[House Hearing, 107 Congress] [From the U.S. Government Publishing Office] AN INQUIRY INTO THE IMCLONE CANCER-DRUG STORY ======================================================================= HEARINGS before the SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS of the COMMITTEE ON ENERGY AND COMMERCE HOUSE OF REPRESENTATIVES ONE HUNDRED SEVENTH CONGRESS SECOND SESSION __________ JUNE 13 and OCTOBER 10, 2002 __________ Serial No. 107-142 __________ Printed for the use of the Committee on Energy and Commerce Available via the World Wide Web: http://www.access.gpo.gov/congress/ house __________ U.S. GOVERNMENT PRINTING OFFICE 80-678 WASHINGTON : 2002 ___________________________________________________________________________ For Sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; (202) 512-1800 Fax: (202) 512-2250 Mail: Stop SSOP, Washington, DC 20402-0001 COMMITTEE ON ENERGY AND COMMERCE W.J. ``BILLY'' TAUZIN, Louisiana, Chairman MICHAEL BILIRAKIS, Florida JOHN D. DINGELL, Michigan JOE BARTON, Texas HENRY A. WAXMAN, California FRED UPTON, Michigan EDWARD J. MARKEY, Massachusetts CLIFF STEARNS, Florida RALPH M. HALL, Texas PAUL E. GILLMOR, Ohio RICK BOUCHER, Virginia JAMES C. GREENWOOD, Pennsylvania EDOLPHUS TOWNS, New York CHRISTOPHER COX, California FRANK PALLONE, Jr., New Jersey NATHAN DEAL, Georgia SHERROD BROWN, Ohio RICHARD BURR, North Carolina BART GORDON, Tennessee ED WHITFIELD, Kentucky PETER DEUTSCH, Florida GREG GANSKE, Iowa BOBBY L. RUSH, Illinois CHARLIE NORWOOD, Georgia ANNA G. ESHOO, California BARBARA CUBIN, Wyoming BART STUPAK, Michigan JOHN SHIMKUS, Illinois ELIOT L. ENGEL, New York HEATHER WILSON, New Mexico TOM SAWYER, Ohio JOHN B. SHADEGG, Arizona ALBERT R. WYNN, Maryland CHARLES ``CHIP'' PICKERING, GENE GREEN, Texas Mississippi KAREN McCARTHY, Missouri VITO FOSSELLA, New York TED STRICKLAND, Ohio ROY BLUNT, Missouri DIANA DeGETTE, Colorado TOM DAVIS, Virginia THOMAS M. BARRETT, Wisconsin ED BRYANT, Tennessee BILL LUTHER, Minnesota ROBERT L. EHRLICH, Jr., Maryland LOIS CAPPS, California STEVE BUYER, Indiana MICHAEL F. DOYLE, Pennsylvania GEORGE RADANOVICH, California CHRISTOPHER JOHN, Louisiana CHARLES F. BASS, New Hampshire JANE HARMAN, California JOSEPH R. PITTS, Pennsylvania MARY BONO, California GREG WALDEN, Oregon LEE TERRY, Nebraska ERNIE FLETCHER, Kentucky David V. Marventano, Staff Director James D. Barnette, General Counsel Reid P.F. Stuntz, Minority Staff Director and Chief Counsel ______ Subcommittee on Oversight and Investigations JAMES C. GREENWOOD, Pennsylvania, Chairman MICHAEL BILIRAKIS, Florida PETER DEUTSCH, Florida CLIFF STEARNS, Florida BART STUPAK, Michigan PAUL E. GILLMOR, Ohio TED STRICKLAND, Ohio RICHARD BURR, North Carolina DIANA DeGETTE, Colorado ED WHITFIELD, Kentucky CHRISTOPHER JOHN, Louisiana Vice Chairman BOBBY L. RUSH, Illinois CHARLES F. BASS, New Hampshire JOHN D. DINGELL, Michigan, ERNIE FLETCHER, Kentucky (Ex Officio) W.J. ``BILLY'' TAUZIN, Louisiana (Ex Officio) (ii) C O N T E N T S __________ Page Hearings held: June 13, 2002................................................ 1 October 10, 2002............................................. 215 Testimony of: Crawford, Hon. Lester M., Deputy Commissioner, Food and Drug Administration............................................. 227 Goldhammer, Robert F., Chairman of the Board, ImClone Systems, Inc............................................... 248 Keegan, Patricia, Deputy Division Director, Center for Biologics Evaluation and Research, Office of Therapeutics Research and Review, Division of Clinical Trial Design and Analysis, U.S. Food and Drug Administration; accompanied by Richard Pazdur, Director, Division of Oncology Drug Products, Office of Drug Evaluation I, Center for Drug Evaluation and Research, U.S. Food and Drug Administration; Lee H. Pai-Scherf, Medical Officer, Clinical Reviewer, Center for Biologics Evaluation and Research, Office of Therapeutics Research and Review, Division of Clinical Trial Design and Analysis, Oncology Branch, U.S. Food and Drug Administration; George Q. Mills, Acting Chief, Team Leader, Center for Biologics Evaluation and Research, Office of Therapeutics Research and Review, Division of Clinical Trial Design and Analysis, Oncology Branch, U.S. Food and Drug Administration; and Susan M. Jerian, Medical Officer, Team Leader, Center for Biologics Evaluation and Research, Division of Clinical Trials Design and Analysis, Oncology Branch, U.S. Food and Drug Administration......... 189 Kopperl, Paul B., Member of the Board of Directors, ImClone Systems, Inc............................................... 250 Landes, John, Senior Vice President, Legal, ImClone Systems, Inc........................................................ 257 Mendelsohn, John, Member of the Board of Directors, ImClone Systems, Inc............................................... 253 Papineau, Frank, Detailee, Committee on Energy and Commerce; and Raymond Weiss, Consultant in Oncology, Clinical Professor of Medicine, Lombardi Cancer Center.............. 18 Smaldone, Laurie, Senior Vice President, Global Regulatory Sciences, Bristol-Myers Squibb Company..................... 64 Vaczy, Catherine, Vice President, Legal, ImClone Systems, Inc 258 Waksal, Samuel, former Chief Executive Officer, ImClone Systems, Inc............................................... 58 Waksal, Harlan, Chief Executive Officer, ImClone Systems, Inc.: June 13, 2002............................................ 61 October 10, 2002......................................... 255 (iii) AN INQUIRY INTO THE IMCLONE CANCER-DRUG STORY ---------- THURSDAY, JUNE 13, 2002 House of Representatives, Committee on Energy and Commerce, Subcommittee on Oversight and Investigations, Washington, DC. The subcommittee met, pursuant to notice, at 9 a.m., in room 2123, Rayburn House Office Building, James C. Greenwood (chairman) presiding. Members present: Representatives Greenwood, Bilirakis, Stearns, Gillmor, Burr, Whitfield, Bass, Fletcher, Tauzin (ex officio), Stupak, DeGette, and Rush. Staff present: Alan Slobodin, majority counsel; Mark Paoletta, majority counsel; Tom Dilenge, majority counsel; Tony Cooke, majority counsel; Will Carty, legislative clerk; David Nelson, minority investigator and economist; and Jessica McNiece, minority staff assistant. Mr. Greenwood. The subcommittee will come to order. It is the Chair's intention to recess the subcommittee until 10:30 or 20 minutes after the conclusion of the full committee markup, whichever is later. The Chair reminds witnesses who have received a subpoena that they remain subject to the committee's compulsory process. The committee stands in recess until 10:30 a.m. or 20 minutes after the conclusion of the full committee markup, whichever is later. [Brief recess.] Mr. Greenwood. The meeting will come to order. The Chair recognizes himself for an opening statement. In the past, when Americans of my generation have thought about the development of life-saving miracle drugs, the images most likely to come to mind have been those of self-effacing men of science, like Alexander Fleming and Jonas Salk. In 1952, when Salk was convinced that he had developed a vaccine for the deadly scourge of polio, he didn't rush out to the marketplace with effusive praise either to the drugs efficacy or its money making possibilities. Instead he vaccinated volunteers, including his wife and three sons. And only when it became clear that even though the volunteers had developed antibodies to the disease, none had become ill, did he finally publish his findings the following year in the Journal of the American Medical Association. Now flash forward to 2001. Another doctor, this time with a Ph.D. in immunology, claims that his company is bringing another miracle drug to the market. Like Salk in 1952, the disease he is researching strikes down roughly 60,000 thousand Americans each year. That disease is colorectal cancer. The name of this new drug is Erbitux. And here the similarity comes to a glaring halt. It appears that, instead of concentrating his focus on the need to carefully conduct clinical trials that the introduction of a breakthrough medicine demands, ImClone seemed more focused on the sales pitch. Dr. Samuel Waksal is quoted as having said that Erbitux was, ``going to be the most important new oncology launch ever.'' Investors and hopeful patients alike were told that the results of ImClone's pivotal clinical trial were, ``knock-your-socks-off exciting.'' While others who had invested and hoped and perhaps prayed for a cure were busy having their hopes dashed, Dr. Samuel Waksal and others close to him appear to have been too busy cashing out to pay attention to those for whom the success or failure of Erbitux represented the difference between life and death. Today the subcommittee examines the unraveling of ImClone, whose highly publicized race to develop and market what some thoughtful researchers still consider to be a promising therapy, failed so spectacularly. Presently, only two drugs have established efficacy for treatment of metastatic colorectal cancer. If these drugs are not effective in a particular patient, there is no real therapy available to save that patient. ImClone sought accelerated approval for Erbitux to meet this unmet medical need of colorectal cancer patients who had failed standard chemotherapy treatments. For these patients with no other options, many believed that Erbitux was their best hope at survival, and late last year they had every reason to count on a speedy FDA approval. These cancer patients and their families were told that Erbitux was a leading monoclonal antibody, part of a new class of targeted therapies, drugs such as Gleevec and Herceptin, that doctors hoped would revolutionize cancer treatment and would not cause the severe side effects of toxic chemotherapy. They were assured by ImClone that Erbitux was going to be approved in early 2002. They believed in a company that had a number of leading oncologists on its board of directors. They believed in a company that in October 2001 had entered into a much publicized and record setting $2 billion strategic agreement with a leading pharmaceutical maker, Bristol-Myers Squibb, an agreement which included an up-front $1 Billion tender offer for ImClone stock from Bristol to ImClone's existing shareholders at the premium price of $70 a share. On December 17, 2001, ImClone was one of seven biotechnology companies included for the first time in the NASDAQ 100 index. Excitement and confidence in ImClone were reflected in such media reports as a December 26, 2001 Los Angeles Times story, which proclaimed, in almost giddy language, that ``Erbitux, a colon cancer treatment from ImClone Systems Inc., is set to make one of the biggest splashes of 2002.'' Yet just days later, the hopes of cancer patients were crushed when they learned that the deficiencies in the Erbitux clinical trials were so severe that FDA took the rare action of issuing a refusal-to-file letter. This meant that, under the 60-day deadline to determine whether a new product licensing application was adequate enough to be evaluated, FDA found such serious deficiencies that the agency could not even continue its review. After announcing FDA's refusal-to-file letter, ImClone executives told investors and the public that the problem was simply some missing documentation and suggested that it was an easily fixable problem of supplying the missing proof in the pivotal study. But soon thereafter, excerpts of the non-public FDA refusal-to-file letter appeared in a trade publication, revealing the real truth behind the FDA's action: The clinical study problems were much more than a failure to provide some data elements. To bring the drug to market, ImClone would need to conduct additional studies to demonstrate the drug's efficacy as a combination therapy for cancer, which would take substantial amounts of time and could in fact raise more questions about Erbitux than they would answer. How did a highly touted drug like Erbitux, which attracted the interest of Bristol-Myers Squibb to the tune of $2 billion, stumble so completely before even arriving at the regulatory starting gate? Cancer patients and their families want to know. And this subcommittee chairman wants to know too. Today, the subcommittee's investigative detailee, accompanied by the committee's scientific consultant, will present the preliminary staff report on this matter. Here are some of the staff's key findings: FDA refused to file ImClone's application not just because of missing documentation and data discrepancies, but also because the pivotal study was neither adequate nor sufficiently well-controlled to meet Federal requirements. Yet, in an August 2000 meeting between ImClone and FDA to discuss this study, ImClone's proposed study design to support accelerated approval was deemed by FDA to be probably acceptable. FDA's decision to accept the protocol design in effect overruled the initial recommendation of the primary FDA medical reviewer, who argued it failed to meet Federal requirements. Moreover, FDA's decision appears to be based on a significant misunderstanding as to the rigor of the study protocol, a misunderstanding that should have been quite apparent to ImClone from its discussions with FDA, but one ImClone did not seek to correct. As FDA reviewers examined the study more closely in the context of ImClone's formal licensing application, these protocol design issues finally received the attention they deserved, but by that point it was too late to turn back. Either FDA accepted the application for licensing, despite these flaws, or refused it and sent ImClone back to the drawing board. As we all know, FDA chose the latter option. Moreover, the due diligence performed by Bristol and the examination by the committee's scientific consultant of ImClone's pivotal study raise similar questions about whether Erbitux really works better in combination with another drug, or whether Erbitux truly has a clinically meaningful effect on colorectal cancer. I understand that ImClone and Bristol are planning to conduct additional studies on these issues and for the sake of cancer patients, I wish them well. But we now know that the promising response rates publicized by ImClone based on this study do not appear nearly as promising as they once did and may in fact be clinically and statistically meaningless. Before receiving the refusal-to-file letter on December 28, 2001, ImClone had received signals from FDA as early as December 4 that a refusal-to-file letter was a realistic possibility given the concerns FDA had about ImClone's application. Certainly by December 20, after a phone call in which FDA told representatives of ImClone and Bristol to no longer contact the agency until it sent a decision letter on December 28, both ImClone and Bristol believed that a refusal- to-file letter was a probable result, according to interviews and records. In fact, on December 25, 2001, Brian Markison from Bristol called Harlan Waksal at ImClone to inform him that Bristol had confirmed from FDA that ImClone would be getting a refusal-to-file letter. The next day, ImClone sent a letter to FDA in an attempt to forestall the negative decision, and on December 27, Sam Waksal, ImClone's CEO at the time, personally called FDA in an attempt to stop the refusal-to-file letter. He was not successful. Adding to the ImClone controversy, on that same day, December 27, and perhaps on December 28 as well, several family members and friends of Sam Waksal sold significant volumes of shares of ImClone stock, all prior to the public announcement of the FDA's December 28 refusal-to-file letter. For example, Sam's daughter, Aliza, sold $2.5 million of stock while she was on vacation. At the same time, Sam gifted to her twice the number of shares she had sold. Incidentally, the amount of these gifted shares was the same as the amount of shares that SEC now alleges that Sam Waksal moved from his own account but was unable to trade these shares through Aliza's account because broker-dealers refused to execute the trades without approval by ImClone's counsel. In another example, Martha Stewart, who had been a long- time investor in ImClone and friend of Sam Waksal, sold all of what was left of her ImClone holdings on December 27. Phone records indicate a telephone call between Ms. Stewart and Dr. Waksal on that same date. Yesterday, the SEC charged Sam Waksal with illegal insider trading, alleging that he had alerted certain family members about the refusal-to-file letter before it became public knowledge, who in turn sold large volumes of ImClone stock before the market learned of the negative FDA action. In addition to the stock trading activity in late December of last year, the committee's investigation also reviewed the purchase and sale of ImClone stock by ImClone's directors and top executives during the months leading up to the Bristol $1 billion tender offer, which was consummated in October 2001. On October 29, 2001, 2 days before ImClone completed its application submission for Erbitux to FDA, Sam and Harlan Waksal, the founders and top executives of ImClone, sold approximately 1.4 million shares of ImClone stock to Bristol for about $111 million. However, unlike all the other ImClone shareholders who tendered shares to Bristol, the Waksals were helped in part by loans of about $35 million that they received from ImClone several months before, so that they could exercise their options to purchase ImClone stock at highly discounted prices. These findings, and other information contained in the staff report and in our witnesses' testimony, will be of great interest to the subcommittee. One of our chief concerns is assuring public confidence in our biotechnology/pharmaceutical industry and the FDA process. When there is a suspicion that we are not getting all the facts about a new drug, investment dries up and clinical trial enrollments stall. We must look seriously at whether the secrecy of the FDA approval process can be, or has been, abused and exploited for personal gain, and whether useful drugs are delayed because of flawed development strategies and internal FDA confusion. The saga of failures like ImClone leads to a loss in confidence, not only in the possibilities of the science, but in the firms that seek to bring new cures to market and the public officials who must approve these cures and regulate these markets. My hope is that the lessons we draw from this debacle will enable us to provide improved direction to the companies, investors and the regulators who need to work cooperatively and openly if we hope to continue to bring the promise of science to the American people. The Chair recognizes the gentleman, Mr. Stupak, for his opening statement. [The prepared statement of Hon. James C. Greenwood follows:] Prepared Statement of Hon. James Greenwood, Chairman, Subcommittee on Oversight and Investigations In the past, when Americans of my generation have thought about the development of life-saving miracle drugs, the images most likely to come to mind have been those of self-effacing men of science like Alexander Fleming and Jonas Salk. In 1952, when Salk was convinced that he had