Author of
THE CELL GAME:
Sam Waksal's Fast Money and False Promises—
and the Fate of ImClone's Cancer Drug
Q. The fate of Erbitux, the ImClone cancer drug at the center of the Waksal story, is confusing. Could you explain whether the drug will reach the market and why it hasn't until now?
Alex Prud’homme: Erbitux has been in development for over twenty years, at a cost of over $200 million, and during that time has been through a lot of ups and downs. Sam Waksal promised it would be on the market by June 2002, and would become a $1-billion a year drug. But in December 2001, the FDA ruled that ImClone’s clinical trials for Erbitux were so poorly done that the drug could not be approved. This bad situation was made worse by Waksal’s insider trading of ImClone stock, the subsequent investigations, and numerous problems at Bristol-Myers Squibb, ImClone’s partner. These setbacks have allowed competing drugs to catch up to Erbitux.
Nevertheless Erbitux remains a promising cancer drug. It seems to help shrink the tumors of some cancer patients – 10% of those who take it alone, and 22% of those who take it with chemotherapy. The drug is not a cure for cancer, and it doesn’t help everyone, but it helps to extend the lives of certain patients who have no other therapy options – and that in itself is good news.
The plan is for ImClone and Bristol-Myers to use new data to re-apply to the FDA for approval of Erbitux by the end of 2003. It remains to be seen how the FDA will respond, although early indications are good.
I think everyone hopes there is a happy ending to this story and that cancer patients soon have a new drug. But with ImClone you never know what is going to happen next. Even though Sam Waksal is going to jail and ImClone’s stock is up, the market and regulatory environment continue to change and the investigations and lawsuits against ImClone and Bristol-Myers are ongoing.
Q. That's a pretty amazing story. How much of a role did Sam Waksal's personality play in the rise of ImClone? And in the fall?
AP: Sam’s personality defined his company and its drug – for better and for worse. It is doubtful that ImClone and Erbitux could have come this far without Sam Waksal’s efforts; it is equally doubtful that any other biotech CEO would have acted as recklessly as he did.
Although he did not invent Erbitux (the lead scientist was Dr. John Mendelsohn, a highly respected oncologist), Sam’s dynamic energy, his willingness to take risks, his willful optimism, and his social/ scientific/business connections – to people like Martha Stewart and Carl Icahn – led to the dramatic rise of ImClone. But those same attributes nearly destroyed the company and its drug.
Today, Sam is going to prison for seven years (for insider trading), his brother Harlan has been demoted at ImClone, the board has been shaken up, and the much more experienced Bristol-Myers Squibb – which made a record-setting $2 billion bet on Erbitux – seems to be quietly taking over the development of the drug. This is a classic example of professional managers taking over from creative but flawed entrepreneurs.
Q. Biotech seems to go in and out of favor. Could you give us a sense of where the industry is going and what effect the Waksal scandal has had on it?
AP: The term “biotechnology” refers to the use of living organisms or their products to modify human health and the environment. The word was coined in 1919, by a Hungarian engineer named Karl Ereky, who predicted a coming “Biochemical Age” much like the Stone Age, Iron Age and Industrial Age. To a certain extent, we are living in that age now – with the decoding of the human genome, the invention of genetically-engineered corn, the development of biological weapons, and the exciting science of new cancer drugs like Erbitux.
But while Wall Street aims to maximize its return quickly and reliably, the truth is that most experimental drugs fail and biotech is a very risky business.
In the last two years, ImClone has played a central role in lifting the entire biotech market (as a result of its $2 billion deal with Bristol in 2001) and then flattening it (as a result of Waksal’s shenanigans in 2002).
Today, many new biotech products are coming to market; biotech indexes are up 30-percent, and there is a wave of mergers and acquisitions underway. There has never been so much money in this sector, nor has there ever been such a high rate of failure.
To a certain extent, ImClone epitomizes the potential risks and rewards of biotech.
Q. Obviously, a big part of Waksal's life was his socializing and social ambitions. His fall has brought down several famous people in disparate worlds. Could you give us a sense of how far the effects of his conviction will be felt?
AP: Sam had a genius for parlaying social connections into business opportunities, and vice-versa. He stocked the ImClone board with notable scientists and financers – such as Vincent DeVita, the former head of the National Cancer Institute, and former treasury secretary Pete Peterson – which attracted investors and good press.
But his failure to play by the rules has negatively impacted a wide range of people, most notably Martha Stewart and her daughter Alexis, but also Merrill Lynch brokers Peter Bacanovic and Douglas Faneuil, Bristol-Myers CEO Peter Dolan, art dealer-to-the-stars Larry Gagosian, politicians like Charlotte Beers, Hillary Clinton and Libby Pataki, and many others – including mom and pop investors, the FDA, and even his own father and daughter.
In all of the talk about who made or lost how much money with Sam Waksal, one group of people is consistently overlooked: the cancer patients who were supposedly the focus of his life’s work. What sets Waksal’s corporate crimes apart from those of Enron and WorldCom is that his actions had not only financial but mortal consequences.
