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Biotech Roundup: Lose-Lose for ImClone, FDA Slows Sector Returns, Trillions

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Consistency and some common sense is all we ask from the FDA.

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Bad Week for ImClone (IMCL)

Amgen (AMGN) gets its FDA approval for Vectibix (panitumumab, or "p-mab") a drug competitive to Erbitux and then says it's going to price it lower. This means ImClone either has to get into a price war or face giving up market share – a lose-lose situation that, by definition, means lower top line revenues.

Carl Icahn apparently fancies himself (or at least some of his pals) as better able to run the company than the current ImClone Board. I especially like the response from the Board that Carl is trying to take over the company without paying a premium.

At least he's consistent with what ImClone learned when it tried to sell itself. Nobody else wanted to pay a premium to this overvalued company either.

Then, the next EGFR inhibitor in the pipeline, YM Biosciences' (YMI) nimotuzumab got clearance from the U.S. Treasury to conduct clinical trials in the U.S. "Nimo" was developed in Cuba, so the special clearance was necessary. YM's management is smartly going after low-hanging fruit by focusing on an orphan pediatric brain cancer indication for first approval, but my firm expects it won't be long (in biotech time) before we have comparable data on colorectal cancer. If Nimo can continue its current profile of at least equivalent efficacy and no significant rash or other class side effects, then Erbitux and Amgen's Vectibix will both be also rans.

Laggard FDA Causing Laggard Sector Returns?

Andy Pollack, a reader of my firm's work, penned a New York Times piece this morning about slowing product approvals at the FDA. Andy makes the correct observation, namely that the FDA has slowed down. Our sense is that this is more resource-related, outside the area of "lifestyle" drugs. It is exceptionally clear that the FDA is very cautious about certain classes of drugs given recent problems with Vioxx and anti-depressants, wanting to make very sure the reward of the new drug balances the risk properly.

I've been writing about this for some time, both at the 'Ville and in my firm's publication. The whole point of personalized medicine, in fact, is to increase the therapeutic index of drugs – essentially boosting the reward side of the risk/reward equation by limiting the number of people who take a drug that won't work for them.

I thought this paragraph was the best in the entire piece:

"A reason for the seeming discrepancy between the perceptions of the agency's critics and the experience of the drug industry may be that, to some extent, they are looking at different things. The Institute of Medicine report, as well as bills in Congress aimed at reforming the F.D.A., focus mainly on lapses in monitoring drugs already on the market, not on the initial approval process."


The FDA has traditionally done little, if any monitoring of drugs on the market. They have relied on the industry to monitor itself, with mixed results. The problems with this approach are backing up into the approval process.

There is also a fundamental misconception around the whole issue of drugs. People think drugs ought to be safe, when that is impossible. Put some peanut butter on a spoon and wave it under the nose of everyone walking into Yankee stadium on any given day. You're likely going to kill at least one person and make a couple of others sick. If you fed the peanut butter to people, about 350 of them would have some sort of allergic reaction. (Granted, people with severe peanut allergies are unlikely to go to a baseball game, but work with me here…).

Peanuts don't interact with the human body as closely as many drugs and have a "side effect" incidence rate higher than that which made us nervous about suicide and anti-depressants or heart conditions and Vioxx . Public Citizen and other Luddite "health advocates" don't want us to take peanuts off the market, even though not a single person would suffer horribly if they were removed (i.e. the reward side of risk/reward equation for peanuts is not particularly compelling).

Yes, the issue with slower FDA approvals is affecting the biotech space just as it did in 2002. We're hopeful that confirmation of Dr. Andrew von Eschenbach will help matters by at least enforcing consistency to the process, much like Dr. Mark McClellan's confirmation did starting in 2003. Biotech investors are used to long timelines, we just don't like our timelines to become unexpectedly long.

That makes me grumpy.

Could Dr. von Eschenbach – a man sorely in need of a nickname, by the way – provide us a 2003-like rally? One can hope.

A Trillion Here, A Trillion There…

One of my subscribers forwarded me a Wall Street & Technology article over the weekend that made even these jaded eyes widen. The total value of lent securities is over $16 trillion dollars. Some equity-lending services process over $60 bln in equities in a single day.

The article is an interesting one, especially if you've not given this side of the business much thought. Lending securities is big business and a not inconsequential benefit to the bottom line for pension plans and other large funds.

One of the companies in the article, LocateStock.com, gave me a chuckle. I popped over to their web site just to peek around. Their logo, of a matador skewering a bull, struck me as cleverly humorous.

Position in YMI

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