developed a vaccine for the deadly scourge of polio, he didn't rush out to the marketplace with effusive praise either to the drugs efficacy or it's money making possibilities. Instead he vaccinated volunteers, including his wife and three sons. And only when it became clear that, even though the volunteers had developed antibodies to the disease, none had become ill, did he finally publish his findings, the following year, in the Journal of the American Medical Association. Now flash forward to 2001. Another Doctor, this time with a PHD in immunology, claims that his company is bringing another miracle drug to the market. Like Salk in 1952, the disease he is researching strikes down roughly 60,000 thousand Americans each year. That disease is colorectal cancer. The name of this new drug is Erbitux. Here the similarity comes to a glaring halt. It appears that, instead of concentrating his focus on the need to carefully conduct clinical trials that the introduction of a breakthrough medicine demands, ImClone seemed more focused on the sales pitch. Dr. Samuel Waksal is quoted as having said that Erbitux was, ``. . . going to be the most important new oncology launch ever.'' Investors and hopeful patients alike were told that the results of ImClone's pivotal clinical trial were, ``. . . knock-your-socks-off exciting.'' While others who had invested and hoped and perhaps prayed for a cure were busy having their hopes dashed, Dr. Waksal and others close to him appear to have been too busy cashing out to pay attention to those for whom the success or failure of Erbitux represented the difference between life and death. Today the Subcommittee examines the unraveling of ImClone, whose highly publicized race to develop, and market what some thoughtful researchers still consider to be a promising therapy, failed so spectacularly. Presently, only two drugs have established efficacy for treatment of metastatic colorectal cancer. If these drugs are not effective in a particular patient, there is no other real therapy available to save that patient. ImClone sought accelerated approval for Erbitux to meet this unmet medical need of colorectal cancer patients who had failed standard chemotherapy treatments. For these patients with no other options, many believed that Erbitux was their best hope at survival, and late last year they had every reason to count on a speedy FDA approval. These cancer patients and their families were told that Erbitux was a leading monoclonal antibody, part of a new class of ``targeted therapies''--drugs such as Gleevec and Herceptin--that doctors hoped would revolutionize cancer treatment and would not cause the severe side effects of toxic chemotherapy. They were assured by ImClone that Erbitux was going to be approved in early 2002. They believed in a company that had a number of leading oncologists on its Board of Directors. They believed in a company that, in October 2001, had entered into a much-publicized and record-setting $2 BILLION strategic agreement with a leading pharmaceutical maker, Bristol-Myers Squibb--an agreement which included an up-front $1 BILLION tender offer for ImClone stock from Bristol to ImClone's existing shareholders at the premium price of $70 a share. On December 17, 2001, ImClone was one of seven biotechnology companies included for the first time in the NASDAQ 100 index. Excitement and confidence in ImClone was reflected in such media reports as a December 26, 2001 Los Angeles Times story, which proclaimed, in almost giddy language, that ``Erbitux, a colon cancer treatment from ImClone Systems Inc., is set to make one of the biggest splashes of 2002.'' Yet just days later, the hopes of cancer patients were crushed when they learned that the deficiencies in the Erbitux clinical trials were so severe that FDA took the rare action of issuing a refusal-to-file letter. This meant that, under the 60-day deadline to determine whether a new product licensing application was adequate enough to be evaluated, FDA found such serious deficiencies that the agency could not even continue its review. After announcing FDA's refusal-to-file letter, ImClone executives told investors and the public that the problem was simply some missing documentation, and suggested that it was an easily fixable problem of supplying the missing proof in the pivotal study. But soon thereafter, excerpts of the non-public, FDA refusal-to-file letter appeared in a trade publication, revealing the real truth behind the FDA's action: the clinical study problems were much more than a failure to provide some data elements. To bring the drug to market, ImClone would need to conduct additional studies to demonstrate the drug's efficacy as a combination therapy for cancer, which would take substantial amounts of time and could in fact raise more questions about Erbitux than they would answer. How did a highly-touted drug like Erbitux, which attracted the interest of Bristol/Myers/Squibb to the tune of $2 billion, stumble so completely before even arriving at the regulatory starting gate? Cancer patients and their families want to know. And this Subcommittee Chairman wants to know. Today, the Committee's investigative detailee, accompanied by the Committee's scientific consultant, will present the preliminary staff report on this matter. Here are some of the staff's key findings:FDA refused to file ImClone's application not just because of missing documentation and data discrepancies, but also because the pivotal study was neither adequate nor sufficiently well- controlled to meet Federal requirements. Yet, in an August 2000 meeting between ImClone and FDA to discuss this study, ImClone's proposed study design to support accelerated approval was deemed by FDA to be ``probably acceptable.'' FDA's decision to accept the protocol design in effect overruled the initial recommendation of the primary FDA medical reviewer, who argued it failed to meet Federal requirements. Moreover, FDA's decision appears to be based on a significant misunderstanding as to the rigor of the study protocol--a misunderstanding that should have been quite apparent to ImClone from its discussions with FDA, but one ImClone did not seek to correct. As FDA reviewers examined the study more closely in the context of ImClone's formal licensing application, these protocol design issues finally received the attention they deserved, but by that point it was too late to turn back--either FDA accepted the application for licensing, despite these flaws, or refused it and sent ImClone back to the drawing board. As we all know, FDA chose the latter option. Moreover, the due diligence performed by Bristol, and the examination by the Committee's scientific consultant, of ImClone's pivotal study raise similar questions about whether Erbitux really works better in combination with another drug, and whether Erbitux truly has a clinically meaningful effect on colorectal cancer. I understand that ImClone and Bristol are planning to conduct additional studies on these issues and, for the sake of cancer patients, I wish them well. But we now know that the promising response rates publicized by ImClone based on this study do not appear nearly as promising as they once did, and may in fact be clinically and statistically meaningless. Before receiving the refusal-to-file letter on December 28, 2001, ImClone had received signals from FDA as early as December 4th that a refusal-to-file letter was a realistic possibility given the concerns FDA had about ImClone's application. Certainly by December 20th, after a phone call in which FDA told representatives of ImClone and Bristol to no longer contact the agency until it sent a decision letter on December 28th, both ImClone and Bristol believed that a refusal-to-file letter was a probable result, according to interviews and records. In fact, on December 25, 2001, Brian Markison from Bristol called Harlan Waksal at ImClone to inform him that Bristol had confirmed from FDA that ImClone would be getting a refusal-to- file letter. The next day, ImClone sent a letter to FDA in an attempt to forestall the negative decision, and on December 27th, Sam Waksal, ImClone's CEO at the time, personally called FDA in an attempt to stop the refusal-to-file letter. He was not successful. Adding to the ImClone controversy, on that same day, December 27th, and perhaps on December 28th as well, several family members and friends of Sam Waksal sold significant volumes of shares of ImClone stock--all prior to the public announcement of the FDA's December 28th refusal-to-file letter. For example, Sam's daughter, Aliza (A-leeza), sold $2.5 million of stock while she was on vacation. At the same time, Sam gifted to her twice the number of shares she had sold. Incidentally, the amount of these gifted shares was the same as the amount of shares that the SEC now alleges that Sam Waksal moved from his own account, but was unable to trade these shares through Aliza's account because broker-dealers refused to execute the trades without approval by ImClone's counsel. In another example, Martha Stewart, who had been a long-time investor in ImClone and friend of Sam Waksal, sold all of what was left of her ImClone holdings on December 27th. Phone records indicate a telephone call between Ms. Stewart and Dr. Waksal on that same date. Yesterday, the SEC charged Sam Waksal with illegal insider trading, alleging that he alerted certain family members about the refusal-to- file letter before it became public knowledge, who in turn sold large volumes of ImClone stock before the market learned of the negative FDA action. In addition to the stock trading activity in late December of last year, the Committee's investigation also reviewed the purchase and sale of ImClone stock by ImClone's directors and top executives in the months leading up to the Bristol $1 billion tender offer, which was consummated in October 2001. On October 29, 2001, two days before ImClone completed its application submission for Erbitux to FDA, Sam and Harlan Waksal, the founders and top executives of ImClone, sold about 1.4 million shares of ImClone stock to Bristol for about $111 million. However, unlike all the other ImClone shareholders who tendered shares to Bristol, the Waksals were helped in part by loans of about $35 million that they received from ImClone several months before, so that they could exercise their options to purchase ImClone stock at highly discounted prices. These findings, and other information contained in the staff report and in our witnesses' testimony, will be of great interest to the Subcommittee. One of our chief concerns is assuring public confidence in our biotechnology/pharmaceutical industry and the FDA process. When there is a suspicion that we are not getting all the facts about a new drug, investment dries up and clinical trial enrollments stall. We must look seriously at whether the secrecy of the FDA approval process can be--or has been--abused and exploited for personal gain, and whether useful drugs are delayed because of flawed development strategies and internal FDA confusion. The saga of failures like ImClone leads to a loss in confidence, not only in the possibilities of the science, but in the firms that seek to bring new cures to market and the public officials who must approve these cures and regulate these markets. My hope is that the lessons we draw from this debacle will enable us to provide improved direction to the companies, investors and the regulators who need to work cooperatively and openly if we hope to continue to bring the promise of science to the American people. Mr. Stupak. Thank you, Mr. Chairman--and also I think your opening statement certainly reviewed the investigation done by our respective staffs in this matter. I believe today's hearings raises a number of issues of importance to the Food and Drug Administration, the manufacturers of new drugs and biologics, investors, large and small, and most importantly the victims of cancer and their loved ones. The ImClone story is not a happy one. We still do not know if Erbitux, a cancer drug developed by ImClone, will be a useful tool in the fight against colorectal and other cancers. Only good and careful science, not anecdotal reports and certainly not inflated and inaccurate hype, will answer this question. Last spring and summer, patients and their doctors were led to believe that a treatment for colorectal cancer, the second most prevalent, and one of the most deadly, was at hand, when the truth was that the drug had not been studied rigorously enough to determine what value Erbitux might have for the treatment of colorectal or other cancers. Erbitux does show activity and may yet prove to be another useful tool for some patients in the battle with a disease that is extremely resistant to treatment. ImClone was in a position to understand how unlikely FDA approval was based on a registration study and another single arm study submitted last fall. But patients and oncologists were not informed that the proposed registration study was so incomplete and that despite six more months of trying, Bristol- Myers Squibb with all their expertise and resources has still not completed the residual work necessary for resubmission to the FDA. Investors had no idea that ImClone was submitting, at best, a marginal application under an expedited procedure that must, and demands, rigorous standards and the conduct and reporting of the pivotal study and statistical power in the results. The ImClone application was so defective and the results were so inconclusive that any hope of an accelerated approval may have evaporated. All this suggests that had the principals of ImClone decided that they would do a better design and a much better executed study instead of submitting a poorly designed and executed Phase II study, then cancer patients, their loved ones and the oncologists that treat them might have had Erbitux available this year. Mr. Chairman, I believe that our respective staffs have done an excellent job. I believe that the staff has framed the issues accurately. I look forward to this hearing today. I look forward to answering questions, and I appreciate the work our staffs have done, and I think we owe them a great deal of gratitude bringing us up to date. I know they have worked on this for a long time. So I am ready to move on with this hearing. I will yield back the balance of my time. [The prepared statement of Hon. Bart Stupak follows:] Prepared Statement of Hon. Bart Stupak, a Representative in Congress from the State of Michigan Today's hearing raises a number of issues of importance to the Food and Drug Administration (FDA), the manufacturers of new drugs and biologics, investors large and small and, most importantly, to the victims of cancer and their loved ones. The ImClone story is not a happy one. We still do not know if Erbitux, the cancer drug developed by ImClone will be a useful tool in the fight against colorectal and other cancers. Only good and careful science, not anecdotal reports and certainly not inflated and inaccurate hype will answer that question. Last Spring and Summer, patients and their doctors were led to believe that a treatment for colorectal cancer, the second most prevalent and one of the most deadly forms of that disease, was at hand when the truth was that the drug had not been studied rigorously enough to determine what value it might have for the treatment of colorectal or other cancers. Erbitux does show activity and may yet prove to be another useful tool for some patients in the battle with a disease that is extremely resistant to treatment. ImClone was in a position to understand how unlikely FDA approval was based on the registration study and another single arm study submitted last fall. But patients and oncologists were not informed that the proposed registration study was so incomplete that despite six more months of trying, Bristol Meyers Squibb, with all their expertise and resources has still not completed the residual work necessary for re-submission to FDA. Investors had no idea that ImClone was submitting, to be generous, a marginal application under an expedited procedure that must require rigor in the conduct and reporting of the pivotal study and statistical power in the results. The ImClone application was so defective and the results were so inconclusive that any hope of accelerated approval has probably evaporated. All of this suggests that had the principals of ImClone decided that they would do a better designed and much better executed study instead of merely submitting a poorly designed and executed Phase II study that they had on the shelf, the cancer patients, their loved ones, and the oncologists that treat them, might have had Erbitux available this year. Clearly, the sale of the company, not approval of the drug, was the Waksal priority. Mr. Chairman, I believe that this investigation has been conducted properly and the staff has framed the questions accurately. I look forward to hearing the testimony and the response to the many questions yet to be answered. Mr. Greenwood. The Chair thanks the gentleman and recognizes the chairman of the full committee, Mr. Tauzin. Chairman Tauzin. Thank you, Mr. Chairman. Mr. Chairman, I want to commend you again and the staffs of both sides of our committee for the excellent work in investigating this extraordinary story. The fact is that there are two stories here today. One of the stories will be more fully told by the SEC and the Justice Department as it examines how the FDA process and what appears to be some rather amoristic players conspired in a way that allowed insider trading to potentially occur and an awful lot of investors to lose a lot of money while insiders were trading on information that was available only to them in an attempt to cash out on what could be, and what was promised to be, a very promising drug for cancer patients. The other story is about the process at FDA and how the FDA process allowed this to happen. And that story has more to do with cancer patients around America who lived with the hope, the expectation and the promise that Erbitux was everything it was hyped up to be and that it would be available by spring, right now, for cancer patients who are living only with this hope in mind, that finally something had been developed that would extend their lives. We were told, and Sam Waksal was one of those telling us, that Erbitux, according to him, and I quote, ``is going to be huge. It is going to be one of the biggest drugs in the history of oncology, a drug that is going to alter the way that cancer therapy is done.'' ImClone reported 400 calls a day from patients desperate to get Erbitux outside of clinical trials. And every indication was that the drug was not only everything it was promised to be but that it would be available by this spring. And the story that unfolds in our investigation is that while ImClone deserves a lot of credit over the years of research into these monoclonal antibodies, which may yet pay off 1 day for these patients, that the leadership of this company was apparently more intent on immediately cashing in on the promise that Erbitux held out for the patients instead of