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CNN Live Today

SEC Considers Legal Action Against Imclone

Aired June 20, 2002 - 13:57   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
FREDRICKA WHITFIELD, CNN ANCHOR: The Securities and Exchange Commission is considering legal action today against the embattled drug maker Imclone. The company's former chairman and chief executive is accused of tipping off certain people to sell company stock. One of those people under investigation in a separate case is home-making queen Martha Stewart. And CNN financial news correspondent Allan Chernoff joins us now from New York with very latest on the investigation. Hey there, Allan.

ALLAN CHERNOFF, CNNfn CORRESPONDENT: Fredricka, hi. And a somewhat ironic situation today with regard to "Martha Stewart Living," the television program, because today, this morning, the program actually ran a rerun, taped more than a year ago with Congressman Billy Tauzin of Louisiana, all about cooking Cajun. What makes this especially ironic is that it's Congressman Tauzin who is conducting the investigation to see whether or not Martha Stewart was engaged in insider trading with regard to the Imclone stock.

Now, a congressman spokesman said, is this some sort of valentine? Martha Stewart has said she did not engage in insider trading, and Martha Stewart Living has not returned our phone calls with regard to the scheduling of this TV program this morning.

Now on a slightly more serious note, the Securities and Exchange Commission has said that it is planning to file charges against Imclone Systems with regard to its public announcements when the Food and Drug Administration rejected its Erbitux cancer drug last December. Now when that happened on December 28, the company put out a fairly vague press release, saying it was planning to meet with the Food and Drug Administration and find out exactly what the problem was, and that it did hope to get approval in due time.

Let's have a look, though, at the actual letter from the Food and Drug Administration, and this appears to be what the SEC is focusing on.

First of all, the refusal to file letter said, "The application is scientifically incomplete in that it does not contain the data needed to evaluate the clinical effectiveness of your product."

This was a scathing letter, and the company simply did not reveal any of the contents.

Let's look at some more: "You have not provided data to confirm that all subjects enrolled were unresponsive to Irinotecan."

Irinotecan is a type of chemotherapy that is given along with Imclone's drug, Erbitux. It basically was supposed to be excluded from the clinical trials, and here the FDA is saying had a serious problem with the way that the trials were actually conducted.

And finally the FDA said: "The current study was not adequate and well controlled. ... you will need to conduct additional studies."

Now in a teleconference on December 31, the next business day after Imclone received those letters, Sam Waksal, the former chairman and CEO of the company, told investors, quote: "I was rather stunned when we got the letter. I have to tell you this was unexpected."

Clearly, very unexpected also by Imclone stockholders. The stock plunged from $58 a share. It is now trading below $10 a share -- Fredricka.

WHITFIELD: All right. Thank you very much, Allan Chernoff. I appreciate it.

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