A court in New York, USA, dealt a punishing blow to US biotechnology company ImClone Systems after ruling that it cannot claim ownership of a patent covering Erbitux drug for colorectal cancer.

ImClone has said it will now appeal the ruling and seek a judgment to invalidate the patent, which in the judge’s opinion should be assigned to three scientists working at Yeda Research and Development, a commercial arm of Israel’s Weizmann Institute.

Erbitux is ImClone’s only marketed product, co-marketed to Bristol-Myers Squibb in the USA and licensed to Merck KGaA in Europe. According to the ruling in the New York case ImClone may be forced to pay royalties on revenues from Erbitux (cetuximab) in the region of 2% to 3%, according to analysts at Citigroup.

Moreover, if Yeda decides to offer a non-exclusive license to the patent ImClone comes under even greater threat as it could allow B-MS to renegotiate the terms of its deal on the grounds of a material change to the conditions.

Shares in ImClone reacted accordingly and fell 4.5% yesterday to $29.16, well down from their 52-week high of $43.08, while B-MS also decline a little under one point to $24.71.

ImClone licenses the disputed patent, which covers the use of monoclonal antibodies targeting epidermal growth factor receptor (EGFr) in combination with conventional anticancer drugs in cancer, from Sanofi-Aventis. More than three quarter’s of Erbitux’ use is as a combination therapy.

The ruling comes at a terrible time for ImClone, which tried and failed to find a buyer for the business earlier this year and is currently trying to find a new chief executive to steady the business over the coming months.

A major event on the horizon is the expected introduction of the first rival to Erbitux, Amgen’s Vectibix (panitumumab), which could be approved as a third-line monotherapy later this month in the USA.

And if Amgen could secure a license to the disputed patent from Yeda, it could avoid potential litigation with ImClone over the use of Vectibix in the adjuvant setting.