House Panel to Probe ImClone Systems
A congressional committee launched an investigation Friday into a small biotechnology company accused of misleading investors about a highly touted cancer drug.
In a letter to ImClone Systems Inc., Rep. W.J. “Billy” Tauzin (R-La.), chairman of the House Energy and Commerce Committee, expressed “serious concerns” about the accuracy of information the highflying company shared with investors about its experimental cancer drug.
Shares of ImClone Systems have lost 65% of their value since Dec. 28, when the Food and Drug Administration rejected the company’s application to market the much-anticipated drug, called Erbitux.
Tauzin’s letter said ImClone Systems gave “questionable descriptions” of the reasons for the FDA’s rejection, which later were laid out in detail by the Cancer Letter, an industry newsletter that obtained a copy of the FDA’s confidential rejection letter.
Tauzin said the company did not tell investors that the FDA believed ImClone’s clinical trial was so flawed that a new trial would be needed, as reported in the newsletter.
Tauzin’s letter also took note of a series of lucrative insider trades in ImClone stock that took place before the FDA rejection.
The committee sent similar letters to the FDA and to Bristol-Myers Squibb, which invested $1 billion in ImClone Systems last fall as part of a costly deal to obtain U.S. marketing rights to Erbitux.
The tenor of the letters suggests the committee may be looking for a way for the FDA to tip off the Securities and Exchange Commission when drug companies provide potentially false or misleading information to investors. Most aspects of the FDA’s administrative review of new drug applications are confidential.
But Peter Sheffield, a spokesman for the committee, said it is too early to know what congressional investigators will find or where the probe may lead.
Representatives of Bristol-Myers and ImClone said the companies will cooperate with the committee, which set a Jan. 31 deadline for receiving the materials. The FDA also pledged cooperation.
The committee, in its letter, asked ImClone Chief Executive Samuel Waksal to provide records of the company’s correspondence and meetings with the FDA and of its now controversial clinical trial of Erbitux.
“It is important that the hopes of cancer patients are not falsely raised and that the integrity of biomedical research is maintained,” Tauzin said his letter.
The committee asked Bristol-Myers to provide a list of people who conducted due diligence of ImClone when the pharmaceutical giant invested in the company, buying a 20% stake at $70 a share.
The committee also asked for internal audits and investigations relating to ImClone and the opinion of Bristol-Myers’ oncology advisory committee on Erbitux, the revelation of which could prove embarrassing to Bristol-Myers, whose stake in ImClone has lost $640 million in market value.
The committee asked the FDA for its materials on Erbitux and also its “legal analysis on relevant federal statutes concerning FDA disclosure of nonpublic information” to the SEC.
The congressional investigation is the latest in a series of setbacks for the entrepreneurial company that until last month was the toast of the biotechnology industry. Its shares traded as high as $75 on Dec. 6 as the deadline for an FDA decision on Erbitux neared. On Friday, its shares fell $8.93 to close at $21.15 on Nasdaq.
The company’s shares had climbed steadily since May, when it presented data at a high-profile medical conference that showed Erbitux, when used in combination with a powerful chemotherapy drug, shrank tumors in 22.5% of colorectal cancer patients. ImClone said the patients selected for the clinical trial had not benefited from the chemotherapy drug, irinotecan, alone.
The results electrified the medical and investment community, because the outcome was better than what is achieved with existing chemotherapy treatments. But the FDA said data submitted by ImClone did not support its conclusion.
