ImClone Systems, Inc. (IMCL)

ImClone Systems Incorporated (ImClone) is a biopharmaceutical company that is focused on development of oncology therapeutics. With various drugs in the pipeline, addressing the medical needs of patients affected with cancer, the company’s only commercial product in the market is Erbitux, which is also undergoing clinical trials for broader use.


The company posted robust results in fiscal 2006, with revenues surging by 76% and bottom-line increasing four-fold. The given increase in topline is due to ramp up in sales of Erbitux, which has generated U.S in-market revenues of $652.2 million; the drug is being marketed by Bristol-Myers Squibb. Imclone gets 39% of the U.S in-market revenues besides reimbursement for all clinical trials for the drug.


Erbitux was approved for metastatic colorectal cancer (MCC), in February 2004 and for Head and Neck Squamous Cell Carcinoma (HNSCC) in March 2006. Revenues stream from MCC is losing momentum due to intense competition from Genentech’s Avastin and recently launched Amgen’s Vectibix. However, greatest potential opportunity for Erbitux may lie in Non-Small Cell Lung Cancer (NSCLC), with a $4.0 billion overall addressable opportunity in front-line NSCLC. The company is expected to release data from Phase III trails for NSCLC in fiscal 2007 and this event is likely to have profound impact on company’s stock price.


The company’s valuation seems reasonable taking in account its recent financial performance. The growth outlook for the company is quite clouded though and this fact appears to be already in the price. However if the company gets a positive trigger from its research and development front, it might get re-rated. To sum it up, it seems to be a story where negatives have been factored in whereas the potential positives may not be yet fully reflected in the price. Consequently, the stock has the potential to outperform in the medium-term.