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07. rt„ . tr,;!, %,10 - v.Vp,-,Di.ATEs DISTRICT COURT .„71. j () t,idliTITERN DISTRICT OF NEW YORK 5 . " „At •`, • Isa•—•
— ROBERT IRVINE, on behalf of himself and all others similarly situated. Index No
Plaintiff. CLASS ACTION COMPLAINI - against - I IMCLONE SYSTEMS INC., SAMUEL D. JL-RY TRIAL DEMANDED WAKSAL, and HA.RLAN W. WAKSAL.
Defendants. r ) •
Plaintiff, individually and on behalf of all others sniniarly situated. by his attorneys, alleges,
the following based upon the investigation of his counsel, except as to allegations specificalli
pertaining to plaintiff and his. counsel, which are based on personal knowledge The investigation
of counsel is predicated upon, among other things. a review of press releases issued by mC lone
. Systems Inc. (In-Clone- or the "Company"), media reports about the Company. , publicly
available trading data relatin g to the price and volume of lniclone's common stock and a review
of reports issued by analysts who follow ImClone.
NATURE OF THE ACTION
1. Plaintiffbrings this actions as a class action on behalf- of himself- and all other
persons or entities who purchased ImClone common stock on ',he open market, other than
defendants and certain related persons and entities, during the period beginning on May 12_ 200 1.
through January 4, 2002, inclusive (the "Class Period"), to recover damages caused to the Class
by defendants' violations of the federal securities laws.
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2. Plaintiff alleges in this action that during the Class Peiiod defendants made
materially false and misleading statements about (1) the efficacy of Erbitux, ImClone's new
"blockbuster" drug for the treatment of cancer, and (2) the progress of its application for the
Food and Drug Administration's ("FDA") approval or Eibitux. As a I esult uf the defendants'
misrepresentations, the market price of IniCloile stock was artificially inflated during the Class
Period.
3. Defendants represented during the Class Period that its Phase It test results for
Erbitux were strongly confirmatory of its primary endpoint (tumor regression). The foregoing
representations were materially misleading among other things because ImClone had failed to
document that patients in the Phase II test had failed to experience tumor regression after
chemotherapy (which was a requirement of the Phase if protocol).
4. linClone shares traded as high as $75 45 per share during the Class Period. On
December 28, 2001, In-Clone issued a press release, disclosing that the FDA had rejected its filing
of a Biologics License Application ("RI .A") for Erhitux The first trading day after the issuance
of the press release, on December 31, 2001. ImClone's shares plummeted $11.15. or 20%. to
$44.10. On January 4, 2002, The Cancer Letter revealed the true contents of the FDA's
December 28, 2001 letter to ImClone, including the fact that imCione was repeatedly informed
ahout the problems with the clinical trials hy the FDA during the Class Period. After these
additional facts were disclosed, ImCione fell further to open on .January 7, 2002 at $34.96 per
share.
JURISDICTION AND VENUE.
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... ,: ... 5. This Court has jurisdiction over the subject matter of this action pursuant to
ci:•'" Section 27 of the Securities Exchange Act of 1934 (the "Exchange Act"), 15 U.S.C. §78aa and •7 - ..;.t. ..-.: • 28 U.S.C. §1331. The claims asserted herein arise under Sections 10(b) and 20(a) of the .44...... ilk Exchange Act, as amended, §78j(b) and §78t(a), and Rulel0b-5, 17 C.F.R. §240.10b-S, Viii:•••• Ai.. promulgated thereunder by the SEC.
6. Venue is proper in this District pursuant to Section 27 of the Exchange Act and 28
U.S.C. §1391(b). Many of the acts and transactions giving rise to the violations of law
complained of herein, including the preparation and dissemination to the investing public of false
and misleading intbrrnation, occurred in this District. In addition, lmClone maintains its principal
executive office within this District.
7. In connection with the acts, conduct and other wrongs alleged in this Complaint,
, the defendants, directly and indirectly, used the means and instrumentalities of interstate
commerce, including the mails, telephone communications and the facilities of a national securities
exchange.
THE PARTIES
- 8. As set forth in the attached certification, plaintiff Robert Irvine purchased the , common stock of ImClone during the Class Period at artificially inflated prices and was damaged ..4.tI'lr. ,. j' thereby. The plaintiff-7 s purchases are reflected in the Certification attached to this Complaint. 9. Defendant ImClone is a Delaware Corporation with its principal executive offices
located within this District at 180 Varick Street, New York, New York 10014. ImClone is a
biopharmaceutical company that purports to develop therapeutic products for the treatment of
cancer, such as growth factor blockers, cancer vaccines, and angiogenesis inhibitors. At all
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t•'...,:. . relevant times, ImCione's common stock actively traded on the NASDAQ National Market under 1:4••• • • -''•:,..: t4•:': i• the symbol "IMCL." ...,•:.:-..::. ....,;4•4..„,,:...:.: 14. 10. Defendant Samuel D. Waksal is and has been President of ImClone since March , • ,!-E:•• . . -,•:.:. . ..0•:!..• • 1987 and has served as its Chief Executive Officer and director since August 1985. He is a .•`...:._. :,,...... i.,.. founder of the Company.
11. Defendant Harlan W WaksaI has served as TmCionc's Executive Vice President
and Chief Operating Officer since March 1987 He is a founder ofirnClone and has been a . • director of the Company since April 1984. Also, he has directed IniClone's research and
development since April 1985. He is the brother of Defendant Samuel D. WaksaI.
12. Defendants Samuel Waksal and Harlan Waksal are collectively referred to herein
as the "Individual Defendants."
13. By virtue of their positions at ImClone, the lndividuai Defendants had access to
the adverse and undisclosed information about the efficac y of Erbitux as contained in the clinical
trial data and the progress oftmClone's application for FDA approval of Erbitux. The Individual
; Defendants directly participated in the management of In-Clone, were directly involved in the - operations of ImClone at the highest levels,. were privN to information concerning the clinical trials
of Erbitux and InaCIone's application for FDA approval of Erbitux, and were involved in the
dissemination of the materially false and misleading statements and information alleged herein.
