. But the situation started improving in November, when the FDA, which had been leaderless for almost two years, finally got a commissioner. Dr. Mark B. McClellan made it clear that he wanted to streamline drug approvals, which had slowed to a trickle since 2000, and Wall Street's confidence in the entire biotech industry rose. "Whether the application would have gone differently without Commissioner McClellan, I can't say," says Bodnar. "But his presence certainly didn't retard the process."

ImClone soon went through its own leadership change. Harlan was asked to step down as CEO in April, 2003, in the wake of a federal probe into taxes the company failed to pay on Sam's stock options. In July, Harlan decided to resign altogether. Lynch became the first person not named Waksal to run ImClone.

Lynch's job quickly got a lot easier. By spring of 2003, preliminary results from the Merck trial were in, and the German company reported a 22.9% response rate, slightly better than ImClone had gotten in its earlier trial. On June 5, 2003, Bristol and ImClone officials met with FDA staffers. "They told us, 'submit the results,"' says Bodnar, a sure sign that the agency was happy with the new Erbitux data.

On Aug. 14, ImClone refiled its application, and this time the drug breezed through. Erbitux won approval exactly six months later, and went on sale Feb. 24, at a cost of $2,500 per dose.

There are still some potential stumbling blocks. Imclone must win FDA certification of its own manufacturing plant for Erbitux; production is currently contracted out. The company also needs to win approvals for other cancers if it wants to maximize sales. Erbitux is now being tested in ovarian, head and neck, and lung cancers.

As for the two founders, Sam has six years of his sentence left to serve, and Harlan is mulling over what to do next. Mendelsohn refuses to cast stones at the only two men willing to take a chance on his drug in the early 1990s. Whatever else one might say of the man, "Sam was very much a visionary," says Mendelsohn. And Harlan notes that unlike so many other companies caught up in recent scandals, ImClone -- and patients -- ended up with a product.

By Catherine Arnst in New York, with Jack Ewing in Frankfurt

    Before it's here, it's on the Bloomberg Terminal.