being carefully conscious of delivering on those promises sooner rather than later. Erbitux had some pretty big names behind it and had the giants of the clinical oncology world on its board. It had John Mendelsohn and Vincent DeVita. And we learned in this investigation that the leadership of this company had total control over what information would be released to the public, about its own studies and about the quality of this new product and about its potential since under our rules FDA is prohibited and restricted under Federal law from talking about such proprietary information. So we have a process whereby FDA is being restricted on what it can say about the clinical studies and about what is happening with this drug, while the company can go out and hype it and take advantage of it financially, while at the same time, according to our investigation, recognizing all the while that its studies were flawed and there were problems with the FDA approval process. Now that is the sad story. The saddest story is not about investors losing money or about the fact that some of these people are facing now SEC and Justice Department investigations and, as we have learned just recently, indictments. The sad thing is that our investigation is opening the black box of the FDA process for public review, and what we see is a drug development and FDA review system that is not necessarily serving the best interest of America's people and its cancer victims in this case. Now, our job, Mr. Chairman, is primarily to examine that process, to see how this train wreck occurred and to see why the promise of a drug that could still hold such great hope for cancer patients was denied them because of a process that fell apart like this; instead yielded only financial gains to people who took advantage of it. If we end up with a process where drug approval strategies don't work in the interest of our patients in America, but simply allow companies to hype their stock and personally enrich their executives and shortchange their clinical research in the process, and if we have an FDA that sort of hangs back while the company falls on its face with such a high risk approval strategy, as was developed in this case, then it is not just the company who loses the gamble, it is the American public who loses, and most importantly the cancer patients who really by this spring, by now, were led to believe that there was really something great on the horizon that would be available now for them and give them life and hope. Now, we have got to fix this system, and if your hearings point the way for FDA and for us, we in the Congress, who have jurisdiction in this area to make some changes to make sure this kind of a train wreck doesn't happen again, we will leave it to the Justice Department and the SEC to deal with the miscreants here, but we ought to give cancer patients who are desperate for hope in a drug like Erbitux a chance to have it really tested and proven out. And if it is as good as some people think it is, that they have the advantage of having it in the marketplace and available to them before it is too late. And that is the task, that is the task of this committee, and I commend you for taking it on. I yield back. [The prepared statement of Hon. W.J. ``Billy'' Tauzin follows:] Prepared Statement of Hon. W.J. ``Billy'' Tauzin, Chairman, Committee on Energy and Commerce Thank you, Chairman Greenwood, and let me commend you for holding this hearing on ImClone Systems and its much touted ``miracle'' cancer drug, Erbitux. We have much to learn from the story of this drug. And I believe the story of this drug provides an opportunity to examine the drug development and FDA review systems. We need to make sure these systems work for patients. Cancer patients and their families had great hopes that Erbitux would be on the market by now. They and the media believed all that was asserted by ImClone and its prominent backers. ImClone's CEO, Sam Waksal, promised that ``Erbitux is going to be huge. It is going to be one of the biggest drugs in the history of oncology--a drug that is going to alter the way cancer therapy is done.'' Imagine what cancer patients thought when they heard that statement. ImClone reportedly received 400 calls a day from patients desperate to get Erbitux outside of clinical trials. By late last fall--when ImClone filed its application with the FDA--there were very sick colon cancer patients holding onto hope that Erbitux would be on the market by this Spring--by now. But when ImClone's clinical research package was finally unveiled to the FDA, it had so many problems, the FDA could not even review it. ImClone certainly deserves credit for its years of research into monoclonal antibodies, which still may pay off for patients in the future. Unfortunately, when the company should have been paying more attention to the quality of its clinical trials, its leadership appeared more intent on immediately cashing in on Erbitux's promise-- and delivering for cancer patients later, if ever. ImClone had the selling points to boost its stock and raise the hopes of dying cancer patients. Erbitux is a targeted therapy, and targeted therapy is supposedly the future of cancer treatment. It had the names, the giants of clinical oncology on its board--John Mendelsohn, Vincent DeVita. It had a growing anti-cancer drug market. And, most important, it had virtually total control over what information would be released to the public about its studies since the FDA is restricted under Federal law from talking about such proprietary information. Yet it appears, as our Committee investigation has revealed, that ImClone was so excited by preliminary response rates in very sick colon cancer patients, it tried to take a mediocre clinical trial and gussy it up as a study worthy of an accelerated approval by itself. But when it became crunch time to get FDA approval, the failure of ImClone's key executives to ensure the quality of its clinical trials collided with the hype. And, all the while, ImClone's insiders were lining their own pockets with millions, as ImClone's publicly-traded stock soared on false, public promises. Now the SEC has alleged that Sam Waksal knew about the FDA's refusal-to-file letter two days before it was issued and that he tipped off family members who sold $10 million of ImClone stock. As Vee Kumar, a 47-year school psychologist and colon cancer patient from Kirkland, Washington, told Vanity Fair magazine: ``There is no excuse for raising patients' hopes and then not delivering. There's been a lot of talk about ImClone's monetary rewards from Erbitux, but not enough about getting it to the patients who need it. They really ought to have done their homework better.'' I understand that the preliminary Committee staff report reveals additional problems in the clinical package ImClone submitted to the FDA, and lays out the series of actions by ImClone, its strategic partner Bristol-Myers Squibb, and FDA that led to this debacle. This Committee's investigation opens the black box of the FDA process, and reveals a drug-development and FDA review system that is not serving the interests of the American people. Through this inquiry, I hope we can prevent such train wrecks in the future. Drug companies and the FDA should develop drug approval strategies that work in the patient's interest--not so that companies can hype stock, personally enrich executives, and short-change clinical research; not so that the FDA hangs back while a company falls on its face with a high-risk approval strategy, as if it's just the company's gamble. It may be the company's gamble, but if it fails, cancer patients are the ones who really lose. Mr. Chairman, I look forward to working with you to improve the drug development system and to make that system really deliver for our sickest patients. Mr. Greenwood. The Chair thanks the chairman and recognizes, for 3 minutes for purposes of an opening statement, the gentlelady from Colorado, Ms. DeGette. Ms. DeGette. Thank you so much, Mr. Chairman. The case of ImClone presents what seems to have become a parable for our times: an upstart corporation with tremendous financial promise, corporate executives reaping fantastic financial, soaring stock prices, in this case up to $70 a share, a precipitous fall causing the stock to plummet tenfold back down to $7, allegations of insider trading by the officers of the company and their close friends. But here is the difference here, and I agree but I disagree a little with my chairman because I don't think it is a second story, I think it is an interwoven story that relates directly to all the things I just listed, and that is tens of thousands of cancer patients who are hanging on to the thread of a hope that Erbitux would be added to the two existing therapies for deadly colorectal cancer. The foibles of the key players here, corporate executives, researchers and FDA reviewers, did not just result in tremendous financial losses to investors but also devastated cancer patients' hopes. Nowhere else in the world is there a greater confluence of pharmaceutical/biotech industry growth, shareholder expectation of large profit margins, high hopes among patients for new and innovative therapies and confidence among the American people that the appropriate regulatory agency, the Food and Drug Administration, is providing the appropriate oversight. To address at least two of these issues, quick approval of new and innovative therapies and government oversight of the process, Congress established an accelerated approval process as part of the 1997 Food and Drug Administration Modernization Act, or FDAMA, which was a comprehensive overhaul of the Nation's food, drug and medical device laws. The Fast Track approval process was created for getting therapies that demonstrate the potential to help dying patients to the marketplace quickly. While the Fast Track process bypasses the rigors of a large-scale Phase III trial, it should not and must not allow products to bypass rigorous and sound scientific review. Unfortunately, there seems to be evidence that this is exactly what happened in the case of Erbitux. It appears that too many people dropped the ball throughout the approval process in this particular case, from the executives and scientists at ImClone who designed the flawed clinical trials, to Bristol-Myers Squibb, ImClone's business partner, who was aware of the trial's flaws, including the too small sample size, and enrollment of patients who did not meet the eligibility criteria. From the FDA's mishandling of the study's protocol design to the issuance of the refuse-to-file letter, sloppy work abounded throughout this process and no one is without blame. I can assure you that all of our votes for FDAMA were not made with the intent of relaxing the rules. However, what dismays us the most is this impact this case may have on other therapies that will be seeking Fast Track approval in the future, including this therapy, by the way, therapies that could have the potential cure for millions of people or even just extend their lives for another day, a month or a year. Like many of my colleagues, I receive hundreds of letters every year from constituents asking to facilitate quick FDA approval for therapies, therapies like for multiple myeloma and thalidomide, therapies for irritable bowel syndrome or lontronix and on and on. I am sympathetic to these patients. On the other hand, the United States has perhaps the world's most stringent standards for approving new drugs. We cannot shirk our duty to take a long, hard look at the approval process. Our job, Mr. Chairman, as I see it today, is to examine how we can foster speedy approval of new drugs, especially in cases where there are few alternatives, while at the same time ensuring that they are safe and effective. I yield back. [The prepared statement of Hon. Diana DeGette follows:] Prepared Statement of Hon. Diana DeGette, a Representative in Congress from the State of Colorado The case of ImClone presents what seems to have become almost a parable for our times: --An upstart corporation with tremendous financial promise; --Corporate executives reaping fantastic financial gains; --Soaring stock prices; --A precipitous fall--causing the stock to plummet ten-fold; --Allegations of insider trading by the officers of the company and their close friends. But here's the difference: Tens of thousands of cancer patients were hanging on to the thread of a hope that Erbitux would be added to the two existing therapies for deadly colo-rectal cancer. The foibles of the key players here--corporate executives, researchers, and FDA reviewers do not just result in tremendous financial loses to investors, but devastated cancer patent hopes. Our job as I see it today, is to examine how we can foster speedy approval of new drugs, especially in cases where there are few alternatives, while ensuring their efficacy. No where else in the world is there a greater confluence of pharmaceutical/biotech industry growth, shareholder expectation of large profit margins, high hopes among patients for new and innovative therapies and confidence among the American people that the appropriate regulatory agency, the Food and Drug Administration is providing the appropriate oversight. To address at least two of these issues, quick approval of new and innovative therapies and governmental oversight of the process, Congress established an accelerated approval process as part of the 1997 Food and Drug Administration Modernization Act (FDAMA), a comprehensive overhaul of the nation's food, drug and medical device laws. The ``fast track'' approval process was created for getting therapies that demonstrate the potential to help dying patients to the marketplace quickly. While the fast track process bypasses the rigors of a large-scale phase III trial, it should not, and must not, allow products to bypass rigorous and sound scientific review. Unfortunately, there seems to be evidence that this is exactly what happened in the case of Erbitux. It appears as though too many people dropped the ball throughout the approval process in this particular case. From the executives and scientists at Imclone who designed the flawed clinical trials, to Bristol Myers Squibb, Imclone's business partner who was aware of the trial's flaws including the too small sample size, and enrollment of patients who did not meet the eligibility criteria. From the Food and Drug Administration's mishandling of the study's protocol design to the issuance of the refusal to file letter, sloppy work abounded through this process. I can assure you that my vote for passage of FDAMA was not made with the intent of relaxing the rules, and I'm sure my colleagues that sit here with me today have the same sentiment. By no means did the '97 Act include a relaxation of any of the rules. There was nothing in it that came close to subverting rigorous reviews of the scientific merits of protocols. However, what dismays me most is the impact that this case may have on other therapies that will be seeking fast track approval in the future. Therapies that could have the potential cure for millions of people, or even just extend their lives for another day, a month, a year. Like many of my colleagues, I receive hundreds of letters each year from constituents asking me to help facilitate quick FDA approval for the one therapy that might be able to ease their pain, or extend their own, or a loved one's, life. For instance, I have received letters from sufferers of diseases such as multiple myeloma, an incurable form of blood cancer, who are desperate for Thalidomide, a drug with a long history associated with birth defects. Just the other day I got a letter from a constituent who suffers from irritable bowel syndrome pleading that I do everything I can to facilitate the return of Lotrinex to the market. I am very, very sympathetic to these people both as their elected representative, and in my capacity as a public servant who votes on legislation that effects every single person in this country. They are looking to us to facilitate the approval of effective and safe medications. And for good reason. The United States has perhaps the world's most stringent standards for approving new drugs. We cannot shirk our duty to take a long hard look at the approval process. Mr. Greenwood. The Chair thanks the gentlelady and recognizes for 3 minutes for an opening statement the gentleman from Kentucky, Dr. Fletcher. Mr. Fletcher. Thank you, Mr. Chairman. I think you have reviewed certainly the situation well. I appreciate very much you holding this hearing. Your statements, as well as the chairman of the full committee, certainly reflect my feelings. And in the interest of time and moving on, I would like to submit my opening statement to the committee, if that is okay. Mr. Greenwood. The gentleman's statement will be made part of the record. [The prepared statement of Hon. Ernie Fletcher follows:] Prepared Statement of Hon. Ernie Fletcher, a Representative in Congress from the State of Oklahoma Chairman Greenwood; thank you for having this hearing today. As a physician I have seen the devastation that Cancer can cause. I have seen the emotion and physical destruction that this disease brings to patients and their families. In the US where we have one of the best healthcare systems in the world, there will be more than 1.2 million new cancer cases diagnosed in 2002. This year about 555,000 people will die from cancer. It is no surprise that patients and physicians are excited when a promising new drug or therapy becomes available. The Energy and Commerce Committee has worked hard to see that groundbreaking research can provide physicians with the tools to provide treatment for cancer. While new drugs, Like Erbitux show great promise, we must also balance their development with the public's interest. They must be proved safe and effective before they are available for general use. We need to make sure that the FDA is doing the best job possible to balance these two issues. This hearing needs to look closely at how this particular drug was handled and use that information to develop policy that allows these new technologies to be available to patients as quickly and safely as possible. Mr. Greenwood. The Chair recognizes the gentleman from Illinois, Mr. Rush, for an opening statement, for 3 minutes. Mr. Rush. Thank you, Mr. Chairman. Mr. Chairman, I am very glad and happy that you are convening this hearing. I want to submit my full statement for the record and beg leave to present my full statement for the record. But I also want to state to you, Mr. Chairman, and to others who have gathered here, to the entire subcommittee, that I am here with an open mind. I have not reached any conclusions, I am not faulting any participant at this point in time. I believe that this hearing will lead me in a direction where I will be able to determine for myself exactly what the problem is, what happened in this particular case, in the case of Enron. And I will be able to determine what I think is the appropriate way to deal with this, both at the FDA and also in any other governmental body. So I am