14. By reason of their positions as executive officers and directors of ImClone, the
Individual Defendants were at all relevant times controlling persons within the meaning of Section
20 of the Exchange Act. Because of their executive and directorial positions with ImClone. the
individual Defendants had access to adverse, non-public information about the future business
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, ...... 1.'' 4..i:.:.::.. • 1;n;,•:.... - ' V ... prospects of ImClone, in particular information about the efficacy and FDA application status of .. ... „ •,...i...,1 Erbittix, which was touted by defendants as 1mClone's "lead product candidate.' Further, as particularized herein, the Individual Defendants were able to and did control the contents of .kY . .k•. i, .:.- various reports and public statements regarding IniClone and Erbitux. Any acts attributed to .4... e..;,... :1i... ImClone were caused and/or influenced by the Individual Defendants by virtue of their
,.• controlling-person positions at ImClone 15. As the senior officers and directors of a publicly-held company whose common
stock was, and is, registered with the Securities and Exchange Commission ("SEC") pursuant to
the Exchange Act, traded on the NASDAQ National Market, and governed by the provisions of
the federal securities laws. the Individual Defendants have a duty to promptly disseminate
accurate and faithful information about the efficacy of Erbitux and the application status for
FDA's approval of Erbitux, so that the market price of IsnClone's publicly-traded securities would
be based upon truthful and accurate information. The Individual Defendants misrepresentations .. and omissions during the Class Period violated these specific requirements and obligations. By
virtue of their positions of control and authority at IinClone, the Individual Defendants had the .
power to and did control the content of the various public statements concerning linClone and
Erbitux during the Class Period and indeed made many of the challenged statements described
herein. Accordingly; the Individual Defendants were responsible for the accuracy of the public
statements and releases detailed herein and are primarily liable for the misrepresentations , contained therein.
SUBSTANTIVE ALLEGATIONS
Background
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16. ImClone develops Erbitux (also known as IMC-C225). ImClone has conducted
clinical trials on Erbitux's effects on patients with cancer, with a view to receive FDA approval to . . market Erbitux According to linClone's Fol [n 10-K, which was filed with the SEC on April 2,
2001, Erbitux "is a therapeutic monoclonal antibody that inhibits stimulation of a receptor for -as... •
growth factors upon which certain solid tumors depend in order to grow."
17. Erbitux supposedly inhibits the action of epidermal growth factor ("EGF"), a
protein that causes tumor growth. Specifically, Erhitux binds to places on the surface of tumor
cells where the growth factor usually docks, displacing the protein and thus inhibiting growth of
cancerous cells
18. Imelone has represented that Erbitux is among a series of experimental cancer
drugs that are expected to revolutionize cancer treatment. According to ImClone, unlike the
conventional chemotherapy drugs, these next-generation cancer drugs specifically target cancer • cells. The greater specificity of these new drugs is expected by IniClone to result in a reduction of
side effects in patients while effectively treating cancer.
19. The other EGF receptor drugs in development and trial include Iressa from
AstraZeneca, OSI-774 from OSI Pharmaceuticals Inc., Roche and Genentech, and ABX-EFG
from Abgenix Inc. and Immunex Corp.
20. Investors and seculities analysts eagerly await positive news from the research and
development of these EGF receptor thugs. Successful development and trial of these next-
generation drugs would generate substantial revenue and profit, and significantly boost the share
prices of these pharmaceutical companies, including Imelone.
The FDA Review Process
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21. linClone's Erbitux leads the pack of EGFieeeptoi drugs in the 'ace to [each this
• profitable market in 2002. Erbitux is the first EGF receptor drug to reach the FDA review
process.
22. In February, 2001, the FDA granted 1mClone a Fast Track designation for Erbitux
•.. in the treatment of irinotecan-refractory colorectal cancer. A Fast Track designation allows an
expedited FDA review of a drug ifit is intended for the treatment of a serious or life-threatening
condition, and it demonsiiates the potential to address unmet medical needs for such a condition.
23. On June 28, 2001, ImCione initiated the filing of a rolling Biologic License
Application ("PIA") with the FDA For approval of Erbitux in combination with the
chemotherapeutic agent irinotecan to treat irinotecan-refractory colorectal cancer.
24. A rolling BLA is a FDA provision which allows sections of a BLA to he submitted
on an ongninu basis if (1) the clinical trials that would form the basis for the FDA's determination
of the safety and effectiveness of the product and that would support drug labeling are nearing
completion or have been completed; (2) the FDA agrees that the product continues to meet the
criteria for Fast Track designation; and (3) the FDA agrees that preliminary evaluation of the
clinical data supports a determination that the product may be effective.
25. On October 31, 2001, as announced in an In-Clone press release on November 1,
2001, innCione completed its rolling BLA. submission to the FDA for approval of Erbitux for the
treatment of irinntecan-refractor' colorectal cancer.
26. Under applicable regulations, the FDA must accept or reject a BLA submission
within 60 days of the completion of the rolling BLA submission (December 31, 2001 for ImClone,
given its submission date of October 31, 2001). However, under its internal rules, the_ FDA
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•;*:',. • usually makes an internal decision to accept or reject a BLA within 45 days of submission
;' .1 • (December 15, 2001 for Imelone).
27. Completing tlie rolling BLA submission on October 31, 2001 and obtaining FDA
acceptance of the filing by December 31, 2001 were crucial objectives for ImClone. Meeting
these tight deadlines and objectives would allow ImClone to obtain an important slot for Erbitux
on the agenda of the February 27-28, 2002 meeting of the FDA's Oncologic Drug Advisory
Committee. A favorable decision by FDA's Oncologic Drug Advisory Committee would mean
that the FDA could approve Frbitux in as early as the first half of 2002. This would allow
InaCione to maintain and consolidate Erbitux's lead position among the EGF receptor drugs in the
race to reach the profitable market
28. On the other hand, failure to get Erbitux scheduled for the February 2002 advisory
panel meeting could spell financial disaster fcr ImClone. Such failure would push Erbitux to the
next scheduled advisory panel meeting, which will not take place until June 2002. The resultant
significant delay would cause Erbitux to lose the race among the EGF receptor drugs to reach the
market, and cause Wall Sueet analysts to reduce revenue estimates fui 1mClone and downgiade
its stock.
