US biotechnology company, ImClone Systems, has agreed to make a major payment to settle two lawsuits relating to insider trading allegations made in early 2002 about its colorectal cancer drug Erbitux (cetuximab). As a result of this move, ImClone said it would take a one-time charge of around $55.4 million dollars against its fourth-quarter 2004 earnings.
Under the terms of the deals, the company will settle a class action suit for $75 million, some of which will be paid by Imclone’s insurance companies, so all claims against the firm and the other defendants will be dismissed with no admission or finding of wrongdoing.
Additionally, ImClone also agreed to settle a derivative suit, noting that its insurers will pay $8.75 million. Again, all claims against the defendants will be dismissed, but the company “will retain the right to continue to pursue certain claims” against former chief executive Samuel Waksal, who was sentenced to seven years in prison in 2003 after pleading guilty to criminal charges of insider trading.
This latest settlement comes just a week after Mr Waksal and his father settled an insider-trading case with the US Securities and Exchange Commission for more than $5 million. The SEC accused Mr Waksal of trying to sell almost $5 million worth of ImClone shares and tipping off his father and other investors after learning that the US Food and Drug Administration was likely to reject Erbitux [[22/01/02a]].
The drug was subsequently approved in the USA [[13/02/04b]], and although initial sales were disappointing, Imclone hopes that a new US government-sponsored clinical trial pitting Erbitux against Genentech’s Avastin (bevacizumab) in patients with a new colorectal cancer diagnosis will give its drug a competitive advantage [[18/01/05e]] and consign the legal wrangles to history.