here with an open mind, and I want to see exactly and hear for myself what the issues are and who is at fault, if there is anyone at fault in this particular case. Thank you, and I yield back the balance of my time. Mr. Greenwood. The Chair thanks the gentleman and recognizes, for 3 minutes for an opening statement the gentleman from Florida, Mr. Stearns. Mr. Stearns. Thank you, Mr. Chairman. Of course, thank you for holding this hearing today. The United States is the foremost in the world today in biotechnological and pharmaceutical innovation. It is unfortunate this scandal has created in the minds of the public some trepidation. This is one more scandal we have seen up here this year with the Enron and Tyco and others, and the real question is, I think, how could analysts and consumers be sure when they are investing in these stocks where you have this executive, Sam Waksal, running around, hyping his Erbitux as the blockbuster cancer drug of all time, of the future, and meanwhile he is mortgaging his shares for an $80 million loan? He is also getting other loans that we can't determine completely. But how can the investor and the analyst look at this company and decide whether or not this man is hyping this for other reasons other than its true picture of the drug? At the same time, he is submitting applications to the FDA which do not have all the clinical evidence. So I am approaching this, Mr. Chairman, from the standpoint of the consumer and the investor: How can he or she be sure when they are investing in this corporation which is talking about a blockbuster drug that the money that is being exercised by the CEOs and the other investors who control the corporations is being properly displayed, made public and coincides with their activities? So we have a history this year of several scandals. We need to follow the money, we need to understand what his previous activities were at the same time he is hyping this Erbitux drug, and we need to protect the consumers, because in the end the consumer is sitting out there thinking that the CEO is correct. At the same time, the CEO has another ulterior motive. So if somehow this hearing would bring to bear a better understanding of what is more transparency on the P&L statement and could help consumers to understand whether they should continue investing, I think that would help bring more confidence to the market. And, you can never be too skeptical. I think that is what has happened here. And you can never be too diversified in the sense that you are dealing with these highly volatile stocks where you have the CEOs and their family hyping this thing at the same time they are trying to sell off their stock knowing inside information. So I commend you for this hearing, and I look forward to the testimony. [The prepared statement of Hon. Cliff Stearns follows:] Prepared Statement of Hon. Cliff Stearns, a Representative in Congress from the State of Florida Mr. Chairman, thank you for holding this hearing today. The United States is foremost in the world today in biotechnological and pharmaceutical innovation. We boast the leadership role in the world in new, lifesaving discoveries. For this, we can thank many parties: capital-providing shareholders who fund the research; the brilliant scientists and support staff of firms toiling at the bench to develop new cures and treatments; the Food and Drug Administration regulators and approvers who carefully examine submissions for accuracy and worthiness. When a drug is on the FDA fast-track for approval because it may be patients' last hope at a cure for a life-threatening condition like cancer or AIDS, the proper functioning of the system becomes all the more imperative. For this system to work, there needs to exist complete honesty and integrity in a company's operations. Yesterday (June 12), we learned that the CEO of the company visiting us today, Samuel Waksal of ImClone, evidently learned of the FDA's negative decision on ImClone's flagship drug undergoing approval, Erbitux. According to the Securities and Exchange Commission (SEC), Waksal and his relatives sold greater than $10 million in Imclone stock in a period of 48 hours: on December 26 and December 27--a day before the FDA released its ``refuse-to- file'' letter to ImClone on December 28. Further, Dr. Waksal's brother, Harlan, we learn, sold roughly $50 million worth of shares on December 6, a day after FDA officials first indicated a negative review of the application may be forthcoming. Further financial improprieties are the fact that ImClone lent money to insiders through the exercise of options based on ongoing, but not yet publicly disclosed, discussions with collaborating pharmaceutical firm Bristol-Myers Squibb. As many of us have know, executive compensation via options lacks clear and consistent definitions that potential investors and lenders need to make solid decisions. Options are an exercise in creativity, in the place of quantifiable, sound accounting. In addition to options, SEC lawsuit documents reveal that Dr. Sam Waksal was carrying more than $80 million in debt at the time of the FDA's Erbitux announcement. Could this have been another motive in quickly dumping his stock, leaving the rest of the investors to hold the bag? Shady executive practices lead to damaging effects rippling through the economy: Integrity is the elixir that will attract capital and lead to lifesaving innovation, while deceit is the poison that is eroding investor confidence. This hearing today should open up all these processes and players for exploration into whether the drug development and approval, including its financing, is occurring as intended. Are the delicate balances between patient safety, shareholder reward, and company incentive all aligned, or is the scale tipped too heavily in favor one way or another, in need of adjusting? Is the exchange between necessary confidentiality and public disclosure at an optimum? That is why on this Committee are here today, in our investigative capacity and responsibility to American citizens. We are here to find out: What are the facts? What happened? What is supposed to happen? What did the high-level executives and their cronies know and when? If something went wrong, how can it be corrected to safeguard the balance I just described among patients, the firm, and the shareholders? Let us fairly and open-mindedly listen to our witnesses today, and thank you. Mr. Greenwood. The Chair thanks the gentleman and recognizes, for 3 minutes for an opening statement, the gentleman from North Carolina, Mr. Burr. Mr. Burr. Thank the Chair. And, clearly, the chairman has not only tremendous interest in this, he has shown in the past tremendous interest in the FDA process. The difficulty that we deal with in this particular case is that many of us, years ago, saw the potential pitfalls of the emergence of biotechnology companies in this country, that without a clear road map at the FDA as to how to evaluate that industry, we saw the tendency of venture capital that funded these companies that hadn't proved anything when they emerged other than that they were creative and they thought they might be on the track to a breakthrough, that with enough capital and enough time that they might unlock that key to something magical and eventually make it through an FDA process. We, in 1997, helped to make that process a little more predictable and we thought a little more transparent. We learn with everything hearing that it is not quite as clear as what we intended to be, and we, as Members of Congress, have tremendous work left. But I think that it is extremely important for us to never forget this is about patience, that though we talk about publicly or privately held companies, in every case their quest is to come up with a new compound that treats something that today is untreatable. I am not sure the percentages today of efforts of the pharmaceutical or biologic world that actually come to fruition, but there are many more paths that they go down that don't prove to be successful, that never make it into the trial process where money is invested, in good faith, money by that company, whether it is public or private, because they believe that that might be the avenue to unlocking the key--the key to unlocking the disease. We are not here to judge the business decisions of any companies. Ours is to make sure that there is a process, a process that not only the companies but the investors can have confidence in works. I am hopeful, Mr. Chairman, that the FDA will be very honest to us today as to how the protocols could have been flawed, how they could have been designed in a wrong way. If the information was bad, then maybe we need to go back, Jim, and look at whether we change what we did. We thought we got it as close to right as we could. The fact is that we are where we were 5 years ago. We are sitting in a committee hearing, and we have got people pointing fingers at each other, and the person that loses are the patients with colorectal cancer. Diana DeGette laid it out very, very well. Everybody is blaming somebody but there is one real specific group that is left behind. As a Member of Congress, I think it is extremely important that we listen very closely to BMS, because they apparently saw something that was worth a tremendous amount of money on the part of their investors in this company but more important in Erbitux, and my understanding is that their hopes have not changed. If their hopes have not changed, then our hopes have not changed that there may be a key that unlocks something here, but more importantly that we must make sure that the system works in a way that we nurture other biotechnology companies to continue to search for those breakthroughs and not quit because of another problem. I thank the Chair for his commitment, and I yield back. Mr. Greenwood. The Chair thanks the gentleman and recognizes for 3 minutes for an opening statement the gentleman from Ohio, Mr. Gillmor. Mr. Gillmor. Thank you, Mr. Chairman. I have a very profound and interesting opening statement, but in the interest of time I will submit it for the record. Thank you. [The prepared statement of Hon. Paul Gillmor follows:] Prepared Statement of Hon. Paul E. Gillmor, a Representative in Congress from the State of Ohio Thank you, Mr. Chairman. Prescription drugs are increasingly prevalent and influential on our health care system. With an ever- increasing number of drugs pending approval by the Food and Drug Administration, we cannot ignore the important, time-consuming process that is involved in making a drug available to market. In the case of Imclone Systems, alleged impropriety has taken place in its application for approval of the cancer drug Erbitux. Although the drug has proven successful in a variety of cases, questions over its consistency and a hastily prepared application contributed to the FDA's rejection of this drug. That is why we are holding this hearing today. In the case of ImClone, however, the FDA has been criticized for its ruling. By applying a more rigorous standard to Erbitux application, it has violated the spirit of ``Fast Track'' approval. Furthermore, it has been alleged that ImClone CEO Samuel Waksal had prior knowledge of the likely rejection of this drug from FDA employees, who are represented today. As a result, significant insider trading took place just days before the final FDA ruling, enriching several Waksal family members and other well-known shareholders. Although it is not in the purview of this Committee to investigate such trading deals, it does fall under the jurisdiction of the SEC and the Financial Services Committee, on which I do serve. I will look forward to witness testimony today that will hopefully shed light on the FDA approval process, as well as alleged impropriety by Imclone that has left shareholders with substantial losses. Upon hearing testimony, I am confident that this Committee will have a better idea on how to address and reform the operations of the FDA for the 21st century. Mr. Greenwood. The Chair will check and if it is profound, it will be included in the record. And with that, the Chair calls forward the first panel of witnesses, and they are Dr. Frank Papineau, who is a detailee-- Papineau, I am sorry, Papineau, Dr. Frank Papineau, who is a detailee, working for the Committee on Energy and Commerce, and accompanying him, Dr. Raymond Weiss, who is a consultant in oncology, a clinical professor of Medicine at the Lombardi Cancer Center of Georgetown University Medical Center here in Washington. Welcome, gentlemen. Thank you for your appearance. You are both aware that this committee is holding an investigative hearing and when doing so we have had the practice of taking testimony under oath. Do either of you have objections to giving your testimony under oath? Seeing no such objection, the Chair advises you that under the rules of the House and the rules of the committee, you are entitled to be advised by counsel. Do you desire to be advised by counsel during your testimony today? Okay. Then if you will stand and raise your right hand, I will swear you in. [Witnesses sworn.] Okay. You are under oath, and Mr. Papineau, we will begin with you. You are recognized for your testimony. TESTIMONY OF FRANK PAPINEAU, DETAILEE, COMMITTEE ON ENERGY AND COMMERCE; AND RAYMOND WEISS, CONSULTANT IN ONCOLOGY, CLINICAL PROFESSOR OF MEDICINE, LOMBARDI CANCER CENTER Mr. Papineau. Chairman Greenwood, ranking member and members of the subcommittee, I am Frank Papineau, on detail to the Energy and Commerce Committee's staff. I am here today to provide background information and key facts and dates surrounding the Food and Drug Administration's decision to end its consideration of ImClone Systems' highly touted cancer drug, Erbitux, and the questionable ImClone stock-selling activity during that timeframe. My remarks are an oral summary taken from the committee staff report provided for today's hearing. I am accompanied today by Dr. Raymond Weiss, consultant in Oncology and clinical professor of Medicine at Georgetown University Medical Center. Dr. Weiss is under contract with the committee to provide assistance to the staff. Dr. Weiss wrote a report, and his findings are appended to the committee staff report. By way of background, ImClone Systems is a small biotech company based in New York City, founded in 1984 by two brothers, Sam and Harlan Waksal. ImClone has never turned a profit in its 18 years of existence and reportedly has spent over $200 million on research of Erbitux. Many people involved in cancer research believe that Erbitux is a promising drug and widely expected it to be on the market this year. Erbitux, however, was not approved for the market because the Food and Drug Administration found so many problems with Erbitux's application for approval that it issued a refusal-to-file letter, a rare FDA action that effectively turned the drug back to the company for further study. This situation attracted national attention because of the pre-market publicity about the drug, because of ImClone's record-setting $2 billion alliance with Bristol-Myers Squibb to market Erbitux and because of the multi-million dollar stock trades by ImClone insiders in the weeks before generated a negative decision. Before we proceed to the business dealings, let me first highlight two of the staff's findings regarding FDA's review of Erbitux. One, FDA's initial decision in August 2000 to grant Fast Track designation to Erbitux appears to have been based on incorrect information regarding the study protocol submitted by ImClone in support of the proposed cancer treatment which involved Erbitux and another cancer drug, Irinotecan. Two, FDA made the initial decision before it had full information about Erbitux's activity when administered in the absence of the other drug, and it was the other information, requested in a letter by FDA in January 2001 and received from ImClone in October 2001, that led the agency reviewers to conclude the application was incomplete. In early 2001, Bristol-Myers Squibb failed in its effort to form an alliance with a biotech company called OSI that it believed had a promising cancer drug. The company believed it was losing its share of the oncology drug market and decided to revisit ImClone and its cancer drug, Erbitux. On June 1, 2001, after a month of negotiations, Sam Waksal outlined an acquisition that would give Bristol Myers a 70 percent majority stake in ImClone. Bristol's Board of Directors rejected the deal. Dr. Waksal then told Bristol that he was willing to consider alternative proposals provided they include a significant equity investment in ImClone by Bristol, and he also advised Bristol that he believed ImClone's existing stockholders would benefit most if Bristol acquiring equity interest through a tender offer to the ImClone's existing stockholders. During July 2001, after ImClone was virtually assured of an equity deal and in anticipation of the tender offer from Bristol, ImClone's board agreed to lend $35.2 million to the Waksal brothers and the chairman of the board. The loans were unsecured and at an interest rate of 7.75 percent. The loans provided an opportunity for the three individuals to exercise options and warrants they held to purchase a total of 4.5 million shares of ImClone stock. Sam Waksal and Harlan Waksal's loans were $18.2 million and $15.7 million respectively. The chairman's loan was in the amount of $1.2 million. On October 29, 2001, thousands of ImClone's shareholders participated in the Bristol tender offer to purchase ImClone stock at $70 a share, a $20 premium over the trading price. ImClone's Board of Directors tendered 2.1 million shares to Bristol by themselves, representing 15 percent of the stock tendered by ImClone shareholders. Sam and Harlan Waksal tendered 814,674 and 776,450 shares for about $111 million themselves. Simply stated, this means that the Waksal brothers received more than 10 percent of the entire proceeds paid by BMS during the tender offer. Although all ImClone shareholders were allowed to tender shares to BMS, only the Waksals and two other board members borrowed millions of dollars of company funds to purchase the stock and then tender it to Bristol. On December 28, 2001, the FDA issued a refusal-to-file letter in response to the ImClone submission. The RTF letter is sent in rare cases when a submission is deemed insufficient. It is a non-public document containing trade secrets and confidential commercial information. In a December 31, 2001 conference call with investors, ImClone executives said that FDA sent the RTF letter because the Erbitux application was missing certain ``train of documentation'' information needed by regulators to accept the filing. ImClone said it would be able to answer the FDA questions by the end of the first quarter, leading hopefully to Erbitux being approved by the fall of 2002. On January 4, 2002, the Cancer Letter published excerpts of the RTF letter indicating, contrary to ImClone statements to investors, FDA had a long list of concerns that went far beyond record keeping. The FDA believed ImClone' clinical trial was not adequate and