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Sam Waksal's ImClone was not a company renowned for its business acumen. New management is not faring much better—at least if you believe major shareholder Carl Icahn, whose recent public rant about ImClone's incompetency led last month to the resignation of chairman David Kies and fellow shareholder William Crouse. Icahn ultimately has managed to oust the interim CEO and become chairman himself. In the midst of all this, the company has made it clear it is for sale, but has struggled to find a suitable buyer.

And now it turns out, according to New York District Court Judge Naomi Reice Buchwald, that ImClone has failed to consolidate the intellectual property (IP) covering Erbitux. On September 18, she decided that ownership of the '866 patent—which covers a method of inhibiting the growth of human cancer cells by administering monoclonal antibodies (mAbs) targeted at the epidermal growth factor receptor (EGFR) in combination with chemotherapy—belongs not to ImClone but to Yeda Research and Development, the commercial arm of the Weizmann Institute.

ImClone may actually have been ingeniously 'strategic' in its use of others' IP. Indeed, doubts have lingered for some time about the inventorship of the so-called '866 patent that covers Erbitux. In its original prosecution of the patent, for instance, the US Patent and Trademark Office (USPTO) noted with surprise that Weizmann scientists were authors of a relevant, if not central, scientific publication but were not named on the original patent application.

Then in 2000—14 months before the patent issued—Yeda discovered the existence of the '866 patent citing large amounts of the Weizmann work. Weizmann sued ImClone two years later. Finally, when Imclone exclusively licensed the technology, it agreed to prosecute the pending applications related to the '866 patent. The record shows that, at that time, the USPTO once more raised the issue of inventorship with ImClone.

From a strategic viewpoint, one might argue ImClone was smart to hold on as long as it could to its position as licensee and co-inventor of the '866 patent. This enabled the firm to secure the billion dollar deal with Bristol Myers Squibb; and it may have enabled it to muddy the waters for the emergence of Amgen's rival human mAb, Vectibix. Because it also targets EGFR, Vectibix would almost certainly fall under the '866 patent when used in combination with chemotherapy. Amgen itself licensed the patent from Yeda virtually as soon as the New York decision was made.

ImClone is probably not yet in a terminal situation. Even though it will now have to pay Yeda royalties on Erbitux, this will probably amount to <2% of sales. There may, however, be market erosion of ImClone's position. Vectibix was approved shortly after the patent ruling and Amgen is planning to price the drug 20% cheaper than Erbitux. Without royalties to ImClone, Amgen will compete on price with its rival. Death by a thousand undercuts, perhaps?