Defendants' Materially False And Misleading Statements
29. During the Class Period, defendants publicly and repeatedly touted Erbitux as a
blockbuster drug that would become "one of the most important new drugs in the history of
oncology." Defendants successfiilly conditioned the market to believe that Erbitux was effective
in reducing cancer. Simultaneously, Defendants also made a series of statements aimed at
assuring and convincing the market that its application for FDA approval of Erbitux was
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• L progressing smoothly without problems, and that Erbitux "is going to be on the market next
spring."
30. The Class Period begins on May 12, 2004. with ImClone's issuance of a materially
• • false and misleading press release concerning the results of its Phase 11 study of Erbitux. The May
12, 2001 press release reported that ImClone had achieved a 22.5% response rate in its Phase
clinical study of Erbitux and chemotherapy in patients with refractor y colorectal cancer. The
press release stated in relevant part:
ImClone Systems Incorporated (N rasdaq :1MCL) announced today the presentation of findings from a Phase II clinical study of 1MC-C225 and trinotecan, a standard chemotherapy, in patients with irinotecan-refractory colorectal cancer. The findings demonstrated that 22.52cl-cent of_patients in the study achieved _partial response (greater than 50 percent tumor regression). 1N1C-C225 is an investigational monoclonal antibody designed to target and block the Epidermal Growth Factor Receptor (EGFR), which is expressed on the surface of certain cancer cells. All of the patients enrolled in the. study had EGER-positive colorectal tumors. The findings were presented during the 2001 Annual Meeting of the American Society of Clinical Oncology.
hi an oi al presentation, Leonard Saltz, M.D., Associate Attending Physician, Memorial Sloan-Kettering Cancer Center, and Principal Investigator of the study, presented findings from the study that treated IZO patients with the combination of TMC-C225 and irinotecan. All of the patients had failed irinotccan therapy prior to joining the study. The findings demonstrated that 27_patients (22.5 percent) achieved a partial resp_onse, and an additional 9 patients 17.5 percen) achieved a stabilization of disease. The median duration of response is 186 days,
(Emphasis Added).
31. [mantic's press release also quoted Saitz as explaining, "Once a patient's tumor is
growing despite irinotecan-based therapy, there really are no good standard treatment options . .
This study is exciting because a substantial number of responses were seen in a population of
patients in which we would hardly expect to see any."
Do0,12509v,..1,29:ito:,.0n4 9 32. The Imelone press release quoted Defendant liarlan Waksal as saying, "We are pleased with these data which provide evidence of IMC-C225's ability to cause tumor regression when combined with irinoteean in colorectal cancer. We believe these data will allow us to move forward to address the unmet medical need that currently exists in the treatment of refractory colorectal cancer."
33. On June 2R, 2001, ImClone issued a press release, announcing that it had initiated the filing of a rolling BLA with the FDA for approval of Erbitux in combination with irinotecan to treat iiinotecan-refiactory colorectal cancer. In the press release, Defendant Harlan Waksal explained ImClone's utilization of the BLA application process by stating that, "The rolling BLA mechanism affords us the opportunity to work with the FDA to ensure that all of the information that the Agency requests is included in each section as it is finalized and submitted for review....
The advantage to submitting the BLA in this tnannei is that it allows us to receive very directed guidance from the respective FDA reviewers on the content and focus of the BI .A during the. submission process."
34. On August 14, 2001, ImClone issued a press release announcing its financial results for the second quarter ended June 30, 2001. In the press release, Defendant Samuel D
Waksal stated, "The initiation during the quarter of our rolling Biologics License Application for
MC-C.225 with the U.S. Food and Drug Administration marked a significant milestone for
ImCione Systems, as we are no focused on working with the agency to get this drug approved and into the hands of oncologists as quickly as possible.... In addition, we were particularly pleased to present data from our clinical trials in May at the Annual Meeting of the American
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Society of Clinical Oncology demonstrating that IMC-C225 helped patients with certain types of
b•la •. cancer that had not responded to existing therapies." . • 35. On October 10, 2001, Defendant Samuel Waksal in an interview with reporter
Dylan Ratigan on the Bloomberg news network about ImClone's IMC-C.225 (Erbitux), stated:
Ratigan: Well, look at shares of this company, ImClone. They're up 30 percent, bolstered in large part by a $1 billion investment they received from Bristol-Myers Squibb just last month. Sam Waksal is the chief executive. Its a $4 billion company right now. He's been here before. He joins us again. And it's a pleasure to see you.
Samuel Waksal: It's great to be here again.
Ratigan: How are you?
Samuel Waksal: Great. Things are good.
Ratigan: Tell us about the reality of what you did with Bristol-Myers last month?
Samuel Wak sal : Well, because of C-225 which is our lead cancer product, and one which we believe is Roinn to he on the market next spring and will be one of the most important new drugs in the history of oncology, we did a landmark deal with our partners, Bristol-Myers Squibb They are the leading oncology company in the world. They have a 240-person oncology sales force. And in this deal, we get $1 billion in near-term revenues, 39 percent.
Ratigan: Is that a guarantee?
Samuel Waksal: We got $200 million already. We'll get another $300 million we believe in the next few weeks, and the last $500 million upon approval.
Ratigan: Upon approval of the drug?
Samuel Waksal: Upon approval of the dnig. So that should bring us about a billion in near-term revenue. We get $1 billion for our shareholders, because diet e's a tendet to our shareholders of
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. $70 a share, which closes on the 25th of October That goes to the shareholders. That's for .about 20 percent of the company, 19.9 percent of the company. And we get 739 percent of the net revenues, right off the top, for our coffers, for the sales of C-225. We manufacture the product, make a small manufacturing profit, and our burn is reduced because our clinical trial costs are taken over by Bristol-Myers Squibb right now So ImClone's put in the position of reducing execution risks, making sure the penetration's great, and we still have a great deal of the economics of the most important new drug in oncology.
