Bristol Paying $2 Bil. For ImClone C225; New Milestone For Inlicensing Deals?

Bristol-Myers Squibb's $2 bil. investment in ImClone's anti-cancer monoclonal antibody C225 (cetuximab) represents a $500 mil. premium to the company's estimate of the peak annual sales potential for the agent.

The Sept. 19 agreement calls for Bristol to make a $1 bil. up-front equity investment and a $200 mil. cash licensing fee. Bristol would pay another $300 mil. when the BLA for the anti-EGF antibody is formally accepted by FDA, and another $500 mil. on approval.

On a conference call announcing the deal, Bristol U.S. Medicines and Global Marketing President Richard Lane maintained that C225 has the "potential to exceed sales of $1.5 bil." per year.

The deal appears to set a new standard for up-front investments to acquire marketing rights to a single, unapproved agent - and bears out recent comments by pharma firms about the increasingly high prices being sought for late-stage agents available for licensing.

GlaxoSmithKline CEO J.P. Garnier declared in February that there would be no more Lipitor-style agreements, under which Pfizer received 50% of the profits from the Warner-Lambert drug with a relatively small up-front payment. Licensing deals for late-stage products only make sense if they are done out of "desperation," Garnier asserted (¹ (Also see "GlaxoSmithKline Is Mouthful But Still Hungry: Is Next Course Japanese?" - Pink Sheet, 26 Feb, 2001.)).

Recent deals for biotech agents pale in comparison to the size of the ImClone deal. In January, Roche and Genentech acquired rights to the Phase II anticancer agent OSI-774 for a total investment (including milestones) of $187 mil. (² (Also see "Genentech Will Market OSI Cancer Drug In U.S. Under Three-Way Deal" - Pink Sheet, 15 Jan, 2001.)). Pharmacia licensed the anti-TNF antibody CDP-870 in March for $50 mil. up-front and up to $230 mil. in additional milestones, including sales milestones (³ (Also see "Pharmacia/Celltech Anti-TNF Antibody Deal Includes $50 Mil. Up Front" - Pink Sheet, 12 Mar, 2001.)).

The deal with the most potential to approach (or exceed) the scale of the ImClone price would have been AstraZeneca's statin Crestor, but the company decided to market the cholesterol drug without a partner (⁴ (Also see "AstraZeneca To "Go It Alone" For Crestor, Cites Large Market Opportunity" - Pink Sheet, 30 Jul, 2001.)). AstraZeneca's decision may have indirectly benefited ImClone: Bristol was believed to be one of the bidders for Crestor, and the company may have been willing to devote more resources to the ImClone agreement once Crestor was no longer available.

Another timing element may have made Bristol more comfortable with a large up-front fee: the pending DuPont acquisition will already disrupt Bristol's profit reports for 2001 and 2002 (⁵ (Also see "Bristol/DuPont Is Timely Deal: Will Disrupt Difficult 2002, Add To 2003" - Pink Sheet, 11 Jun, 2001.)).

Bristol will take a $1 bil. pre-tax charge for the ImClone deal on top of a $2 bil.-$3 bil. charge for DuPont. Bristol predicts the ImClone agreement will be accretive in 2004, about a year after the DuPont deal begins to contribute to the bottom line.

The co-promotion deal gives Bristol exclusive marketing rights in the U.S. and Canada, and shared rights in Japan with Merck KGaA.

Bristol will receive 40% of C225 profits. ImClone said its 60% profit split will be equivalent to 39.9% of C225 sales.

Using Bristol's $1.5 bil. sales estimate, ImClone's annual share of profits would be $600 mil. Bristol's share would be $400 mil., meaning it would take five years of sales at that level for Bristol to recoup its up-front investment.

Bristol's equity stake in ImClone would give the company another means to recoup its investment if the product lives up to the forecasts.

Under the two-part ImClone deal, Bristol will acquire 19.9% of ImClone's 14.4 mil. outstanding shares at $70 per share, for a total investment of $1 bil. The price represents a 40% premium to ImClone's Sept. 18 closing price.

The deal extends through the life of the use patent on C225, which expires in 2018. Bristol will have additional product rights as part of the agreement, including the right to first offer for ImClone's investigational oncologic 2C6 should the company decide to seek a marketing partner in the next five years.

