Pharmas Market with Mike Huckman

ImClone's Erbitux And The Dueling Analysts

ImClone - Erbitux

Because it's so extraordinarily rare--if not unheard of--for one analyst to publish research specifically to refute another analyst I thought this is blogworthy.

Last Friday, FBR biotech analyst Jim Reddoch told clients in a research note that he was downgrading ImClone Systems to Market Peform in the wake of the robust data released last week on Erbitux that sent IMCL shares to a new intra-day high. FBR makes a market in IMCL.*

Reddoch's call, in which he slashed his 2011 Erbitux/lung cancer sales estimate from $521 million to $401 million and his price target from $64 to $45, caused the shares to give back about $4.50 (more than 10%) of their Tuesday gain. He based his downgrade on conversations his team had the night before with oncologists who Reddoch wrote "were unmoved by the…announcement…." He said their "feedback (was) too lukewarm to wait for the…(detailed survival) data," which are not expected until the American Society of Clinical Oncology meeting next Spring. He also cited the fact that the stock sold off $15 after ImClone presented a different set of positive data at ASCO this year.

Typically, that's the last word. But on Sunday, ahead of the resumption of trading in IMCL on Monday, Rodman & Renshaw senior biotech analyst Mike King put out a research note to clients saying, "While we are not in the habit of playing tit-for-tat with our competitors or quoting specifically their estimates, ratings or opinions, we believe it is important in this case….(because) in a nutshell we believe our competitors' numbers do not add up." R & R also makes a market in IMCL.

King based his call on a Babson College statistician's detailed, but "back of the envelope" number crunching of the potential amount of added life--under multiple scenarios--using Erbitux on lung cancer. So, he's keeping his Market Outperform rating and $55 price target on the stock.

If it's true that the exact length of added survival won't be presented until next year's ASCO that is a long time to wait. But if it's significant, it could be one of the major headlines out of the widely-followed and highly-anticipated scientific conference. Lung cancer is very difficult to treat. It's often caught way too late. And the prognosis is never good.

*FYI--makes a market means being ready to buy or sell in round lots--10, 100, 500 shares etc. This is pertinent for disclosures.

Questions?  Comments?