ML believes that unless there is significant market expansion, Vectibix could hurt Erbitux worse than the Street assumes because short durations of treatment make it easy for physicians to switch to Vectibix rather than Erbitux regimens for new patients.
They expect continued loss of market share to Vectibix will lead ImClone to reduce the price of Erbitux, which will hurt revenues. Firm does not expect a decision on price cuts to be made until the CRYSTAL phase 3 data in 1st line colorectal cancer is available in 1H07. They believe CRYSTAL will meaningfully benefit sales because the primary endpoint is progression-free survival, not survival, which is not enough to cause broader adoption & the regimen used in the study is not
standard of care.
With Erbitux sales now clearly declining as Vectibix captures share of its market, the firm believes it is less likely that ImClone can be acquired for a price near or above its current value. If market share continues to decline and ImClone/Bristol Myers have to lower price to compete, peak revenues are likely to fall significantly below Street estimates, reducing the company's break-up value. They currently estimate a break-up value of $25-$29, but if sales decline and Erbitux's price is cut, the break-up value could be in the low $20s or lower.
Notablecalls: Oh boy, IMCL's in trouble. Their main revenue generator is facing huge competition, there is nothing exciting in the pipeline and now the talk of the imminent takeover (it's been imminent for the past 3 yrs) is fading. Looking at the chart I suspect most market participants already know it. While I suspect the call will hurt the stock early on, it may produce a bounce later. That's how it usually works. Also, Carl Icahn may still have something up his sleeve.