well controlled and that additional studies would be needed. The letter suggested FDA had warned ImClone starting in August 2000 that its data would have to demonstrate that Irinotecan, the standard chemotherapy mentioned above, was needed along with Erbitux. But the data submitted by ImClone was not sufficient to distinguish the effects of the two treatments. Adding to the controversy over Erbitux has been the trading of ImClone stock by ImClone insiders a few weeks before the FDA letter, as well as trading of stock by Waksal family relatives and friends during the 48 hours before the FDA letter was issued. On December 21, 2001, ImClone issued a Company order stopping employees from trading in ImClone stock until the FDA decision on Erbitux was made public. The committee staff believed until yesterday that no member of the board or officer of the company traded stock between the 21st and 28th. The staff found that, except for Sam and Harlan Waksal, members of Sam Waksal's immediate family sold ImClone stock on December 27, 2001 or the next day, hours before ImClone announced publicly that FDA had refused to accept the filing of Erbitux. We found that three officers of ImClone sold stock prior to December 18, 2001 on the advice of their broker. In addition, Harlan Waksal conducted a forward sale of 700,000 shares on December 6, 2001. The staff learned that on October 31, 2001, Harlan notified the ImClone board members that he planned to execute a $700,000 sales transaction. He told the board that the stock would still be under his voting control for the next 3 years. He also stated he would finalize the transaction over the next 2 weeks. He told the committee staff in early 2001 he attempted to shop the sale. He told the staff he was forced to sell the ImClone stock to come up with enough cash to pay substantial taxes racked up from his prior exercise of stock options and the tendering of shares to Bristol. He also stated that because he didn't want to sell shares he entered into a forward sales contract that gives him a percentage of the cash value of the shares up front but still allows him to control the shares and defer tax payments for another 2 years. In short, Waksal received less than the stock was worth at the time of the sale, but he also limited the downside risk when ImClone's stock price continued to drop. It should be noted that Harlan Waksal sold the 700,000 shares on the same day that ImClone hit its 52-week high. Mr. Chairman, that concludes my prepared statement. I'll be happy to answer any questions. [The prepared statement of Frank Papineau follows:] Prepared Statement of Frank Papineau, Committee Staff, Committee on Energy and Commerce Chairman Greenwood, Ranking Member Deutsch, and Members of the Subcommittee, I am Frank Papineau, on detail to the Energy & Commerce Committee's staff. I am here today to provide you with background information and key facts and dates surrounding the Food and Drug Administration's decision to end its consideration of ImClone Systems' highly touted cancer drug, Erbitux, and the questionable ImClone stock- selling activity during this turn of events. My remarks are an oral summary taken from the Committee staff report prepared for today's hearing. I am accompanied today by Dr. Raymond Weiss, Consultant in Oncology and Clinical Professor of Medicine at Georgetown University Medical Center. Dr. Weiss is under contract with the Committee to provide assistance to the staff. Dr. Weiss wrote a report of his findings, which is appended to the Committee staff report. background By way of background, ImClone Systems is a small biotech company based in New York City, founded in 1984 by two brothers--Sam and Harlan Waksal. ImClone has never turned a profit in its 18 years of existence and reportedly has spent over $200 million on research of Erbitux. Many people involved in cancer research believe that Erbitux is a promising drug and widely expected it to be on the market this year. Erbitux, however, was not approved for the market because the Food and Drug Administration found so many problems with ImClone's application for approval that it issued a Refusal To File letter, a rare FDA action that effectively turned the drug back to the company for further study. This situation attracted national attention because of the pre-market publicity about the drug, because of ImClone's record-setting $2 billion alliance with Bristol-Myers Squibb to market Erbitux, and because of multi-million dollar stock trades by ImClone insiders in the weeks before FDA's negative decision. Over the past six months, Committee staff has conducted an extensive investigation into matters surrounding ImClone's cancer drug and related business dealings. The Committee's investigation focused on the FDA drug approval process, Erbitux's clinical trials, Bristol- Meyer's partnership arrangement to acquire commercial rights to Erbitux, and the key events leading up to FDA's Refusal to File letter and trading of ImClone stock by its board members and officers, as well as, several of Sam Waksal's immediate family and friends. Before we proceed to the business dealings, let me first highlight two of staff's findings regarding FDA's review of Erbitux: One, FDA's initial decision in August 2000 to grant fast-track designation to Erbitux appears to have been based on incorrect information regarding the study protocol submitted by ImClone in support of the proposed cancer treatment, which involved Erbitux and another cancer drug, Irinotecan. Two, the FDA made this initial decision before it had full information about Erbitux's activity when administered in the absence of this other drug; and it was this other information--requested in a letter by FDA in January 2001 and received from ImClone in October 2001--that led agency reviewers to conclude the application was inadequate. the bristol-meyers squibb deal and imclone's internal loan In early 2001, Bristol-Meyers Squibb (BMS) failed in its effort to form an alliance with a biotech company, OSI, that it believed had a promising cancer drug. The company believed it was losing its share of the oncology drug market and decided to re-visit ImClone and its cancer drug Erbitux. On June 1, 2001, after a month of negotiations, Sam Waksal outlined an acquisition plan that would give BMS a 70% majority stake in ImClone. BMS's Board of Directors rejected the deal. Mr. Waksal then told BMS that he was willing to consider alternative proposals provided they include a significant equity investment in ImClone by BMS and he also advised BMS that he believed ImClone's existing stockholders would benefit most if BMS acquired an equity interest through a tender offer to the ImClone's existing stockholders. During July 2001, after ImClone was virtually assured of the equity deal and in anticipation of the tender offer from BMS ImClone's Board agreed to lend $35.2 million to the Waksal brothers and the Chairman of the Board. The loans provided the opportunity for the three individuals to exercise stock options and warrants they held to purchase a total of approximately 4.5 million shares of ImClone stock. (Sam Waksal and Harlan Waksal's loans were $18.2 and $15.7 respectively. The Chairman's loan was in the amount of $1.2 million.) On October 29, 2001, thousands of ImClone's shareholders participated in the BMS tender offer to purchase ImClone stock at $70 a share, a $20 premium over the trading price. ImClone's Board of Directors tendered 2.1 million shares to BMS by themselves-- representing approximately 15% of the stock tendered by ImClone shareholders to BMS. Sam and Harlan Waksal tendered 814,674 and 776,450 shares for about $111 million. Simply stated this means that the Waksal brothers received more than 10% of the entire proceeds paid by BMS during the tender offer. Although all ImClone shareholders were allowed to tender shares to BMS, only the Waksals and two other board members borrowed millions of dollars of company funds to purchase the stock and then tender it to BMS. the rtf letter On December 28, 2001, the FDA issued its ``refuse-to-file'' (RTF) letter in response to the ImClone submission. The RTF letter is sent in rare cases when a submission is deemed insufficient. (It is a non- public document containing trade secret or confidential commercial information.) In a December 31, 2001 conference call with investors, ImClone executives said that FDA sent the RTF letter because the Erbitux application was missing certain ``train of documentation'' information needed by regulators to accept the filing. ImClone said it would be able to answer the FDA questions by the end of the first quarter, leading, hopefully to an approval of Erbitux in the fall. On January 4, 2002, the Cancer Letter published excerpts of the RTF letter indicating that--contrary to ImClone statements to investors-- the FDA had a long list of concerns that went far beyond record keeping. The FDA believed ImClone's clinical trial was not adequate and well controlled and that additional studies would be needed. The letter suggested that the FDA had warned ImClone starting in August 2000 that its data would have to demonstrate that Irinotecan, the standard chemotherapy mentioned above, was needed along with Erbitux. But the data submitted by ImClone was not sufficient to distinguish the effects of the two treatments. trading activity by imclone executives and others Adding to the controversy over Erbitux has been the trading of ImClone stock by ImClone insiders a few weeks before the FDA letter, as well as the trading of stock by Waksal family relatives and friends during the 48 hours before the FDA letter was issued. On December 21, 2001, ImClone issued a Company order stopping its employees from trading in ImClone stock until after the FDA decision on Erbitux was made public. Committee staff believes that no board member or officer of ImClone traded ImClone stock between December 21 and 28, 2001. However, staff found that, except for Sam and Harlan Waksal, members of Sam Waksal's immediate family sold ImClone stock on December 27, 2001 or the next day hours before ImClone announced publicly that FDA had refused to accept the filing of Erbitux. We found that three officers of ImClone sold stock prior to December 18, 2001 on the advice of their broker. In addition, Harlan Waksal conducted a forward sale of 700,000 shares on December 6, 2001. The staff learned that on October 31, 2001, Harlan Waksal notified the ImClone Board Members that he planned to execute a 700,000 share stock transaction. He told the board that the stock would still be under his voting control for the next three years. He also stated that he'd finalize transaction over the next two weeks. He told Committee staff that in early November 2001 he attempted to shop the sale. He told staff he was forced to sell the ImClone stock to come up with enough cash to pay substantial taxes racked up from his prior exercise of stock options and his tendering of shares to BMS. He also stated that because he didn't want to sell shares he entered into a forward sales contract that gives him a percentage of the cash value of the shares up front but still allows him to control the shares and defer tax payments for another two years. In short, Waksal received less than what the stock was worth at the time of the sale, but he also limited the downside risk when ImClone's stock price continued to drop. It should be noted that Harlan Waksal sold the 700,000 shares on the same day that ImClone hit its 52-week high. This ends my prepared testimony, and I will be pleased to answer your questions. Mr. Greenwood. Thank you, Mr. Papineau. The Chair recognizes himself for 5 minutes for questions, and let me address my questions to you, Dr. Weiss. You are a clinical professor of Medicine, is that right? Mr. Weiss. Yes, sir. I am independent consultant in oncology. Mr. Greenwood. Just pull that right up close to you, sir. Pull the microphone forward about 5, 6 inches. Mr. Weiss. Does this work now? Yes. Mr. Greenwood. Yes. Mr. Weiss. Okay. I am a 100 percent self-employed independent consultant in oncology. I have a number of contracts with agencies of the Federal Government to do various tasks, and I am also a clinical professor of Medicine at Georgetown. That is an unpaid teaching faculty position. Mr. Greenwood. Do you treat patients now? Mr. Weiss. Yes, I do. I have an arrangement with an oncologist in solo practice who has offices on either side of the Maryland and Pennsylvania border in Gettysburg and Westminster, and I go to that office about 7 days a month to give him some time off and see patients, to maintain my clinical skills. I also have a contract with the Walter Reed Army Medical Center to go there 1 day a week to see patients in the breast disease clinic. So, yes, I do see patients, and I see patients with colon cancer too. Mr. Greenwood. And for how many years have you audited scientific research? Mr. Weiss. Yes. Since 1981, the National Cancer Institute has required onsite quality assurance auditing of the clinical trials that they fund at institutions around this country. There are 11 such cooperative groups, collaborating institutions, and I work for one of them, the Cancer and Leukemia Group B, which has its major grant handled by the University of Chicago, so I am a contractor to the University of Chicago for that grant. And I make site visits, as I did just the past 3 days, to institutions around the country, auditing the records, the medical records of patients that are in clinical trials. Mr. Greenwood. Okay. And you reviewed the clinical trial data from Erbitux's 9923 study. Mr. Weiss. Yes, I did. Mr. Greenwood. Okay. In your report, you described as incredible the fact that 37 patients, almost 27 percent, of the 139 patients who were entered in that study were ineligible. Why is that percentage--why do you consider that percentage to be, quote, ``incredible?'' Mr. Weiss. Because eligibility criteria for the clinical trial are most important. They determine the patient population you are going to study. They have to have the right cancer, they have to have the right stage, they have to have certain degree of normal liver function, normal kidney function, blood counts. All those sorts of things are criteria for being eligible to go on the study. Mr. Greenwood. So in this study, there were only 139 patients that were entered, and 27 percent of them didn't meet the criteria for the study as it was designed. Mr. Weiss. That is correct. That was determined by---- Mr. Greenwood. Is that an atypical rate? Mr. Weiss. Yes, it is. Mr. Greenwood. What it is a typical rate? Mr. Weiss. To give you an example, just on Monday, one of the visits that I did, one of the 13 patients we audited was ineligible for the trial. It was due to the mistake of the nurse data manager overlooking the fact the patient was still on a drug that made him ineligible. That is just pure human error. It happens 5, 6, 8 percent of the time. It doesn't happen 27 percent of the time. Mr. Greenwood. Okay. And so what does you extrapolate from that with regard to the quality of the ImClone study? Mr. Weiss. There are a lot of patients who were entered on the trial that did not meet the eligibility criteria as set up in the protocol, and therefore that automatically makes the results somewhat subject to question. Mr. Greenwood. You also described as incredible the fact that 15 patients were exemptions to be enrolled in the study. What does that mean and why is that incredible? Mr. Weiss. Once you set up these eligibility criteria, you do not deviate from them, except that you might make an error, as I just described. You don't give exemptions from these eligibility criteria, because if you do, then you have changed the patient population that you are studying. You have allowed on patients who weren't eligible for the study. Mr. Greenwood. So is it highly unusual for exemptions to be given in such a study? Mr. Weiss. Most certainly. In the Cancer and Leukemia Group B, with the 300 participating institutions, the only time an exemption can be given is by the group Chair at the University of Chicago. That means a phone call to the highest level, and that is rarely done, No. 1, make a phone call, No. 2, even more rare is to give the exemption. Mr. Greenwood. Okay. I see in your report that you identified another set of major deviations in the study which involve the dose and the administration frequency of Irinotecan. Pronounce that for me. Mr. Weiss. Irinotecan. Mr. Greenwood. Irinotecan, the toxic chem. drug used in combination with Erbitux. How would the dosing and the frequency of dosing affect the results of the study? Mr. Weiss. The protocol set up a standard for giving that particular drug and said that the dose and the frequency had to be the same as the patient received when they progressed; that is, their cancer got worse when they were on that drug previously. When they were treated on the protocol, I believe there were 17 patients did not get the same dose and same schedule of frequency of treatment as they were prior to entering. That is a major deviation. Mr. Greenwood. How would you determine whether the patients were actually improving because of these drugs? Mr. Weiss. You couldn't separate the effect of increasing the dose of the one drug from the effect of the combination of the two drugs, either the Erbitux and/or the Irinotecan. When you are giving more of one drug than you had before, you are changing the results, and, again, you make the results of the study subject to question. Mr. Greenwood. The Chair's time has expired. The Chair recognizes the gentleman, Mr. Stupak, for inquiry for 5 minutes. Mr. Stupak. Thank you, Mr. Chairman. Dr. Weiss, the patient eligibility, that was decided by who, the patient eligibility for these studies? Mr. Weiss. They are set up in the protocol, and I assume the investigators entering the patient decided the patient met the eligibility criteria or not. But in the case of those 15 patients, they would have had to call somebody, perhaps at ImClone, I don't know, to say it is okay to handle that patient even though they are not eligible. Mr. Stupak. This study is known as 9923, correct? Mr. Weiss. Yes, sir. Mr. Stupak. And the study was actually done in 1999, I believe. Mr. Weiss. It was started in the end of 1999 and ended in early 2001. Mr. Stupak. And then after that August of 2000, ImClone and FDA met to see if they could get an accelerated approval of this drug, correct? Mr. Weiss. Yes, sir. Mr. Stupak. Okay. After that meeting, there was a change in the protocol, was there not? Mr. Weiss. Actually, the change in the protocol anti-dated that meeting by about 10 months. It was October 1999. And it is apparent, to me anyway, that the FDA staff did not know about the change in the protocol because their understanding was Version 1.0 of the study. Mr. Stupak. Correct. They thought it was Version 1.0, and in fact when the approval was given on Fast Track, which was, if I remember correctly, January 12, 2001, they were given the Fast Track authority to do protocol No. 1, correct? Mr. Weiss. Yes, sir. That is what it appears. Mr. Stupak. In fact, even 7 days there later, FDA, on January 