Imclone Hot Stock Pick

A relatively small drug company which has had its share of controversy, ImClone depends almost entirely on Erbitux. It’s already approved to fight colorectal cancer and head and neck cancer. But it’s also easy to see why several analysts are skeptical that ImClone can seize what could be a $1 billion opportunity.

But Erbitux may be headed for bigger things. Recent price surges can be contributed to Erbitux drug that may be useful in battling lung cancer.  ImClone, along with its Erbitux partner Bristol-Myers Squibb (BMY), announced on Sept. 11 that a large, three-year study showed Erbitux increased survival rates for patients facing non-small cell lung cancer. “It is a huge surprise,” says Hanzhong Li, an analyst with Stanford Group. An earlier, smaller study using a different chemotherapy mix had shown far less success fighting lung cancer.

Bears Stearns analyst Akhtar Samad upgraded the stock on the news. “This result was widely unexpected and opens up a new potential blockbuster market opportunity for Erbitux,” he wrote in a Sept. 11 note.

Because ImClone relies so heavily on Erbitux, the potential for profits is huge. You can expect Imclone to be a steady gainer with the potential for that one swing homerun.  Erbitux sales could result in earnings before interest and taxes of $270 million. November 3rd Quarter earning recorded of 165 million shows the backbone of this company with huge potential still unproven with Erbitux. But getting to that point won’t be easy. ImClone says the full results of the Erbitux study won’t be released until a future medical conference. The study was conducted by Merck KGaA (MRCG.DE), which hasn’t given ImClone the full data, the company says. Without the full data, it’s impossible to know exactly how effective Erbitux is, and how it stacks up against competitor drugs.

Even with good data Erbitux might have trouble winning FDA approval because of previous results for Erbitux alongside chemotherapy commonly used in the U.S. Approval could take a year or more, so extra sales may not fully show up until late 2009.

Still, ImClone looks to be at “an inflection point.” Its new CEO, John H. Johnson, was most recently chairman of Johnson & Johnson’s worldwide biopharmaceuticals unit. It announced recently that one of its patent disputes had been settled. Many investors like the way Icahn is shaking up ImClone. Though Erbitux remains the sole breadwinner and one swing grandslam for ImClone, a couple other drugs under development show promise which makes ImClone a good bet regardless of any homeruns with Erbitux.