Content area
Full Text
How much damage will the scandal at ImC[one Systems cause for the biotech industry?
The tabloids and the mainstream media had a field day raking celebrity media mogul Martha Stewart over the coals for accusations that she engaged in insider trading. It was alleged that Stewart sold her ImClone Systems shares on a tip that the FDA was rejecting the review of the drug development company's highly touted cancer drug, Erbitux. Throw in the indictment of ImClone's former CEO, Samuel Waksal, on charges of securities fraud and the questionable behavior of Stewart's broker, Peter Bacanovic, who is quite the colorful character among New York City's society matrons, and you have the makings of a juicy National Enquirer story.
It's enough to cause other biotech companies to hunker down until the scandal blows over. In the meantime, ImClone's stock has plummeted, and so has the stock value of the rest of the already ailing biotech industry. But will the scandal create long-term scars? Despite the industry's current woes, many biotech analysts and investment bankers covering the sector don't feel pessimistic at all.
BAD RECORDS
What's missing in much of the current dialogue is the fact that although the FDA refused to consider Erbitux's application, it only means that, at this point in time, the agency feels that the clinical data presented was insufficient. Michael Brinkman, managing director of health care investment banking for CIBC World Markets in the firm's New York office, points out that the drug has produced good results, albeit in small clinical trials.
It's not unusual for cancer drugs to get approval based on one set of clinical trials, which is the amount of clinical data that ImClone submitted to the FDA. It appears that the problem centered on the way the trial was conducted and how its records were being kept.
"The bad news is that bad record keeping is unacceptable. That's not supposed to happen in our business," Brinkman says. And while it's tempting to compare the industrywide investigations...