19, actually sent them a letter and talked about the first protocol, and that would be used in this Fast Track study. Mr. Weiss. That is correct, sir. Mr. Stupak. Okay. If you go then to--let me back up just a little bit. While they were doing this study and everything, there has been a lot of discussion here about the July 30, 2001 Business Week article, and in the Business Week article, which was touting Erbitux, it stated that this drug was the furthest along of a handful of new cancer treatments that precisely honed in on a growth signal found in up to 50 percent of all cancers. In clinical trials, ``the drug demonstrated remarkable success in causing colon cancer to regress in patients who had failed to respond to other treatments.'' Did you find in your review any medical evidence that the drug demonstrated remarkable success in causing colon cancer regression? Mr. Weiss. No, sir. The patients who got a response, that is their cancer shrunk, the measurable lesions that were seen on a chest x-ray or a CT scan, the percentage that got that sort of response was in the 15 to 20 percent range. When you look at all of the people who have reviewed these CT scans and decided that they agreed, they agreed only on 20 patients and unfortunately there were all these disagreements, whether the patients truly were resistant to Irinotecan, No. 1---- Mr. Stupak. Sure. Mr. Weiss. [continuing] and, No. 2, whether they truly got a response to the protocol therapy. Mr. Stupak. Well, in your investigation, or Mr. Papineau, did either one of you find who was responsible for putting out the statement saying that you had remarkable success when at best the success was only 20 percent? Mr. Weiss. It was Mr. Waksal is the one who did most of the touting of this drug. Mr. Stupak. Sure. Which Mr. Waksal was that? Mr. Weiss. Mr. Sam Waksal. Mr. Stupak. Okay. Well, did you find in your investigation any evidence that, and I am going to quote again in a conversation that Mr. Waksal on the phone referenced as single agent data, ``Apparently it came out at 13 percent, which he feels is half the C22-25, plus CUT 11 data. They have informed the FDA who were pleased and confirmed that they would be on for the February 28 FDA's Oncologic Drugs Advisory Committee,'' I take it the Advisory Committee for approval. Did you find anything, Mr. Papineau or Dr. Weiss, in which the FDA was, use the word, ``pleased'' and that there would be the expected February 28 that they would be on the Advisory Committee? Did you find anything like that? Mr. Papineau. We did not, sir. The FDA reviewers that we talked to were very clear that no statement like that was ever made to Sam Waksal. Mr. Stupak. Okay. Was it made to anyone else? If not Sam Waksal, was it made to anyone else that FDA was pleased with this single agent data? Mr. Papineau. Not that I am aware of, sir. There was talk about the single agent data and FDA wanted to see it. And ImClone told them that they had the data and they would present it to them at a later date. When it came time to present the data---- Mr. Stupak. And, actually, that data wasn't submitted until late December, just before it was rejected. Mr. Papineau. It was finally given to them in total on December 4. Mr. Stupak. December 4. So whether it was the L.A. Times, business news, even statements about the remarkable success of this drug or FDA's apparently position with this drug, excitement about this drug, those are just--there is no basis of fact that you could find anywhere in your investigation to support those statements? Mr. Papineau. Not totally. What we did find from talking to the FDA officials is that they were listening to it and they couldn't talk because of the secrecy--the trade secrets and stuff of drug applications---- Mr. Stupak. So during that time, even though they saw these statements publicly, they could not--FDA could not stand out publicly and say, ``This is not true.'' Mr. Papineau. Exactly. Mr. Stupak. Because of the trade secrets and the ongoing study, correct? Mr. Papineau. That is exactly true. You will hear later from FDA witnesses. They will tell you that they watched ``60 Minutes'' and they read Business Week, and as they sat there and watched ``60 Minutes'' on Sunday night, they had a lot of problems in the hype and what was being said, but there was nothing they could do about it. Mr. Greenwood. Time of the gentleman has expired. The Chair recognizes the gentleman of the full committee, Mr. Tauzin, for 5 minutes for inquiry. Chairman Tauzin. Thank you, Mr. Chairman. Let me see if I can get all this in sort of layman's understanding. Our understanding from our investigation, gentlemen, is that this whole matter revolves around a mistake made in the early protocol that was based upon the notion that the way to test this drug, Erbitux, was to test it in combination with another toxic chemotherapy; is that correct? Mr. Weiss. That is correct. Chairman Tauzin. And that mistake was based upon information that Erbitux alone didn't show enough effect, didn't show a reasonable amount of good results, that it had to be used in combination and tested in combination with other toxic chemotherapy; is that correct? Mr. Weiss. Yes, sir. All drugs that go to clinical trials, whether they are cancer drugs or anything else, go through testing in animals. And when they tested this new drug, Erbitux, in animals, they found that they got the best results if they used Irinotecan and Erbitux together in the animal cancers. Chairman Tauzin. Yes. But, apparently, when the FDA medical reviewer handling this matter looked at it, the original decision was that the protocol shouldn't be approved. And then in August 11, the senior FDA medical official, in effect, overruled the primary review and said, ``Yes, go forward with it,'' based upon this combination used; is that right? Mr. Weiss. That is what it appears to be; yes, sir. Chairman Tauzin. And later on a single agent study indicated in fact Erbitux did have enough activity to indicate that it should have been studied by itself without studying it in combination with the toxic chem. you mentioned; is that correct. Mr. Weiss. Yes, sir. A single agent study was subsequently done. Fifty-seven patients were entered and although six patients were said to have responded, the Bristol reviewers said they clearly agreed that five did respond. So that is about an 8 to 9 percent rate of regression of the cancer-- number of patients who got benefit. Chairman Tauzin. Now, the 9923 study, which was the study that was used to approve the original protocol, apparently it had lots of problems. When BMS, Bristol-Myers Squibb, did the independent radiological review, they indicated that the response rate was only 12.5 percent compared to the claimed 22.5 percent. They found that the number of patients valuable under the system was 89 instead of the original 120. And if that data was correct, that would drop it below the 15 percent clinical end point set by ImClone, and the study would therefore be too small to support the accelerated approval process. So BMS, in its radiological review, ends up saying, ``Hey, this process, 9923, this protocol that the FDA has approved, over the objections of the initial reviewer, is flawed;'' is that right? Mr. Weiss. Yes, sir. Chairman Tauzin. But they went ahead and invested anyhow and went ahead with that deal. Now, in the end, the end result of all this was at some point, December something, FDA finally says, ``This is not working. This review process is not doing its job, it is flawed, and so we are going to recommend a so- called refusal-to-file letter.'' Tell us what that is. Mr. Weiss. That is basically a rejection---- Chairman Tauzin. It is a rejection notice. Mr. Weiss. It just says, ``We are not going to review your study because there are too many problems with it.'' Chairman Tauzin. Now, you have been asked to independently review all this stuff, right? Mr. Weiss. Yes, sir. Chairman Tauzin. The first question I want to ask you, if this drug is as important as it was hyped to be, was this a case--if ever there was a case that should have been handled absolutely carefully and correctly from Day One, wasn't this one? Mr. Weiss. Yes, sir. Any time you have a study that is going to the FDA to get approval for marketing so that thousands of patients into the indefinite future get the drug, you want to be sure your scientific results and your study are iron clad. Chairman Tauzin. Yes, but more importantly, here is a drug that is being hyped as a blockbuster chemical treatment drug. Here is a drug that is being told it is going to revolutionize cancer treatment. Here is a drug that by all accounts is life or death for hundreds of patients who call in daily saying, ``Get it to me.'' Mr. Weiss. That is correct. Chairman Tauzin. Isn't this the kind of drug that should have been handled in the most careful, most precise, knowing ways so that FDA was assured from Day One that the protocols were correct, that everybody working with FDA, including Bristol Myers Squibb, everybody, should have been very careful that every T was crossed, every I was dotted, everything was done precisely right because of the importance of the potential of this drug to cancer therapy? Mr. Weiss. Most assuredly. Chairman Tauzin. Now, you have looked at this process. Was there any doubt in your mind that it was flawed when you looked at it? Mr. Weiss. The protocol had flaws in it. Chairman Tauzin. You could see it, couldn't you? Mr. Weiss. Yes, sir. Chairman Tauzin. Why couldn't FDA? Why couldn't ImClone? Why couldn't Bristol-Myers see it? Why couldn't somebody see it early enough to say, ``Stop. Let us stop it right now and start it up again correctly and do it right so that we don't delay this process the way it has now been delayed.'' Mr. Weiss. I don't believe I can answer that question, sir. Chairman Tauzin. That is the question I think we have got to answer, Mr. Chairman. Thank you. Mr. Greenwood. The Chair thanks the chairman and recognizes, for 5 minutes for inquiry, the gentlelady from Colorado, Ms. DeGette. Ms. DeGette. Thank you, Mr. Chairman, and following up on Chairman Tauzin's question, the way the Fast Track process is supposed to work is if you have a promising drug, but you want to move it more quickly because it is addressing some need that has not being addressed by existing drugs or it is being used on patients with no hope, Congress and the research community sort of said, ``Well, we are not going to have the full-blown research Phase III studies that we might have with other drugs;'' correct, Dr. Weiss? Mr. Weiss. Yes, sir--yes, ma'am. Ms. DeGette. I am used to it. And so there is some sense with Fast Track approval that maybe you won't have the full-blown, years long research process, and that is accepted by everyone at the FDA, in the research community and by Congress. Mr. Weiss. Yes. Ms. DeGette. Okay. But nonetheless, the studies are supposed to have--are designed to have protocols which are acceptable scientifically, correct? I mean we don't abandoned scientific protocol simply because we want to get these drugs on the market, right? Mr. Weiss. You not only have to have a scientifically valid protocol, but you have to have scientific valid patients and analysis of those patients that were entered on the study. Ms. DeGette. And the problem with this--one of the problems with this study was that it was--it had a very small sample size to begin with. Am I correct in saying that? Mr. Weiss. Relatively speaking, in clinical trials in cancer, yes. Ms. DeGette. And it probably would have been all right as a stage two study, correct, Dr. Weiss, do you think? Mr. Weiss. I am sorry? Ms. DeGette. As a pivotal study, both of these protocols were undoubtedly flawed. We are getting all hung here about which protocol did the FDA know about, but as a study on which you would face Fast Track approval of a drug, both of these protocols probably had flaws, wouldn't you say? Mr. Weiss. Yes. The major flaw was not requiring a specific dose and schedule of the Irinotecan. It was left up to the judgment of the physician, to some degree, by saying, ``Give them the same dose and schedule that they had before.'' Ms. DeGette. So if you were doing an FDA approval process, that study which didn't give any sense of the dose of the Irinotecan might have been all right as a preliminary study, but you would want to refine that study before you approved Erbitux for use in cancer patients, correct? Mr. Weiss. Yes, and you would not ineligible patients on it either. Ms. DeGette. Especially when you already had such a small sample size. Mr. Weiss. Yes, most definitely. Ms. DeGette. Okay. Now, was there any--do we have any idea why there was such a high percentage of ineligible patients in the protocol? Mr. Weiss. I have no idea. Ms. DeGette. So any answers would be speculative unless the researchers themselves could tell us, correct? Mr. Weiss. They are speculative as far as I am concerned, I don't know. Ms. DeGette. Okay. And I am a little curious about this discussion in August 2000 with the FDA and with ImClone where apparently the FDA was relying on an old protocol and ImClone had adopted a new protocol. Whose responsibility would it be to know that new protocol at that meeting? Would the be the FDA's responsibility or ImClone's responsibility? Mr. Weiss. I would assume it is ImClone's responsibility to present it to the FDA and say, ``Look, we have changed the study.'' Ms. DeGette. Now, do we have--had ImClone, in fact, given that updated protocol to the FDA prior to the August 2000 meeting? Mr. Weiss. I saw no evidence that they had. Ms. DeGette. So you have no evidence that the FDA had that study in hand, whether or not they referred to it at the meeting or not. Mr. Weiss. I do not. Ms. DeGette. Okay. I just have a couple more quick questions. I have in my hand the report that you presented to this committee, Doctor. I assume you personally have overseen a number of protocols, given your background. Mr. Weiss. Yes. I have personally participated in a number of clinical trials---- Ms. DeGette. Okay. Now---- Mr. Weiss. [continuing] written the protocols. Ms. DeGette. On page 7 of your study, I don't know if you have it in front of you. Mr. Weiss. Yes, I do. Ms. DeGette. Okay. At the bottom, the very last paragraph, it says, ``Flaws in the design of the 9923 protocol were also expressed publicly by three prominent medical oncologists after the publication of the RTF,'' which is the refusal-to-file letter. That was in January 2002 after everything fell apart, correct? Mr. Weiss. Yes. Ms. DeGette. I am wondering if you can tell me very briefly, because my time is up, what flaws those three prominent oncologists found in the protocols. Mr. Weiss. The eligibility criteria regarding the patient being clearly resistant to the Irinotecan was one. The way that the specifications for giving the Irinotecan on this study, which I said were non-existent, those were the two major flaws. Ms. DeGette. And are those flaws that should have been caught in the FDA Fast Track approval process? Mr. Weiss. Yes, I believe they should have been. Ms. DeGette. Thank you, Doctor. No further questions. Mr. Greenwood. The time of the gentlelady has expired. The Chair recognizes the gentleman from Kentucky, Dr. Fletcher, for 5 minutes, for purposes of inquiry. Mr. Fletcher. Thank you, Mr. Chairman. Again, I want to thank you for conducting this hearing, and even though I had to step out briefly, I tried to listen to much of the testimony here. Dr. Weiss, let me just ask you, in general terms, and I hope this hasn't been asked, but in spite of--if you look at the problems with the study, particularly eligibility, those that were entered into the study with lack of eligibility, some of the other things you pointed out, does this drug, Erbitux, represent possibly a major breakthrough in cancer therapy, in your opinion? Mr. Weiss. I would not describe it as a major breakthrough. I would describe it as an interesting drug with some activity apparent in colon cancer that makes it worthwhile to study further. We have many such drugs in the field of oncology. Mr. Fletcher. I certainly understand that and appreciate it. Let me---- Mr. Weiss. In other words, drugs that are interesting but not blockbusters. Mr. Fletcher. Thank you on that. And, obviously, we have heard much of the emphasis on the company management seemed to be on the financial dealings rather than making sure that the research was conducted adequately, and that does, at least-- that appears from the testimony thus far and what we have heard occurred there. Let me ask you this. It is very common for oncology agents to be used together because of the synergy. Sometimes they do not work alone, but they may work in combination with another medication. Help me understand why part of the refusal included making sure the drug was studied alone in efficacy alone. Doesn't the FDA sometimes permit to drug to use and say it is approved for use with another specific drug for a particular disease? Mr. Weiss. Yes. This registration study involved the two drugs, and you want to be sure that one drug is really producing some additional benefit over the other drug when they are used together. And so you had no information that the new drug, Erbitux, all by itself provided any benefit. So when they are used together, you want to be sure that the new drug also has activity by itself along with the old drug, which you know has some activity. So if you see a response greater with the two, you know it is because, yes, the one drug works a little bit but the two work together better and higher percentage of patients benefit. Mr. Fletcher. Do the flaws in the study prohibit you even if statistically you rule out some of the problems due to the eligibility that the drug that Erbitux accompanied or was used with efficacy was not enhanced with Erbitux? Mr. Weiss. It appeared to me that there was, for some patients, some benefit of Erbitux, both in the single agent study and in the combination study. The problem is with the combination study a large percentage of the patients were ineligible, many of them got doses higher of Irinotecan than they should have been, and there is a great deal of controversy over which patients responded and which didn't. So there are all sorts of flaws, and I don't think FDA could agree that it is a study that clearly makes a case for Erbitux as a drug that should be allowed on the market where anybody can prescribe it. Mr. Fletcher. Let me ask you then another question. Apparently, not only were there problems in following the protocol of the design of the study, but there were problems that you understand, and you may have already said this, problems in the design of the study itself then. Mr. Weiss. Yes. The eligibility criteria for determining whether the patient was truly resistant to Irinotecan before they were entered, that was a problem. And then the looseness-- and I use that term as my own--the looseness of the directions on what dose of Irinotecan would be prescribed. It was stated that you give the same dose as they received before they went on study with no dose increase, but, obviously, the