WASHINGTON, Jan. 26 (UPI) -- ImClone's earnings for the fourth quarter of 2006 beat Wall Street's expectations, and some analysts think the company looks to be on solid ground going forward despite lagging sales of Erbitux.
David Witzke, an analyst with Bank of America, reduced his forecast for 2007 earnings per share but said he sees strong potential from Erbitux and the company's cancer pipeline.
"With an enterprise value of $1.8 billion, we believe (ImClone's) current valuation does not fully reflect the potential for Erbitux label expansion and the company's promising monoclonal antibody cancer pipeline," Witzke stated in a research report issued Friday.
"While there is still considerable 'hair' on this story, including the need to find a permanent CEO and obtain a non-exclusive Yeda license, we like the risk/reward of (ImClone) in front of important Erbitux colorectal cancer data presentations at AACR and ASCO," he added.
In addition, Witzke noted, phase 3 pancreatic cancer data should be released in the next two months. The results are highly uncertain, but he said he likes the risk vs. reward due to the bearish sentiment from Wall Street.
He projects Erbitux will generate sales of $712 million this year.
Erbitux also may get a boost from the negative results of Amgen's PACCE study involving Vectibix for first-line treatment of colorectal cancer. Vectibix did not increase the response rate when added to the standard of care.
Witzke said if the PACCE PFS study expected in the second quarter 2007 is negative, Vectibix could be relegated to third- or fourth-line therapy. "With an estimated duration of therapy of less than 2 months in this setting, we believe Vectibix sales will quickly plateau, especially considering the positive 1st and 3rd-line Erbitux PFS and survival data to be presented at AACR and ASCO in 2Q07," he stated.
Witzke did not respond to United Press International's request for comment.
ImClone Thursday reported its fourth-quarter 2006 earnings per share came in at $0.53, significantly ahead of the Street's consensus of $0.43. Total revenues, however, at $132.2 million fell short of the consensus expectation of $155.9 million.
U.S. sales of Erbitux also came up short at $167.2 million compared to the Street's consensus expectation of $180.3 million. Erbitux did better in Europe, generating sales of $125 million and beating some analysts' forecasts.
Morgan Stanley analyst Steven Harr said he was concerned by ImClone's rapid acceleration in expenses.
This "will have a negative impact on earnings for years to come," Harr stated in a research report. "We appreciate the need to diversify the company's long-term dependence away from Erbitux and recognize that this decision may be the best one for the long-term health of the company, but we were surprised by the magnitude of growth in operating expenses as the company moves multiple early-stage assets through clinical development."
Morgan Stanley, in response to UPI's request for comment, said Harr does not speak to the press.
Michael G. King Jr., an analyst with Rodman & Renshaw, acknowledged Erbitux's lagging sales are a concern, but he saw a positive future for ImClone.
"We continue to be optimistic about the future of ImClone with multiple investment catalysts expected in the coming quarters," King stated in a research report. "In particular, we believe data presentations from the EPIC and CRYSTAL studies at this year's ASCO will draw attention to the use of Erbitux in first- and second-line (colorectal cancer)."
King did not respond to UPI's request for comment.
Jim Reddoch, an analyst with Friedman, Billings & Ramsey, saw a positive outlook and raised his rating of the stock from "underperform" to "market perform."
"We believe the stock has probably bottomed, and there are some catalysts over the next 12 months, which could cause short-term moves," Reddoch stated in a research report. "Vectibix will still be a threat, but it looks like the two drugs can co-exist and that the Erbitux numbers have become doable."
Friedman, Billings & Ramsey did not respond to UPI's request for comment from Reddoch.