Ratigan: Which - 1 guess the key to all of this of course is the success of the drug itself and its - in its reception.
Samuel Waksal: Absolutely.
Ratigan: So let's talk about where it stands right now?
Samuel Wak sal Well, we've completed all of our clinical trials for our egistration for the iefractory colorectal indication. The BLA, the Biologics License Application, will be completed by the end of October. We believe we'll be before the FDA Oncology Drug Advisory Committee in February. And the drug should be approved shortly thereafter. So were excited.
Ratigan: Do you have any reason to believe you will not be selling C- 225 by June of next year?
Samuel' Waksal. No, we don't.
(Emphasis Added).
36. On November 1, 2001, ImClone issued a press lelease announcing that it had
completed its rolling BLA submission to the FDA for approval or Erbitox for the treatment of
irinotecan-refractory colorectal cancer. In the press release, Defendant Samuel Waksal stated,
"IinClone Systems has worked diligently with the FDA to complete the ERBITI TX rolling BLA
according to the timetable agreed upon by the Company and the A gency. The timely
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accomplishment of this most important milestone is a reflection of the Company's commitment to
bring this very important product candidate to patients as quickly as possible."
37. On November 6, 2001, shortly Mier ImClone completed its rolling B LA
submission to the FDA for approval of Erbitux, Defendant Samuel Waksal had an interview with
reporter Su Keenan on the Bloomberg news network. The following is a transcript of the
interview:
Keenan: Pharmaceutical companies taking part in the annual CIBC Oppenheimer Health Care Conference here in New York. The New York-based pharmaceutical company has gotten a big investment - that's almost an understatement - by Bristol- Myers Squibb, an investment worth about S2 billion. The two companies have a multi-billion dollar deal for development and marketing of a cancer drug called Erbitux. Now, joining us now is ImClone's CEO Sam Waksal.
And this has been a terrific year for you, not to mention recent months, your stock doing well in down times, as you point out, getting an almost 30 pei cent pop on the Bristol-Myers Squibb deal alone. The question is, how is the drug approval coming? Give us the update.
Samuel Waksal: Well, we're very pleased with the drug approval process. We just announced last week, along with Bristol-Myers, that we completed um rolling BLA filing, which means that the approval process is moving along, we feel, incredibly well. We believe that we will be reviewed early next year. We think well have an oncologic advisory panel - a review some time in the first quarter - and that this drug could get on the market some time in the first half of next year.
Keenan: Now, BLA, this is the licensing data that you had to file. Many on the Street are impressed that you said you'd have it in by the end of October. 1 think you had in the last day of October.
Samuel Waksal: We did.
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Keenan, You are expecting a six-month, a rather quick, review. Some , on the Street, even your supporters, think that might be too •.. aggressive a time line. .0••• Samuel Waksal: Well, we don't believe its an av,ressive time line. We actually think that we've met all of our time lines with the Street. We believe that we have an important new drug. We think it's going to be the most important new oncology launch ever. • And it's a drug that meets a lot of unmet medical needs Our first indication is in the refractory colorectal cancer area, but this drug is useful, we believe, in pancreatic cancer, head and neck, and others. And we believe that this drug is going to be on the market in the first half of next year.
Keenan: I should point out to those who don't follow the drug sector that closely that this is a cancer drug that is seen as - very optimistically for its treatment of colorectal cancer. It is a potential blockbuster drug, when you talk to many of the analysts on the Street that say this could bring in over a billion dollars a year, hence, the big drug companies putting their money here.
But let's talk about what kind of expectation you have of approval, given the fact that there was only one large Phase II study here?
Samuel Waksal- Well, it's all about statistical analysis. And our study was large enough and statistically valid enough that we feel comfortable that that study for the first colorectal indication is going to be all that's necessary for that first approval.
Keenan: Were almost out of time, but what is your expectation that you will get that expedited six -month approval, which is key here? • Samuel Waksal: Very high.
• Keenan: Do you have assurances? Would you say almost 100 percent?
Samuel Waksal. The] e's no such thing as 100 pei cent in anything, but we feel very comfortable and we've guided the Street that way, that we will be on the market with our drug in the first half of next year and that with our pipeline and with our lead products.
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_ . . , . . . . . , . . . Iri-.•:„..:•:,' . .,•,•. • •, that were going to be one of the most important new • '-'''' companies in the biopharmaceutical field.
PI, Keenan: And if you can do it in the time frame, many agree. We'll have .'''' • you back in a couple months to check back on that. Thank ....:,. : ' you, Dr. Sam Waksal, the CEO of 1mClone. .r.:...,. (Emphasis Added). ..--.. : 38. One December 17, 2001, The New York Times reported on the EGF receptor
.,:.-••,r- •:; . drugs in development, including ImClone's Erbitux. The article noted that: i•:. [Samuel Waksal] says he is confident that the drug can be approved because it is being proposed for use in colorectal cancer patients who have failed chemotherapy. A clinical trial showed that Erbitux plus a chemotherapy drug shrank tumors in 22.5 percent of patients who had failed the chemotherapy alone. That exceeds the 15 percent threshold the F.D.A. typically requires for a drug to be used as a backup, he said.
The Effects of Defendants' False and Misleading Statements
39. The defendants cominuous and publie touting of the efficacy of Eibitux arid the
smooth progress of ImClone's application for FDA approval of Erbitux produced profound
. effects. During the Class Period, defendants' false and misleading statements successfully (1)
deceived the securities analysts and the investing public; (2) caused Bristol-Myers Squibb
_ Company ("BMS”) to substantially invest in 1mClone and Erbitux; (3) created the opportunity for
the Individual Defendants to tender their ImClone shares to BMS for profit; and (4) enabled the
Individual Defendants to exercise their stock options and sell their ImClone shares at artificially
inflated prices.