physicians involved went ahead and did that anyway. And that makes the results very suspect. Did the patient respond because they got the two drugs together or did they respond because they got more of the Irinotecan now than they did before. Mr. Fletcher. And I can certainly understand how that makes the results somewhat uninterpretable. Let me ask you, in this company you have substantial expertise on the board at ImClone, you have obviously substantial expertise in the FDA. How does this study, first off, get structured with these flaws, how does it get implemented with these flaws in conjunction with the FDA, and this allowed to go on? Could you help us with some insight on that? Mr. Weiss. I can't answer that question, sir. One of the board of directors is somebody I used to work under at the National Cancer Institute, Dr. DeVita, whom I highly respect, and I don't know whether he actually saw the protocol or not. Mr. Fletcher. I find it, and the reason I do, certainly, many families, and I know our family's been affected personally with metastatic colon cancer, and I remember when the studies came out with 5-fu and Lamisil, we were very optimistic and it was apparently helpful, and we looked forward to this medication or others like this in not only metastatic colon cancer advance but other diseases. And if there is ever a time that you need to make sure for the timeliness of the availability of this drug that a study is done well, a study is conducted properly, that there is proper FDA oversight, that our Fast Track procedures were followed that were established by Congress, I mean this is the time you want it, because there is nothing more disheartening to raise the expectations of thousands of cancer patients that there is a new medication on the horizon and then to find out that it may still be, I mean it may still be a very good, effective medication, but the delay due to the flaws, and it looks like problems on both the companies and particularly with the FDA as well in overseeing the study, and maybe summon the process where a company can release and talk about how good this drug is and where the FDA, even if they have concerns, are prohibited, rightfully so, from talking about that. I would just like your discussion on what do you see can be done to prevent this in the future that we are not doing? Mr. Weiss. I agree with you entirely that it was extremely unfortunate that the hopes of many patients with cancer were raised and somewhat dashed now by the fact that the study wasn't interpretable sufficiently to approve the drug for marketing. I honestly don't have an answer to the second part of your question, what can we do to change things. One of them is perhaps allow the FDA a little more latitude to make some of their analyses public. I think that is for Congress to decide, though. Mr. Fletcher. I see my time has expired, and thank you, Mr. Chairman. Mr. Greenwood. The Chair thanks the gentleman. The Chair wishes to make one correction with regard to the testimony given by Mr. Papineau. I believe you testified that the sale on December 6 by Harlan Waksal of stock occurred on the day of the highest value of the stock. I believe the record should be corrected that it was near--the highest day was December 5 and he sold on the 6th. I wish the record to be corrected. The Chair recognizes the gentleman from Florida, Mr. Stearns, for 5 minutes. Mr. Stearns. Thank you, Mr. Chairman. Dr. Weiss, did you see the ``60 Minutes'' CBS program on Erbitux? Mr. Weiss. No, I did not. Mr. Stearns. Mr. Papineau, you did, and you---- Mr. Papineau. No, I did not. Mr. Stearns. You did not. I think you indicated--staff told me that you thought that the executives Erbitux saw the ``60 Minutes;'' is that true? Mr. Papineau. I indicated that the FDA reviewers that were reviewing the drug watched ``60 Minutes,'' and they---- Mr. Stearns. Okay. Mr. Papineau. [continuing] had serious questions. Mr. Stearns. Okay. So the FDA people who reviewed the ``60 Minutes'' had serious questions? Mr. Papineau. Yes, sir. Mr. Stearns. Did the executives of ImClone, do you know if they saw the ``60 Minutes?'' Obviously, they did, but I mean it seems to me that if there were exaggerations in that ``60 Minutes,'' somebody should have corrected the story. Mr. Weiss. I would think so. Mr. Stearns. Now, that is not the FDA's responsibility. Mr. Papineau. No, it isn't. FDA is not allowed to do that. Mr. Stearns. Right. Dr. Weiss, who do you think should have the responsibility if there is a bad story from CBS, they have hyped this, in fact it appears on the July 30, 2001 issue of Business Week international cover story they were talking about what a great new cancer treatment drug this was. And it seems like the point I am getting at is all this hype in the media about this. Where did they get this hype from? Mr. Weiss. It seems to be from the two executives that ran the company, the Waksal brothers. Mr. Stearns. Now, the Waksal brothers obviously didn't want to contact CBS ``60 Minutes,'' and say, ``No, you exaggerated,'' as CBS will say, ``Well, this is what you told us.'' So you have these two brothers hyping this and then you have the media picking up and hyping it too. Mr. Weiss. That seems to be the case; yes, sir. Mr. Stearns. So then the public is under the perception that it is legitimate because the media is promoting this, two legitimate media sources, ``60 Minutes'' and Business Week. What does it mean when the FDA puts a drug on a Fast Track for an application? Mr. Weiss. My understanding is that it is a drug that has a lot of interest, looks really hot and is one that should get on the market sooner rather than later, because it meets an unmet need for certain patients with cancer, and it works. Mr. Stearns. Does Erbitux legitimately make the argument for a Fast Track with FDA, and who makes that argument? Do the executives make it or does the FDA, and how is that determined? Mr. Weiss. The executives make it. To some degree, the FDA has to accept it too. Mr. Stearns. And so the application was made by the executives and then the FDA approved it and put it on a Fast Track. Mr. Weiss. That is my understanding. Mr. Stearns. And the evidence, the clinical evidence to put on a Fast Track has to be provided by ImClone, I guess, to the FDA and say, ``This is what we have from our clinical evidence, and we expect it to be on a Fast Track.'' Mr. Weiss. Yes, sir. Mr. Stearns. In your opinion, should drugs go on a Fast Track based on any new criteria or the criteria is satisfactory? Mr. Weiss. Sir, they got a Fast Track by they first in the spring of 2000 came to FDA and asked for accelerated approval and Fast Track. They had that meeting that we have discussed in great detail in August of 2000. Part of that meeting was to decide whether or not it should be accelerated, and it was information that was made available to FDA at that meeting that FDA decided that they would give them accelerated--they would accelerate the application. In January of 2001, it was agreed it would go Fast Track. Fast Track simply means that as the application moves along, you can submit parts of it as you complete it. The actual application itself was presented to FDA on October 31, 2001. The biggest part of this Fast Track thing is that it gives the FDA 60 days to review it, which is what put the RTF letter into play. Mr. Stearns. Because it was on a Fast Track, it allowed the executives to submit documentation partially then; is that correct? Mr. Weiss. Yes, sir. Mr. Stearns. Now, Dr. Weiss, you indicated the assessment of Erbitux based upon your available information. You said it is not a breakthrough drug, it is not a blockbuster drug, yet they got Fast Track. Describe the problems in the 9923 study-- would you describe the problem in the 9923 study as merely missing documentation or much more serious? Mr. Weiss. Much more serious. There are three major problems: One, a high rate of ineligibility; No. 2, that a large fraction of the patients were given different doses of the Irinotecan, major higher doses of the Irinotecan than they received before, which was against the protocol; and then, third, that there is a great deal of difference between the investigators, the ImClone Review Committee and the BMS consultants regarding who responded to the treatment and who did not; in other words, the cancer shrunk versus did not shrink. So those are the three major problems. Mr. Stearns. It seems to me that those are pretty transparent problems, that people who have a Ph.D. in immunology would know and should have gone ahead. I note that you discuss that ImClone attended the inclusion criteria of the 9923 study. What was this change and was it important? Mr. Weiss. Yes. It changed the requirement of the amount of therapy the patient had to have with Irinotecan beforehand. In other words, the original version the patient had to have a significant amount of that drug, 12 weeks of therapy and prove that their cancer grew despite that therapy. The protocol was changed that the patient could have had only a few doses, like on one patient as few as four. And that is 4 weeks of therapy, not 12 weeks. And you don't have sufficient information from just 4 weeks of therapy that the drug didn't work and the patient should now go on the study. That was the major change. Mr. Stearns. Thank you, Mr. Chairman. Mr. Greenwood. The Chair thanks the gentleman and recognizes for 5 minutes the gentleman from North Carolina, Mr. Burr. Mr. Burr. I thank the Chair. Dr. Weiss, you said that it was--the protocol was small and this was unusual. Is it unusual for a drug under Fast Track to have a small protocol? Mr. Weiss. No, it is not. A hundred and twenty patients should be sufficient if you truly have reliable results and you really see a benefit of the treatment. Mr. Burr. How many Fast Track processes have you testified on? Mr. Weiss. I have never done this before. Mr. Burr. And how many Fast Track processes have you reviewed as a medical professional? Mr. Weiss. I have not had any experience at the FDA reviewing such things. Mr. Burr. But you testify a lot because you are good. Is your consulting role to review things and potentially file a report on it? Mr. Weiss. Yes. I both practice medical oncology, take care of patients, and I act in this role of quality assurance for the clinical trials that the National Cancer Institute supports. Mr. Burr. How many Fast Track trials to date have used combination drugs in a Fast Track application? Mr. Weiss. I have not reviewed any Fast Track applications, sir. I never worked for the FDA. Mr. Burr. Yes, sir. I understand that, I am just trying to make sure the familiarity with the Fast Track process. But in fact this is the first time there has ever been a Fast Track process that used combination drugs. And in every case of the participants, they had to have already had a traditional chemotherapy approach that they had been non-responsive to; am I correct? Mr. Weiss. Yes. I think that is true. I can't think of---- Mr. Burr. My understanding is that is true, and do we know in how many cases the particular drug---- Mr. Weiss. Irinotecan. Mr. Burr. [continuing] Irinotecan was used? Mr. Weiss. There is the original studies with that drug conducted back in the early to middle 1990's that allowed that drug to be approved for marketing. Mr. Burr. And if I understand correctly from the notes I have got, Dr. Leonard Saltz, of the Memorial Sloan-Kettering Center, was intricately involved in the 9923 process? Mr. Weiss. Yes. I know him and I hold him in high regard. Mr. Burr. And what did he say when we interviewed him about these? Mr. Weiss. I don't believe we did interview him, sir. Mr. Burr. Oh, we didn't interview him, okay. And there were 27 clinical sites that participated in 9923 trial, am I correct? Mr. Weiss. I am not sure. I would have to provide that for the record. Mr. Burr. But it was a number of them. Did we talk to any of them relative to the discrepancies, the flaws---- Mr. Weiss. No, we didn't. We did not go out and interview any of the original investigators. Mr. Burr. I am just trying to better understand--as a Member of Congress, and I may be the only one, I don't think I am, I get calls all the time from patients who have gone through the traditional mode and they have been non-responsive. And they pick up the phone and they call and they say, ``Can you find a clinical trial? Can you get me in something?'' I can sort of understand how people snuck into this. I am not sure who approved it, whether it was one of the clinical sites or whether it was somebody at the FDA, maybe somebody changed the guidance a little bit. Certainly, the numbers that you talk about that you found are disturbing, and I think they do, to some degree, question the results that were found. I think that it is real important that we understand better from those 27 clinical sites what transpired. How did we have the contamination of the pool? But I think to suggest that it was flawed because it was small is in fact because it was a Fast Track application, and I think that there is some degree of history to prove that that is the case usually when we have it. Let me ask you, Dr. Weiss, if the pool of individuals who participated in this trial was clean, in other words the fit within the parameters, as you understand them, that were agreed to by the FDA and ImClone, would the results then, if they were the same percentages that you see today, increase or decrease your belief that there was something here that we ought to really pursue, as it relates to the colorectal cancer? Mr. Weiss. It would increase it. The problems are, as I said, we don't know about the fact that there were so many ineligible patients, why that occurred. We know that some of the patients got a higher dose of Irinotecan than they should have, and we also know that there is a good deal of disparity between the various radiologists reviewing the CT scans to decide whether or not the patient got a response. But if everything were pure, then I can tell you it would be a very interesting drug. I don't know that I would call it a breakthrough, but it would be very interesting. Mr. Burr. I purposely did not refer to it as a breakthrough and never try to on this committee to refer to anything as a breakthrough, other than when we actually pass a bill, because usually that is a breakthrough. I think it is extremely important, though, that we understand better these 27 sites and why they made the decisions to either lower or raise the level of the chemotherapy drug that they were using in combination, because in fact by itself Erbitux showed some response but not tremendous response. It showed a much better response when used in combination with--what was the name of that chem. drug again? Mr. Weiss. Irinotecan. Mr. Burr. Irinotecan. But in the case of every person in the trial, they had gone through a traditional chemotherapy approach and had been non-responsive; in other words, their problem had not gotten better. In most cases, it had gotten worse; at best, it had stayed the same, am I correct? Mr. Weiss. Yes. Mr. Burr. So there was some promise that was there. Mr. Chairman, I know my time has run out, and I hope that either in other information that we have from our staff report or from other witnesses we can better understand these discrepancies that deal with the makeup of the protocols, why there were deviations in the size of the chemotherapy that was given, and hopefully we can follow up with Dr. Saltz and the 27 sites. Mr. Greenwood. The Chair thanks the gentleman. Just to clear the record, Dr. Weiss, you did review some of the audit reports from some of the 27 sites; is that correct? Mr. Weiss. Yes, sir. Mr. Greenwood. Okay. The Chair thanks--Dr. Fletcher asks unanimous consent for an additional 2 minutes for purpose of inquiry. Mr. Fletcher. Thank you, Mr. Chairman. I just had one more question, especially the gentleman from North Carolina certainly spurred my interest in the fact that looking at Bristol-Myers Squibb, which purchased this company and I think still, obviously, has a belief that this medication will help in colorectal cancer, metastatic colorectal cancer, especially in patients who have had failed conventional therapy. I mean this is a company that invested a substantial amount of money. They have a tremendous amount of expertise in this area. They looked at this study. Now why do you think in looking at this study that they still believe that this medication certainly has a great deal of viability and yet you seem to dismiss the study substantially? Mr. Weiss. I do not dismiss the study substantially. I say there are so many problems it is hard to know whether the drug really works. And I do not know why the BMS people went ahead with it, but I guess that I could use the analogy they thought they were getting a diamond and they turned out to have gotten a zircon. Mr. Fletcher. Let me ask you just one follow-up with that, and that is that what are the side effects of this medication? Mr. Weiss. It has two side effects. One is any time you give a protein, which it is, to anybody there is always the chance of allergy. Mr. Fletcher. Percentage of that, do you have it? Mr. Weiss. Three or 4 percent. And the patient can't get any more of that drug because they are allergic to it. The other major side effect---- Mr. Fletcher. Does that include any anaphylactic reaction or life-threatening---- Mr. Weiss. Yes. That is exactly what I mean. And the other major side effect, where 85, 90 percent of the patients get it, is they get cases of acne, skin reaction, and sometimes it is bad enough so the patient wants to stop the therapy. Mr. Fletcher. Thank you very much. Thank you, Mr. Chairman. Mr. Greenwood. The Chair thanks the gentleman. The Chair wishes, without objection, to enter two documents into the record. One is the staff report entitled, ``An Inquiry into the ImClone Cancer-drug Matter, Preliminary Committee Staff Report,'' and the second is a report to the House Committee on Energy and Commerce by Dr. Weiss. Without objection, those documents will be entered into the record. [The reports follow:] An Inquiry Into the ImClone Cancer-Drug Matter preliminary committee staff report At the direction of Chairman W.J. ``Billy'' Tauzin and Subcommittee Chairman James C. Greenwood (later joined by Ranking Minority Member John D. Dingell and Subcommittee Ranking Minority Member Peter Deutsch), Committee staff conducted an investigation into matters surrounding the development by ImClone Systems, Inc., (ImClone) of its colorectal cancer drug Erbitux (also known as C225 or Cetuximab). ImClone, a small biotechnology company based in New York, was founded by two brothers, Drs. Sam and Harlan Waksal, in 1984. ImClone developed a cancer therapy drug called Erbitux, reportedly spending more than $200 million on research on this drug. ImClone has never turned a profit in its 18 years of existence. In the spring of 2000, ImClone sought accelerated approval from the Food and Drug Administration (FDA) to market Erbitux to meet the medical need of colorectal cancer patients who have failed to respond to standard chemotherapies. ImClone and Erbitux are internationally