Bristol will also have right of first negotiation for the next five years on all other ImClone products in development.

ImClone began the rolling BLA submission for C225 in June, and hopes to complete the filing in November. A six-month review would allow for approval in the first half of 2002.

ImClone expects C225 to be considered by FDA's Oncologic Drugs Advisory Committee at its Feb. 27-28 meeting. The companies are seeking an initial indication for irinotecan-refractory colorectal cancer.

"We feel very comfortable...with the data that we have accumulated thus far, that we will be on the February ODAC panel meeting," ImClone CEO Samuel Waksal, PhD, told analysts during a conference call.

The BLA is based on Phase II data in combination with irinotecan (Pharmacia's Camptosar) as well as a single-agent study.

In the combination study, a partial response was reported in 22.5% of patients, or 27 of 120. The disease was stabilized in an additional nine patients (7.5%). Single-agent trial results should be ready in October. The most common side effect is an acne-type rash.

In response to analysts' questions as to whether Phase II data alone would be adequate for approval, Bristol Chief Scientific Officer Peter Ringrose, PhD, noted that the approval of Novartis' Gleevec (imatinib) "was based on a pretty small database and pretty dramatic efficacy data. We feel this is a very similar situation to our own."

Taxol (paclitaxel) was approved using Phase II data, Lane noted. "It is not uncommon for FDA...to approve drugs on the basis of Phase II data, particularly when they're being looked at in areas for which there is no alternative. C225 certainly meets that criteria."

Cetuximab has also shown a 23% response in Phase II head and neck cancer studies; Phase III is underway. In pancreatic cancer, combination cetuximab/gemcitabine almost doubles gemcitabine's (Lilly's Gemzar) one-year 18% survival rate to 33%, Ringrose said.

Bristol sees a much larger role for C225 beyond its initial indications. The company said that the overexpression of the epidermal growth factor receptor occurs in 70% of colorectal tumors, 85% of non-small cell lung cancer tumors, and nearly 90% of head and neck and pancreatic tumors.

"We're looking at this compound as potentially being a cornerstone of combination therapy in a number of solid tumors, with the opportunity to build that out through clinical development programs," Bristol Exec VP Don Hayden said.

Hayden compared C225's potential in Bristol's oncology program to paclitaxel. "If one thinks back to the early days of our experience with Taxol, [it was a] new class of therapy, and a compound that became a cornerstone of combination therapy on a large number of solid tumors," he said.

C225 is being studied in combination with a number of other cancer drugs, including some of Bristol's existing oncologics: cisplatin and carboplatin.

Bristol expects C225 to be alone in the EGF category before the two other "main players" are approved: AstraZeneca's Iressa and Roche/Genentech's OSI-774. AstraZeneca is "about a year behind where we are," while OSI "is about two years away," Ringrose said.

Both potential competitors are small molecules rather than monoclonal antibodies. Ringrose maintained that both "have been associated with a certain amount of GI toxicity." Bristol also maintains that C225's once-weekly dosing is more convenient than Iressa and OSI-774's once-daily administration.

As with most monoclonal antibodies, production capacity will be an issue in the commercialization of C225. "If it gets a really fast start out of the gate, there's a potential for supplies being tight," Lane said.

ImClone canceled its compassionate use program for C225 this year after capacity could not keep up with demand. The company received more than 8,500 requests, but had only enough product to treat 30 (⁶ (Also see "ImClone C225 Compassionate Use On Hold Pending New Manufacturing Plant" - Pink Sheet, 25 Jun, 2001.)).

Initial commercial supplies will be manufactured by Lonza Biologics; the contractor has committed to producing 25 runs per year in a 5,000 liter fermenter.

In June, ImClone completed construction on an 80,000 square foot manufacturing facility with three 12,500 liter fermenters in Somerville, N.J. The company expects to receive approval "sometime after the product launch," Waskal said. ImClone is also breaking ground on a second facility at the end of October.

Bristol "may have the potential to add capacity through our Syracuse site," Lane said. "We'll look closely at it, we think that we are in a strong position to supply what the market needs will be." The deal was expected to be considered by the companies' boards on Sept. 11; the announcement was postponed by the terrorist attacks.