Goldman Sachs: ImClone's Erbitux poised for growth

In a note to investors Thursday, Goldman Sachs analyst May-Kin Ho said she expects Erbitux sales to remain modest in 2008, but gain ground in 2009 with possible approvals for first-line treatment of colon, head and neck, and lung cancer. The drug is already approved as a treatment for colon cancer that has spread to other parts of the body and for head and neck cancer that has relapsed.

The company plans on asking for first-line head and neck cancer approval in mid-2008, lung cancer approval during the fourth quarter and colon cancer approval during the first quarter of 2009

Ho said recent study data focusing on Erbitux's relation to the gene known as KRAS could have a modest negative impact on colon cancer sales, but a positive impact in other indications. She said Erbitux will still likely be used mostly for patients who can't be treated with Avastin, bringing a sales potential of about $500 million.

Ho reaffirmed a "Buy" rating with a $50 price target, implying upside of nearly 28 percent over its closing price Thursday of $39.10.

Overall, analysts have been looking to Avastin to continue leading the cancer treatment market. At the American Society of Clinical Oncology's annual meeting in Chicago earlier in June, ImClone said adding Erbitux to chemotherapy added five weeks to a lung cancer patient's life. But, analysts reaffirmed their top outlook for Avastin because its survival benefit is nearly a month longer.

However, because many patients can't take Avastin because of blood disorders or blood thinner regimens, analysts think Erbitux will be the prescription of choice for that patient population.

Avastin, which is FDA-approved to treat colon, lung and breast cancer, is Genentech's key revenue driver and brought in just under $2.3 billion in 2007. Erbitux had sales of about $1.3 billion in 2007.

Shares of New York-based ImClone dropped 84 cents, or 2.2 percent, to $38.24, while shares of South San Francisco, Calif.-based Genentech rose 10 cents to $73.90.