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Amgen and ImClone Snubbed

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FDA regulations a drag on potential sales.

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I don't officially cover ImClone (IMCL) or Amgen (AMGN), but my firm does cover companies that are affected by the progress these two big biotech companies make with their epidermal growth factor receptor (EGFR) drugs. That meant attending the CRYSTAL and FLEX plenary data presentations at the ASCO 2008 meeting here in Chicago was a mandatory event.

I'm not going to try to delve deep into the different arguments about whether Erbitux got a leg up, a leg sideways, or a beat down – particularly in terms of competition with Genentech's (DNA) Avastin. I'll leave that to the folks who cover the big companies. I do have a few opinions based upon conversations with folks on the sell side and a few doctors in the field I spoke with after the data were released.

1. The Erbitux FLEX trial in front-line NSCLC (lung cancer) showed a marginally relevant survival advantage of 1.2 months. It looked like the survival benefit was driven by Asian patients, but that's exactly the opposite of what really happened. Because patients enrolled in Asia tended to also get an EGFR-inhibitor after progression on the control arm, their results narrowed the survival advantage.

2. The Erbitux CRYSTAL trial retrospective analysis clearly showed that EGFR inhibitors don't work in patients with a k-ras gene mutation. This restriction appears to cut the potential market for ImClone's Erbitux and Amgen's Vectibix by about 35%.

3. Before summer is over, I believe the FDA will add a requirement to the labels of Erbitux and Vectibix, requiring a negative k-ras mutation test before dosing. Select insurance companies may require the tests sooner. ImClone already has data in front of the FDA for this kind of testing program.

4. Sales for both drugs will dip for some number of months until a k-ras mutation test system becomes readily available. Sales may stay depressed even after the test is FDA approved and widely available, though the companies may be able to offset lost revenues with price increases as the therapeutic index of the drugs will increase without the dead weight of k-ras mutation non-responders.

This sort of data continues to prod pharma (and the FDA) along the path of personalized medicine and towards the Death of the Blockbuster Drug theme I spoke about at the very first Minyans in the Mountains event in 2004. I attended a number of presentations this week at ASCO where its clear clinical investigators – the docs who conduct the clinical trials that determine what drugs and medical procedures you and I will receive from our local doctors – are firmly on the bandwagon towards personalized medicine. This is a relatively new trend that grows in influence each year.

I also came away with the sense that any company with a drug that works in k-ras mutated patients could get very popular, very quick. Since the mutation excludes use of the big-selling EGFR inhibitors in anywhere from 30-40% of patients, this is a significant hole in the oncology market.

I wouldn't be surprised if the press release machines of other companies start up declaring their drug can affect mutant k-ras cells. There's a pretty big hole made by the likely elimination of k-ras positive patients who used to get EGFRs, and that won't stay empty for long.

No positions in stocks mentioned.

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