SEC May Consider Action Against ImClone

ImClone Systems Inc. said Wednesday that federal regulators are considering taking action against the troubled drug maker for failing to accurately disclose information in December about an experimental cancer drug.

ImClone said it received a notice saying staff at the Securities and Exchange Commission may recommend the SEC penalize the company for disclosures it made, or did not make, to the public immediately after learning that regulators had declined to accept its drug, Erbitux, for review.

Any action would be separate from initiatives taken by the SEC against ImClone’s former chief executive, Samuel D. Waksal, who was arrested last week on charges of insider trading in the company’s stock.

ImClone shares rose 3% to $11.41 on Nasdaq, but fell $1.41 in after-hours trading on Instinet.

On Dec. 28, the Food and Drug Administration told ImClone that it would not consider reviewing the company’s marketing application for Erbitux.

In a conference call with analysts and investors several days later, ImClone said the agency’s concerns were over how the company documented its evidence.

The company said that although an independent radiology group tested patients in clinical trials and recorded improvements in their condition, the FDA was dissatisfied with the documentation that should have backed up the results.

“We didn’t understand the importance of making sure we documented the pathway of how the doctors reached their conclusions,” Harlan W. Waksal, ImClone’s chief operating officer at the time, told investors. Harlan, brother of Samuel, now is chief executive.

It subsequently emerged--first through portions of the FDA’s letter to ImClone leaked to the Cancer Letter, an industry newsletter, and most recently in a congressional hearing to determine whether ImClone defrauded investors--that the FDA’s concerns were significantly deeper.

The FDA, it now is clear, believed the trials themselves to be flawed. A number of patients should not have been included in the trial. Their presence may have distorted the results, the FDA said last week at a public hearing in Washington.

The depth of the problems probably will cause a far longer delay in Erbitux reaching the market than a simple problem of documentation would have.

ImClone can respond to issues raised in the SEC notice and said it plans to cooperate fully.