40. Defendants' false and misleading statements caused securities analysts to positively
and enthusiastically comment about ImClone. Cory Kasimov, an analysts at Gruntal & Co., was
quoted by Business Week in its issue dated June 11, 2001 as saying that ImClone's Erbitux had
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s.i. . the potential to generate $1 billion in annual sales Kasimov fiirther stated, The data that eq]•, .. .*, ,.. ImClone presented [at the 2001 Annual Meeting of the American Society of Clinical Oncology on .—.. ..!....,...... , May 12, 2001] substa.ntiate our belief that C225 could he a blockbuster ,,_ ..,.: ..'....'• 41. Stephen Farinelli, an analyst at Merrill Lynch & Co., was described by the same
iBusiness Week article dated June 11, 2001, as expecting ImClone to be profitable in two years, .„.:,.. ,T]t. ; • earning 84 cents a share in 2003 and $1.50 in 2004. '37 • :`•-• 42. On September 19, 2001, Blooniberg quoted Matt Geller, an analyst at CIBC 'Wold
Markets, as rating ImClone as a strong buy and stating "[Erhituxi is going to be one ofthe
biggest selling biotech drugs . . • It is a major step in treating cancer while maintaining patients'
quality of life."
. 43. Defendants false and misleading statements also led BMS to substantially invest in
Itnnone and Erbitux. FINIS is a leading pharmaceutical company that recently lost exclusive
rights in the United States to sell top-selling drugs such as Glucophage, Taxol_ and BuSpar To
maintain its lead position among the major pharmaceutical companies, BMS actively seeks to
acquire rights to blockbuster cancer drugs from smaller biotechnology companies like 1mClone.
44 As early as mid-April 2001, RMS expressed to Defendant Samuel Waksal its
interest in pursuing a strategic transaction with hriClone. Subsequent discussions between BMS
and 1mClone resulted in an agreement on September 19, 2001.
45. Under the agreenient, BMS and ImClone would co-develop and co-promote
Erhitux in the United States, Canada, and Japan. In exchange, BMS agreed to pay ImClone a
total of $1 billion in three cash payments for the achievement of the following milestones: $200
million upon the signing of the agreement, $300 million upon the completion of the BLA
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. submission with the FDA, and $500 million upon the FDA's marketing approval of Erbitux.
ImClone would also receive 39% of sales revenue in the U.S. and Canada, and 50% of the sales
revenue in Japan.
46. Further, BMS agreed to acquire approximately 14.4 million shares (19.9%) of
Imacne through a tender offer made to ImCione shareholders at $70 per share. On October 29,
2001, BMS accepted for payment pursuant to the tenclex offer, 14.4 million shares of1mClone's
common stock on a pro rata basis from all tendering shareholders and those conditionally
exercising stock options.
47. According to ImClone's Form 10-Q as filed with the SEC on November 14, 2001,
"The tender offer by [BMS] allowed for present or former employees and directors of [linClonel
who hold exercisable options to purchase shares of [InnClone - s] common stock having exercise
prices less than 570.00 per share to conditionall y exercise an y or all of those options and tender
the underlying shares in the tender offer."
48, Defendants' false and misleading statements, and the resultant agreement with
BMS, sent ImClone's stock price soaring. From about $40 per share in early May, 2001,
IrnClone's stock climbed to as high as $75.45 per share on December 6, 2001.
49. On October 29, 2001, Defendant Samuel Waksal sold 814,674 shares of ImClone
common stock at $70 per share to BMS for proceeds of $57 million. On the same day. October
29, 2001, Defendant Harlan Waksai sold 775,336 shares of ImClorie common stock at $70 per
share to BMS for proceeds of $54 million. On December 6, 2001, only a few weeks before the
FDA was due to announce its decision regarding kriClone's BLA submission, Defendant Harlan
1)oa. ti: 125079 Vr0 :2 9730:0794 17 . _ . ..
n.: Waksal filed a Form 144 with the SEC, announcing his intention to sell 700,000 shares of S
kt ImCione stock for estimated proceeds of almost $49 9 million Ar,::2‘ 50. Further, contrary' to defendants repeated assurances to the investing public that
11 ImClone was "diligently" wcPrking "very closely" with the FDA in connection with the rolling N. .*.,. • BLA submission for Erbitux which was progressing "incredibly well," ImCIone was in fact not
able to audit its clinical data on time for proper and adequate submission to the FDA to obtain a
• slot for Erbitux on the agenda of the February 27-28, 2002 meeting of the FDA's Oncologic Drug
Advisory Committee.
The Truth Is Revealed
51. Shortly after December 15, 2001, nimors of a possible FDA rejection of the
Erbitux BLA began circulating among Wall Street biotechnology analysts As TheStreet.corn
reported on December 19, 2001, these analysts began suspecting that there was "something amiss
at ImClone" because the FDA had exceeded its usual 45-day period for deciding to accept or
reject the E,rbitux BLA. The FDA's delay was thought to be caused by FDA's concerns about the
adequacy of the Erbitux BLA.
52. On December 2, 2001, IinClone stunned the market by issuing a press release,
announcing the FDA had rejected the filing of its Erbitux BLA The press release stated:
lmelone Systems Incorporated (Nasdaq: IMCL) announced today that the U. S. Food and Drug Administration (FDA) has advised the Company that at this time it is not accepting for filing in its current form the Company's rolling Biologics License . Application (111_ A) for ERBITUX(TIVI). The BLA was submitted for marketing approval to treat irinotecan-refractory colorectal carcinoma. In accordance with application regulatiens, the FDA is required to accept or refuse an application within 60 days of the completion of the filing, which occurred on October 31, 2001 Neither the acceptance nor non-acceptance of the BLA filing is a determination of the approvability of ERB/TUX.
Docti: 'ler t,, 1 8
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The Company intends to meet with the FDA as soon as possible to discuss the requests for additional information made by the Agency in order for the filing to be - • accepted. Following its meeting with the FDA, the Company will be able to better . assess the timing for addressing the Agency's issues in order to move the application • • process forward quickly.
. "We will be working closely with the FDA toward the goal of an expeditious acceptance of our DLA," stated Samuel D Waksal, Ph D , President and Chief Executive Officer of ImClone Systems Incorporated. "Our goal is to get ERBITUX FDA-approved as soon as possible so that it is accessible to patients suffering from this serious form of cancer."
