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Waksal brothers reunite in ImClone 2.0

Sam Waksal of Kadmon Pharmaceuticals
Kadmon Pharmaceuticals
Sam Waksal of Kadmon Pharmaceuticals

Kadmon, the drug company founded by Sam Waksal of ImClone and Martha Stewart fame, is starting to look more and more like its founder's last company.

CNBC reported Wednesday that Sam Waksal will step aside as chief executive of closely held Kadmon as the company plans to file for an initial public offering. Because of Waksal's ban from serving as an officer of a public company that stemmed from his insider trading charges, his brother, Harlan, is joining the company as president and CEO.

Kadmon confirmed the news in a press release, also noting Sam Waksal would remain chairman, "and will transition from that role in the event that the company elects to pursue an initial public offering."

The two brothers founded and ran ImClone together, with Sam as CEO and Harlan as chief operating officer, among other roles. At Kadmon, Sam will become chief of innovation, science and strategy.

"As we look to the future, it is my goal to ensure that the company is well-positioned to take advantage of value-building corporate, strategic and financial options," Harlan Waksal said in the company's statement.

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Kadmon, which is developing drugs for cancer and other diseases, has raised about $500 million in debt and equity. A potential IPO comes amid a record streak in the biotech industry, and investors are likely to have an appetite for the company, said Les Funtleyder, portfolio manager with Esquared Asset Management and author of the book Healthcare Investing.

"Given how well the market's been receiving health-care IPOs this year, especially with late-stage assets, and Kadmon certainly has a fair share of late-stage assets, I think the market would be very receptive to a company like this," Funtleyder said. "ImClone was a very successful company; they brought a cancer drug to market that has actually helped people."

ImClone developed the cancer drug Erbitux, which was approved in 2004 after a rocky development path. It was the rejection of the drug's application by the FDA, in 2001, that was the source of the insider trading scandal involving both Waksal and Stewart. ImClone was sold to Eli Lilly in 2008 for $6.5 billion.

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"Given his track record and given the desire for new drugs coming to market, I'd say investors are certainly willing to give him a chance," Funtleyder said. "Certainly the more financial-minded will remember ImClone ultimately got acquired by Lilly; it was very successful and a lot of people made money."

That doesn't mean the path to market won't be complicated.

"It's reasonable to expect that in the comment process of going public, there will be a lot of questions from the SEC about Mr. Waksal's going-forward role and the independence that his brother will exercise in the executive capacity in which he will serve," said Jacob Frenkel, chair of the securities enforcement, white-collar crime and government investigations practice at law firm Shulman, Rogers. "This will be scrutinized."