Pharma's Market

Over the past couple of days, a couple of analyst reports have come into my inbox regarding the results of the so-called "CRYSTAL" study of ImClone's Erbitux on metastatic colorectal cancer. ImClone shares Erbitux with Bristol-Myers Squibb. The drug is approved for colon and head and neck cancers, but they're testing it on other tumor types. CRYSTAL is an acronym, but you won't believe how they stretched to create it: Cetuximab combined with iRinotecan in first line therapY for metaSTatic colorectAL cancer. Which came first? The acronym or the study description? Anyway, I digress. Crazy clinical trial acronyms are for another day, another blog entry.

The detailed data that researchers present at the upcoming ASCO (American Society of Clinical Oncology) conference is supposed to be under strict embargo. But it's not unusual for some information to leak out ahead of the meeting especially after the abstracts (a thick book containing all of the presentations) are sent out to the 30,000 or so doctors so they can plan their itinerary in advance. ASCO also sends them to registered reporters. I have not received mine yet.

No one's pointing fingers, but the Street has apparently gotten wind of some of ImClone's CRYSTAL data. Here's a sample from the research notes I've received: "...we heard convincing chatter that the CRYSTAL first-line data at ASCO will show a median progression-free survival (PFS) improvement of just under a month... We are hearing the PFS improvement in the Erbitux (plus chemo) arm of this trial is on the order of approximately one month." The information is not attributed to any source, just chalked up to "market chatter." And that chatter has had an impact on the stock.

Mike King, the head biotech analyst at Rodman & Renshaw, is not waiting until ASCO. In a research note to clients, he writes that he's "lowering numbers on concerns over (the) commercial impact of (the) CRYSTAL study data. At this time, it is difficult for us to precisely quantitate (analyst-speak for "quantify", I think) the impact on Erbitux market penetration going forward, but a more conservative course of action strikes us as a prudent move. Based on our interpretation of the impact of the entire data set, we are reducing our penetration rates in metastatic colorectal cancer in both North America and in Europe. We are lowering our price target to $42."

He's also significantly cutting his revenue and earnings per share estimates through 2010. R&R makes a market in IMCL and wants to do investment banking for the company.

Meantime, Jim Reddoch at FBR, in a research note to clients this morning, takes a different view. He writes, "Optics of CRYSTAL may disappoint, but Erbitux still getting approved, growing. What drives the stock post-ASCO, overall survival data from CRYSTAL, lung cancer data in the fall, and increasing Erbitux sales. We are maintaining our Outperform rating and $53 price target." FBR also makes a market in IMCL. 

As ASCO gets closer -- it starts June 1 in Chicago -- you can expect increasing volatility in a number of biotech names. Reporters are under strictly enforced ASCO embargo rules. If a reporter breaks them, chances are ASCO will issue a strong reprimand and bar the reporter from being credentialed in the future.

It seems to me that in this era when more doctors are working for and/or consulting for hedge funds and more biotechs have cancer drugs on the market and maturing oncology pipelines that there needs to be a better way of making sure there's a level playing field for investors. ASCO wants to preserve the "scientific integrity" of its conference. But it also needs to acknowledge and deal with the fact that the science is increasingly tied to finance.

Questions?  Comments?