ERBITUX is an investigational monoclonal antibody designed to target and block the Epidermal Growth Factor Receptor (EGFR), which is expressed on the surface of certain cancer cells. The FDA is reviewing F.RBITUX for the treatment of colorectal cancer.
In February 2001, the FDA granted ImClone Systems Fast Track designation for FRI3ITUX(T11.4) in the treatment of irinotecan-refractory colorectal cancer. I Jnder the FDA Modernization Act of 1997, Fast Track designation facilitates the development . and expedites the review of a drug if it is intended for the treatment °Fa serious or life-threatening condition, and it demonstrates the potential to address unmet medical needs for such a condition. The Agency's Guidelines for Industry Fast Track Development Programs require that a clinical development program must continue to meet the criteria for Fast Track designation for an application to be reviewed under
the Fast Track Program.
53. As Defendant Samuel Waksal admitted in an interview with Reuters immediately
after the issuance of the December 28, 2001 liriClone press release, the FDA had refused to
accept the Erbitux application because the Agenc y wanted more "annotation and measurement'.
information about how 1mClone conducted its clinical trials. Specifically, according to Defendant
Samuel Waksal., the FDA wanted ImClone to disclose how it verified that patients in its clinical
trials had failed previous drug therapies
54. Further, the FDA was also concerned about the way ImClonc analyzed data on
patients' response to Erbitux, and asked for additional information on how ImClone derived its
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conclusions from raw information generated in the clinical study. Contrary to defendants' earlier
statements that ImClone was "diligently" working "very closely" with the FDA in connection with .• the rolling BLA submission for F.rhitux which was progressing "incredibly well," Defendant.
Samuel Waksal admitted to Bloomberg on December 31, 2001 that ImClone's BLA submission to . . the FDA was inadequately audited by stating, "What is missing is the train of documents leading
from the raw data to these conclusions."
55. The market's reaction to 1mClone's December 28, 2001 announcement was swift
and devastating. The price of ImClone common stock plummeted $11.15, or 20%, to $44.10.
IniClone's stock had fallen almost 40% since rumors or a FDA rejection of the Erhitux BLA
began circulating a mang Wall Street analysts in mid December. 2001.
56. On January 4, 2002. after the close of the I J. S. stock markets, the contents of the
FDA letter to linClone were first revealed by The Cancer I ..etter. Accordin p. to The Cancer
Letter, the BLA was rejected for filing, among other things, because the company's Phase H Hal
was not "adequate and well controlled," new clinical trials would be need to provide more robust
data documenting response, the application does not justify. the proposed dosage of C'225, and
additional pharmacokinetic information is needed, and the pivotal trial contains protocol
violations. The FDA also stated that hinClone was repeatedly informed about the problems with
its clinical trials.
57. As a result of the publication of the synopsis of the FDA letter contained in The
Cancer Letter, analysts further downgraded linClone common stock.
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_ ...__ -4... . 1 e•:' ,..i.- • - . . . . ,. ..7 :;.':' • i• •,. 58. The additional revelation of the actual contents of the December 28, 2001 FDA
letter caused a further reduction in Tin Clone's stock price, with the shares opening at $34.96 per ,..-,. -.. share on January 7, 2002.
SCIENTER .4',..:ii..7:.;.. ..yr.j._._ 59. As illustrated by the Individual Defendants' positions with the Company, they had, ...4,. and used their influence and control to further the scheme alleged herein. The Individual
Defendants had broad responsibilities which included communicating with the financial market
and providing the market with information about the Fabitux clinical studies and the Erbitux BLA
application process During the Class Period, Defendant Samuel Waksal made specific statements ... to the market, indicating his knowledge of Erbitux and the clinical study forming the basis for the
Erhitux BLA, During the Class Period, Defendant Hailari Waksal was priv y to and directed the
research and development of Erbilux at InnClone.
GO. The facts indicate that the Individual Defendants had not only the motive and
°ppm (unity to commit the acts alleged, but also knew and/or were reckless in not knowing that
the information publicly disseminated during the Class Period with respect to the efficacy of
Erbitux and the progress of the Eibitux BLA were materially false and misleading.
61. By making the misleading statements contained herein the individual Defendants
knew that they would artificially inflate the value of the Company's securities. Defendants'
actions in doing so resulted in damage to plaintiff and the Class.
62 The Individual Defendants were motivated, in part, to make the false and
misleading statement about Erbitux so that they could attract substantial investments from BMS.
On October 29, 2001, Defendant Samuel Waksal sold 814,674 shares of ImClone common stock
DocS: Ver#: 23. . . .
1r . i •:P , . . . .f41 : & IL. 5 at $70 per slime to BMS for proceeds o157 million On the same day, Defendant Harlan Waksal :.= . sold 775,336 shares of IinClone common stock at $70 per share to BMS for proceeds of $54 i 44Ff' million.
63. Further, defendants were motivated to complete the rolling Erhitux BLA i d ' submission on October 31, 2001. despite the serious and material inadequacy of the submission,
. by BMS's promise of a $300 million payment upon the achievement of such milestone.
64. The Individual Defendants were further motivated to artificially inflate the
• Company's stock price in order for them to sell the Company's common stock at artificially high
prices to reap tremendous profits. On December 6, 2001, only a few weeks before the FDA was
due to announce its decision regarding ImClone's BI,A submission. Defendant Harlan Waksal
filed a Form 144 with the SEC, announcing his intention to sell 700,000 shares of ImClone stock
for estimated proceeds of almost $49 9 million. g CLASS ACTION ALLEGATIONS
65. Plaintiff brings this case as a class action pursuant to Rules 23(a) and (b)(3) of the
Federal Rules of Civil Procedure, on behalf of himself and all other persons who purchased or
otherwise acquired Imelone common stock between May 12, 2001 and January 4, 2002, inclusive
(the "Class"). Excluded from the Class are InnClone, its subsidiaries and affiliates, the Individual
Defendants, members of the immediate families of each of the Individual Defendants, any entities
in which any of the defendants has a controlling interest, and the legal representatives, heirs,
successors, affiliates or assigns of any of the foregoing excluded persons and entities
