Back Into IMCL

Investing note:  I reopened my long position in ImClone Systems (NASDAQ: IMCL) today @ 40.50.  The negative effect from the news release earlier this week wasn't nearly as strong as I thought it was going to be.  My expectation is that there is going to be a healthy run in this stock at some point between now and mid June, and after struggling with this one for so long I just don't want to miss it.  Naturally there is risk, but we already know IMCL will be moving into 2nd and 1st line colorectal cancer treatment, so the downside risk is somewhat mitigated.

Avastin Quarterly Sales Up 34% Year Over Year

Sales of Genentech's (NYSE: DNA) Avastin in the first quarter this year are reported to have increased 34% over the same quarter last year from $398 to $533 million dollars.  When they file their form 10-Q with the SEC, I believe you will find that Avastin sales in metastatic colorectal cancer over that period are more-or-less flat, while the lion's share of that increase comes as a result of Genentech's having received FDA approval of for its use in combination with chemotherapy agents carboplatin and paclitaxel for first-line treatment of patients with unresectable, locally advanced, recurrent or metastatic non-squamous, non-small cell lung cancer.  That FDA approval came on Oct. 11, 2006.  While not yet FDA approved for treatment of breast cancer, I believe an increasing number of oncologists are also using Avastin off-label in this indication, which also contributed to the increase.  Additionally, opthamologists are using Avastin off-label in the treatment of choroidal neovascular membrane (CNV) in age-related macular degeneration (AMD).

Avastin (bevacizumab) is an anti-VEGF humanized antibody approved for use in combination with intravenous 5-fluorouracil based chemotherapy as a treatment for patients with first- or second-line metastatic cancer of the colon or rectum.  VEGF is an acronym for “vascular endothelial growth factor,” a protein that stimulates the growth of new blood vessels from pre-existing vasculature.

The Analysts Finally Begin to See the Light of Day

Some excerpts from an article by Adam Feuerstein on ImClone for TheStreet.com, Apr. 7, 2007 (all emphasis mine):

[. . .] I have had a love-hate [emphasis on the word “hate”—Rob] relationship with ImClone for years. I've done some of my best work on the stock and, sadly, some of my worst.

[. . .]I think ImClone has a very good stretch ahead of it.[. . .]

At next week's annual meeting of the American Association of Cancer Research, ImClone will be presenting positive survival data from a study of Erbitux in third-line colon cancer as well as positive data from a study combining Erbitux and chemotherapy in second-line colon cancer.

[At the ASCO meeting in June] we'll get more good Erbitux data, including first-line colon cancer data combining Erbitux and chemotherapy (the so-called Crystal study) as well as new and positive data on Erbitux in head-and-neck cancer.

[Referencing a Southwest Oncology Group trial, there is also] Erbitux data from a big pancreatic cancer trial any day.

[. . .] I also think some of the new colon cancer data we'll get in the next few months will help Erbitux gain share in the second-line colon cancer treatment market.

I don't think Erbitux is powerful enough, necessarily, to go after Genentech's (DNA) Avastin in front-line colon cancer, [I disagree.—Rob] but ImClone still wins if doctors see Erbitux as the go-to second-line drug for their colon cancer patients.

This stuff Feuerstein is now (mostly) saying is the stuff I've been preaching for a couple years now. Note the hallowed reverence with which Mr. Feuerstein still prostrates himself before the Avastin juggernaut. I guarantee that behind closed doors Genentech management is not taking a light view of Erbitux about now.