66. This action is properly maintainable as a class action because: .
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... . .,,.-,•:y ., e 4g. Ka) The members of Class are so numerous that joinder of all members is impracticable. During the Class Period, in excess of 72 million shares of ImClone common stock r. were outstanding and actively traded on the NASDAQ National Market Upon information and A . belief, plaintiff- believes that there are more than 1,000 members of the Class; Q . (b) Plaintiffs claims are typical of the claims of the other members of the Class,
7.!. as plaintiff and he members of the Class purchased ImClone shares and sustained damages as a
result of defendants' wrongful conduct complained of herein;
( e) Plaintiff is a iepresentative pal ty who will fan ly and adequately pi otect the
interests of the other members of the Class and has retained counsel competent and experienced in
class action securities litigation. Plaintiff has no interests antagonistic to, or in conflict with, the
Class it seeks to represent;
(d) A class action is superior to other available methods for the fair and
efficient adjudication of the claims asserted herein As the damages suffered by the individual
Class members may be relatively small, the expense and burden of individual litigation make it
virtually impossible for the Class members individually to redress the wrongs done to them. The
likelihood of individual Class members prosecuting separate claims is remote;
(e) The questions of law and fact common to the members of the Class
predominate over any questions affecting individual members of the Class. The questions of law
and fact which are common to Plaintiff and the Class include, among others:
(i) whether the federal securities laws were violated by defendants acts
as alleged herein;
NO: Verol: 23 *
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(ii) whether statements disseminated to the investing public and to .44 IinClone's common stock holders during the Class Period misrepresented material facts about the
efficacy of Frbitux;
(iii) .whether statements disseminated to the investing public and to
ImClone's common stock holders during the Class Period misrepresented material facts about the
progress of1mClonc's application for FDA approval of Erhitux,
(iv) whether defendants have acted with knowledge or with reckless
disregard for the truth in misrepresenting and/or omitting to state material facts;
(v) whether, during the Class Period, the market price of IniClone
common stock was artificially inflated due to the material misrepresentations and/or non-
diselosuies complained or heieim
(vi) whether the defendants participated in and pursued the common
course of conduct complained of herein; and
(vii) whether the members of the Class have sustained damages and, if
so, what is the proper measure thereof; and
(f) Plaintiff anticipates no unusual difficulties in the management of this action
as a class action.
APPLICABILITY OF PRESUMPTION OF RELIANCE: FRAUD-ON-THE-MARKET DOCTRINE
67. At all relevant times, the market for ImClone common stock was an efficient
market for the following reasons, among others:
(a) In-Clone common stock met the tequirennents for listing, and is listed, on
the NASDAQ National Market System, an efficient and automated market;
noo: 2 4
‘ T ..„ . . . .. '.'. .:.. .m. (b) During the Class Period, millions of shares of ImClone common stock were 6..' y.o.,,... J'..f.: traded on the open market;
-I:. (c) As a regulated issuer, ImClonc filed periodic public reports with the SEC .4. ,...,,:..: and the NASDAQ; and f.1r. .r (d) ImClone was followed by several securities analysts employed by .1.. ‘ brokerage firms who wrote reports that were distributed to the sales force and certain customers
of their respective brokerage firms. These repuits were publicly available and enteted the public
marketplace.
68 As a result, the market. for ImClone common stock promptly digested current
information regarding the Company from all publicly available sources and reflected such
information in ImClone's common stock price. Under these circumstances, all purchasers of the
Company's common shares during the Class Period suffered similar injury through their purchase
of shares at artificially inflated prices and a presumption of reliance applies.
INAPPLICABILITY OF STATUTORY SAFE HARBOR
69. The statutory safe harbor provided for forward-looking statements under certain .
circumstances does not apply to any of the allegedly false statements pleaded in this Complaint.
. The statements alleged to be false and misleading herein all relate to then-existing facts and
conditions. In addition, to the extent certain of the statements alleged to be false may be . . characterized as forward-looking, they were not identified as "forward-looking statements" when
made, there was no statement made with respect to any of those representations forming the basis ... . of this Complaint that actual results "could differ materially from those projected," and there were
no meaningful cautionary statements identifying relevant important factors that could cause actual
,
o..,:: vv.,,i, . 25 .:::,.... . ,.. ..:, .,,,,,,..,• i. ., ,
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vF.,:k4 results to differ materially limn those in the purportedly forward-looking statements ..M. 11;4. 70. Alternatively, to the extent that the statutory safe harbor does apply to any forward-looking VI -3A statements pleaded herein, defendants are liable for those false forward-looking statements
because at the time each of those forward-looking statements was made, the particular speaker
I had actual knowledge that the pat ticulat futwaid-louking statement was false, and/or the [inward-
, looking statement was authorized and/or approved by an executive officer of IrnClone who knew
that those statements were false when made
70. The statutory safe harbor provided for forward-looking statements under certain
circumstances, moreover, does not apply to false statements or material omissions of existing
facts
C:OUNT I
VIOLATION OF SECTION 10(b) OF THE SECURITIES EXCHANGE ACT AND RULE 10b-5 THEREUNDER
71. Plaintiff repeats and realleges each and every allegation above, as if set forth in full
herein.
72. Throughout the Class Period, defendants, individually and in concert, directly or
indirectly, engaged in a common plan, scheme and course of conduct described herein, pursuant
to which they knowingly or recklessly engaged in acts, transactions, practices and a course of
business which operated as a fraud upon plaintiff and the other members of the Class; made
various false statements of material facts and omitted to slate material facts to make the
statements made not misleading to plaintiff and the other members of the Class; and employed
manipulative or deceptive devices and contrivances in connection with the purchase and sale of
1mClone stock.
Doc#: Vcrg,: 2 6
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73. The purpose and effect of defendants plan, scheme and course of conduct was to x1 . 4:,.. artificially inflate the price of 1mClone stock and to artificially maintain the market price of
... . ImClone securities. fr'' ,v,•: . • u••,,. • 74. Defendants, who are the top officers of the Company, had actual knowledge of the !411...,Y,..;•!..• . • 6: .. material omissions and/or the falsity of the material statements set forth above, and intended to
deceive plaintiff and the other members of the Class, or, in the alternative, acted with reckless
disregard for the truth when they failed to ascertain and disclose the true facts in the statements
made by them or other IniClone personnel to inembeis of the investing public, including plaintiff
and the Class, and the securities analysts.
75. As a result of the foregoing, the market pi ;e of irriClone set:Amities was artificially
inflated during the Class Period. In ignorance of the falsity of die tlefelidants' statements
concerning the efficacy of Erbitux and the status of IinClone's application for FDA approval of
Erbitux, plaintiff and the other members of the Class relied, to their damage, on the statements
described above and/or the integrity of the market price of ImClone stock during the Class Period
in purchasing ImClone common stock at prices which were artificially inflated as a result of .
defendants' false and misleading statements.
76. Had plaintiff and the other members of the Class known of the material adverse
information which defendants did not disclose, they would not have purchased ImClone common
stock at the artificially inflated prices that they did
77. Defendants' concealment of this material information served only to harm plaintiff
and the other members of the Class who purchased linClone common stock in ignorance of the
financial risk to them as a result of such nondisclosures.
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f . -..' , - 1 . • -• ,E,.. • a tqk , rt. le! A!4 . 78 As a result of the wrongful conduct alleged herein, plaintiff and other members of , .ri. . the Class have suffered damages in an amount to he established at trial. i 79. By reason of the foregoing, defendants have violated Section I0(b) Act and Rule I0b-5 promulgated thereunder and arc liable to the plaintiff and the other members of the Class for
substantial damages which they suffered in connection with their purchase of ImClone common A., stock during the Class Period.
COUNT 11
VIOLATION OF SECTION 20(A) OF THE SECURITIES EXCHANGE ACT
80. Plaintiff repeats and realleges each and every allegation above, as if set forth in full
herein.
81. During the Class Period, each of the Individual Defendants, by virtue of his office
or offices at, and directorship of 1mClone and his specific acts, was a controlling person of
. ImClone within the meaning of Section 20(a) of the Exchange Act.
82. Each of the Individual Defendant's positions made him privy to, and provided him
with actual knowledge of, the material facts which ltinClone concealed from plaintiff and the other
members of the Class during the Class Period.
83. Each of the Individual Defendants had the power and influence, and exercised
same, to cause ImClone to engage in the unlawful conduct and practices complained of herein by
causing ImClone to disseminate the false and misleading information referred to above
.. 84 By virtue of the foregoing, the individual Defendants have violated Section 20(a)
of the Exchange Act.
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85. By virtue of the conduct alleged above, defendants are liable to the plaintiff and the
other members of the Class for the suhstairlial damages which the y suffered in connection vvith
R.: . • their purchase of mClone common stock during the Class Period • WHEREFORE, plaintiff, on his own behalf and on behalf of the other members of the
Class, demands judgment. against the defendants as follows:
A. Determining that this action is properl y maintainable as a class action
pursuant to Rule 23 of the Federal Rules of Civil Procedure:
B. Certifying plaintiff as the Class Representative and his counsel as Class
Counsel;
C. Declaring and determining that defendants violated the federal srciiiitec.
laws by reason of their conduct as alleged herein:
D. Awarding monetary damages against all defendants, jointly and severally, in
favor of plaintiff and the other members of the Class for all losses and damages suffered as a result
of the acts and transactions complained of herein, together with prejudgment interest f:-om the
date of the wrongs to the date of the Jud gment herein.
E. Awarding plaintiff the costs, experses, and disbursements incurred in !ilk
action, including reasonable, attorneys and experts . fees: and
F. Awarding plaintiff and the other members of the Class such other and
further relief as the Court may deem just and proper in hat of all the circumstances of this case
Doc ñ: r 29 4Fr
JURY DEMAND
Plaintiff demands a trial by jury.
41: Dated New York, New York January 7, 2002 lfr; RespecttUlly submitted,
WOLF POPPER LLP By/id (- Mai ian P Rome' (MR 0410) Robert C Finkel (RF 2373) Ken H Chang (KC g4q1) 845 Third Avenue New York, New York 10022 Tel. (212) 759-4600 Fax (212) 486-2093
Vett 30 v+,80z 1 1 ; e5 co o, 7=. R WOLF P ,:)PPt P Ll- p E 1 E 11F E D 93 Tril I'.-.13=%1Z1r3;'-'6' z p' 4.., .,.:i;- ,i-..- vit- I 4.. .7.=: i -4,„4: adwilFE_CERTIElcATJOIS
47.
...., I, Robert Irvine, hereby state: r'- ,. 'er I. I have reviewed the complaint against lrnClont System '3, Inc.. er ni., and have authorized 113 on My behalf. :g shares of IrnClone Systems, Inc., at the direction of counse1 or in 4.., , 2_ 1 did not purchase any order ka participate in this private action
3. I am willing to serve as a represcritatiNe party. on bchall of a class, including providing testimony at deposition and trial, if necesstry.
0- 4. The following includes all cf rny transactions in [mCIonr Systerns. Enc., common stock c:' •J', during the Class Period (vlay 12.2001 through laralary 4, 2002) as defined al thc Compiaint:
,.. TRANSAs:110_N I.R.ADY-J231 01.1frE QUITI_TY .,..: {P3RCHA5E_ sAi_E, (Pc+. Siw.) ... PACHANGE. CALL, . PUT, ETC.) ,..,... :..9; Purchase July 27, 2001 546.44 50
., Sale November 2, 2001 $70 00 11
5. Thrive not filed any action as a representative party or. behalf of a class under the federal seruritiep laws dunng the last three ycar3.
6. I , will not accept any payment for set-sting a.i a representative party on behalf of rt 0195 except to receive my pro ratia share of any recovery. or aE ordered or approved by the Court, , including the award to a representative patty of reaEonable cogs and expenses including lost . wages reaiing to tlx representation of the class.
,. t neoi:i.D402v.r.diatuovig y , „,::,...... k....„. ,.. . , „..:,