known, having been featured on the CBS news program ``60 Minutes,'' and the international cover of the July 30, 2001 issue of Business Week. One reason Erbitux received such attention is that, according to Business Week, this drug was ``the furthest along of a handful of new cancer treatments that precisely home in on a growth signal found in up to 50% of all cancer types.'' In clinical trials, ``the drug demonstrated remarkable success in causing colon cancer to regress in patients who had failed to respond to all other treatments.'' Erbitux also is promising because it is an antibody that targets and blocks off cancer cells, without the high degree of side effects from standard cancer treatment. Such promise apparently prompted thousands of cancer patients to try to obtain Erbitux either through clinical trial enrollment or ``compassionate use'' access. For example, USA Today reported that ImClone had received 400 calls a day from patients desperate to get Erbitux outside of clinical trials In September 2001, Bristol-Myers Squibb (BMS) bought 19.9 percent of ImClone for $1 billion, and agreed to pay as much as $1 billion more to obtain the marketing rights to Erbitux. On October 30, 2001, ImClone submitted its Biologics License Application (BLA) for Erbitux to FDA. On December 17, 2001, ImClone was one of seven biotechnology companies included for the first time in the NASDAQ 100 index. Excitement and confidence in ImClone was reflected in such media reports as an article in the December 26, 2001 Los Angeles Times, which proclaimed, ``Erbitux, a colon cancer treatment from ImClone Systems Inc., is set to make one of the biggest splashes of 2002.'' Many observers and investors were thus stunned to learn that, on December 28, 2001, FDA issued a ``refuse-to-file'' (RTF) letter in response to the ImClone license submission. The RTF letter is sent in rare cases when a submission is deemed insufficient, and is a non- public document, since it contains trade secret or confidential commercial information. ImClone publicly announced the FDA decision the evening of December 28th, which prompted a sharp sell off in ImClone shares starting on December 31, 2001. The Committee's investigation focused on the validity of the claims that were asserted about ImClone's effectiveness, the FDA filing and review process, and evidence uncovered by the Committee that friends and family members of ImClone's founders sold large amounts of ImClone stock just prior to ImClone's receipt of the negative determination from FDA. methodology To review the above issues, Committee staff conducted hundreds of hours of interviews with officials from ImClone, BMS, and other pharmaceutical companies, FDA, Wall Street firms, patient advocacy groups, oncologists, and representatives of family and friends of Sam and Harlan Waksal. Staff also obtained and reviewed thousands of documents from the above officials, corporations, and FDA. These documents and discussions with officials included, but were not limited to, the FDA drug approval process, clinical trials, the BMS tender offer and milestone payments with ImClone, events leading up to the FDA refusal-to-file letter, stock trading by ImClone officials and Waksal family and friends, and ImClone's filings with the Securities and Exchange Commission (SEC). Staff also reviewed the due diligence activities conducted by seven other major pharmaceutical firms during 1999 and 2000, to determine what they learned about ImClone and its products, and what their rationale was for not entering into an alliance with ImClone, as BMS did in 2001. the fda process: accelerated approval and fast-track designation The ImClone case highlights the policy question of how to test cancer drugs in a way that balances rapid access to life-saving drugs with the need to ensure that the drugs work, particularly when a publicly traded company is involved. In the standard approval process for a drug, FDA normally requires one or more large clinical trials (usually called Phase III trials) showing that a drug prolongs life compared with a placebo or with an already-approved drug. Such trials can take years, involve thousands of patients, and cost hundreds of millions of dollars to perform. When a company develops a drug for patients with life-threatening diseases and there are comparatively few treatment options available, FDA sometimes approves the new drug based on smaller trials, without a control group for comparison. The trials normally look at whether tumors are shrinking, which can be determined much faster than whether patients are living longer. Often, these trials are limited to patients who have not responded to existing therapies (known in medical terms as ``refractory'' patients). If FDA approves a drug based on such small trials, it typically requires companies to conduct additional studies to show more widespread benefit, such as additional survival time. In ImClone's case, the company was trying to get approval for Erbitux based on a study where the drug was used in combination with an approved chemotherapy, in a universe of approximately 120 patients--a very small patient pool. ImClone's strategy appears to have been unprecedented. According to the BMS Due Diligence Findings, dated June 12, 2001: ``No accelerated approval has ever been granted for an oncology drug for use in a combination therapy.'' It also should be noted that ImClone was seeking FDA's agreement for accelerated approval with a protocol design of a study that already had been conducted.1 --------------------------------------------------------------------------- \1\ Some companies meet with FDA before they conduct the clinical trial to seek the agency's input and guidance on the clinical protocol design. Agreements between the company and FDA can be made binding through Special Protocol Assessments. Although FDA's Center for Drugs has used dozens of these assessments for cancer drugs, the FDA's Center for Biologics (the division handling ImClone) had never used one for a biologic product, other than in one instance involving a vaccine. --------------------------------------------------------------------------- The Committee's investigation focused on two areas of the FDA process prior to the submission of ImClone's BLA for Erbitux in October 2001: (1) the clinical protocol design and conduct of the pivotal 9923 study, and (2) the single-agent study of Erbitux. In the spring of 2000, ImClone had two Phase II clinical trials that looked promising for accelerated approval: a study in head-and- neck patients, and a study in colorectal cancer patients. ImClone originally anticipated that it would be the head-and-neck trial that would be the vehicle for possible FDA approval. However, because of faster accrual of patients and promising results, it was the colorectal cancer patient study, known as the 9923 study, that ultimately formed the clinical core of ImClone's BLA. According to ImClone, the results of the 9923 study showed a 22.5% positive response rate in colorectal cancer patients who already failed the standard chemotherapies. In August 2000, ImClone was scheduled to meet with FDA to discuss, among other things, whether the results of the 9923 study were clinically meaningful and whether 9923 could meet accelerated approval criteria and receive fast-track designation. Prior to the ImClone meeting, FDA officials held an internal ``pre-meeting'' to prepare. At this pre-meeting, the primary FDA medical review officer indicated her reservations concerning the 9923 study. Her notes from this meeting state: ``1) Is ORR [overall response rate] = 15% clinically meaningful for colorectal CPT-11 failure? Only if as a single agent. 2) CP02-9923 meet accel. approval criteria and fast track? No.'' According to Committee staff interviews, nobody on the FDA staff expressed disagreement with the assessment of the medical review officer at this internal ``pre-meeting.'' On August 11, 2000, FDA met with ImClone officials and consultants to discuss ImClone's accelerated approval strategy using the 9923 study. According to the minutes of this meeting prepared by FDA, FDA participants described the 9923 study during this meeting as follows: ``This is a Phase 2 open label study of Cetuximab [Erbitux] plus irinotecan in metastatic or recurrent colorectal cancer refractory to irinotecan. Following two courses of irinotecan, patients' tumors are measured and based on the results, divided into the Stable Disease Treatment Group (tumor volume change < 25%) or the Progressive Disease Treatment Group (tumor > increased in volume 25%). Patients then receive irinotecan plus cetuximab until treatment failure.'' This description accurately tracks the first version of ImClone's protocol for 9923. According to that August 2, 1999 Version 1.0 of Protocol IMCL CP02-9923, Section 3.1.2, the patient ``must have demonstrated progression of disease after completing a minimum of two courses of a regimen containing irinotecan.'' However, a few months later, when patients were being enrolled into the study, ImClone relaxed the inclusion criteria in an amended protocol. According to the October 18, 1999 Version 2.0 of Protocol IMCL CP02-9923 amended Section 3.1.2 (Inclusion Criteria), the patient ``has documented stable disease (must have received a minimum of 12 weeks of irinotecan therapy) or progressive disease at any time after receiving an irinotecan- containing regimen. Copies of scans must be provided to confirm the lack of an objective response to prior therapy.'' (Emphasis added). Therefore, FDA was relying on an outdated version of the protocol at the August 2000 meeting with ImClone. Yet nobody from ImClone informed FDA about the amended protocol at this meeting or any time thereafter. Moreover, the minutes of the meeting taken by the company and FDA were exchanged, yet, again, the company did not correct the FDA's misunderstanding on this point. At the August 11, 2000 meeting with ImClone, the most senior FDA medical officer agreed that ``the basic trial design is probably acceptable,''--albeit, relying on the incorrect version of the study protocol--and, in effect, overruled the view of the primary medical reviewer that had been expressed at the pre-meeting among FDA personnel. The senior FDA officer told Committee staff that her decision to accept the protocol was based on her belief that she should be flexible for a promising drug meeting an unmet medical need, but was also based on representations that ImClone made about the special synergistic effect of Erbitux when used in combination with irinotecan. The senior FDA officer said that ImClone asserted that Erbitux showed no activity when used alone, which would support the claim of synergistic effect. This assertion was based on animal data and one small human trial. In the context that ImClone discussed this point, she assumed the human trial involved human colorectal cancer patients. The senior FDA officer later learned that the human trial involved renal cancer patients, which cannot be used as a basis for determining single-agent activity in colorectal cancer patients. ImClone disputes that the issue of single-agent activity came up at the August 11, 2000 meeting, but the company agrees that the issue was discussed in subsequent phone calls and meetings with FDA. On January 12, 2001, FDA granted fast-track designation for Erbitux. The FDA fast-track designation appears to be based on the inclusion criteria of the outdated version of the 9923 protocol. According to the January 12, 2001 letter to Nikhil Mehta of ImClone from Glen Jones of FDA: ``[W]e are designating as a Fast Track development program the investigation of cetuximab in combination with irinotecan for its effect on durable tumor responses (complete and partial responses) in patients with metastatic colon cancer who are refractory to standard chemotherapy (5 fluorouracil and irinotecan), where refractory is defined as progressive disease during at least two cycles of standard doses of 5-fluorouracil and irinotecan.'' (Emphasis added). On January 19, 2001, FDA sent a letter to ImClone requiring them to conduct a small study of 25-50 patients to test the response rate when using Erbitux alone as opposed to being used in combination with the toxic Irinotecan. As FDA explained: ``You are expected to study and submit the following in order to have a biologics license application which meets filling criteria and in order for your development program to continue to meet the criteria for Fast Track designation: 1. Preclinical and clinical data (including at least 25-50 patients) which excludes the possibility (e.g., through establishment of the upper limit of the 95% confidence interval around the observed response rate and the lower limit of the 95% confidence interval around the observed response rate with combination therapy) that the response rate observed with the combination of irinotecan and Cetuximab [Erbitux] would not be observed with single agent Cetuximab at the dose and schedule proposed. You must provide evidence that continuation of a toxic agent (irinotecan) is necessary to achieve the desired clinical effect. If you do not have such data, you should generate this information in a randomized controlled trial directly comparing the efficacy of single agent Cetuximab (the generic name for Erbitux) to the combination of Cetuximab plus irinotecan to establish the contribution of irinotecan in this setting.'' During the winter and spring of 2001, while conducting the single- agent study, ImClone was actively pursuing a joint venture or a sale of the company, or of a majority interest in the company, to several pharmaceutical companies. It appears that, in pursuing such an arrangement, the ImClone leadership attempted to downplay the significance of the single-agent study required by FDA. For example, according to one drug company official's e-mail, dated April 6, 2001: ``They [Imclone] have to complete the pilot trial of C225 [Erbitux] alone in refractory colon cancer patients, 25-40 patients. The FDA has required a final study report from this trial prior to an ODAC [Oncologic Drug Advisory Committee] meeting. Per [ImClone] estimately [sic], they believe a final study report will be sent Oct/Nov, meaning a likely Spring ODAC meeting. According to Harlen [reference to Harlan Waksal], the FDA has agreed that while this study is necessary for filing, it will not impact the approval of the combination in refractory. They need to have the single agent activity per their regulations. They won't use the small trial to compare RR [response rate] of the single agent to the combo, but will use it to help plan further development of C225 as a single agent if appropriate.'' On October 12, 2001, ImClone finished its single-agent study. The results of this study showed six responses out of 57 patients, for a response rate of 10.5%. As FDA noted in its December 28, 2001 refusal- to-file letter: ``Based on the summary information provided, and assuming that the results can be confirmed, the data do not show that the response rate observed with the combination of Cetuximab and irinotecan could not also be observed with single agent Cetuximab at the dose and schedule proposed.'' Even though there was a difference in the response rates (10.5% single agent; 22.5% combination), because both studies had such small populations, the confidence intervals overlapped and, thus, there was still a possibility that a very sick colorectal cancer patient could respond just as well with Erbitux alone as with Erbitux combined with a toxic chemotherapy. As a result, additional studies would be needed to isolate and establish the contributions of each drug. These additional studies would, at a minimum, significantly delay the launch of Erbitux. However, it appears that ImClone attempted to portray the results of the single-agent study and the prospects for its application in an inaccurate light to BMS, its likely new business partner. According to an October 12, 2001 e-mail from BMS Chief Scientific Officer Peter Ringrose to other BMS executives: ``I just had Sam Waksal on the phone re the single-agent data. Apparently it came out at 13% which he feels is half the C225 plus CPT-11 data. They have informed the FDA who were ``pleased'' and confirmed that they would be on for the Feb 28 ODAC (FDA's Oncologic Drugs Advisory Committee). He reckons they will be on the market by March. I am planning to meet with Sam in NY week after next.'' But, according to Committee staff interviews with FDA personnel, no one at FDA spoke to ImClone about the single-agent data on or around October 12, 2001, and FDA had never placed Erbitux on the agenda for the February 2002 ODAC meeting. The submission of the single-agent study to FDA was not completed until December 4, 2001. To more closely evaluate these two studies relied upon by ImClone, the Committee hired an expert consultant to review the studies' designs, protocols, and results. The key findings from this review are contained in a Report to the House Committee on Energy and Commerce by Raymond Weiss, MD, FACP (attached as an appendix to this report). the filing of the erbitux application and fda's review On October 31, 2001, ImClone completed its BLA application for Erbitux by submitting the clinical portion of the BLA to FDA. This clinical portion included the records for the 9923 study and the single-agent study 0141 (except for data on 17 patients, which was submitted on December 4, 2001). Under the fast-track designation of the FDA Modernization Act of 1997, the agency was required to complete its review of Erbitux and determine filability within 60 days of the submission date. Until this submission, FDA had relied on assurances from ImClone and the records in ImClone's Investigative New Drug file. FDA did not actually see the details of the clinical trials for Erbitux until ImClone submitted this portion of its BLA at the end of October 2001. Upon reviewing the clinical portion, FDA reviewers immediately identified significant problems, and the number of problems continued to mount as their review continued in November 2001. According to the FDA reviewers, the Erbitux application, as filed, raised serious questions and lacked needed information that ImClone had been advised on several occasions would be required as part of the application. The FDA reviewers told Committee staff that it was readily apparent that the clinical research was severely deficient and could not meet the legal requirement of an adequate and well-controlled clinical trial. On November 30, 2001, key FDA reviewers reached the conclusion that problems in the clinical portion were so severe that there was no option but to issue a refusal-to-file (RTF) letter, a rare event. On December 4, 2001, after raising the prospect of an RTF in a conversation with one of the FDA reviewers, ImClone's Regulatory Affairs Vice President formed an impression for the first time that an RTF letter was a realistic possibility, according to her interview with Committee staff. That same day, she reported this conversation and FDA's concerns to Dr. Harlan Waksal. On December 5, 2001, FDA management decided ImClone would receive an RTF letter. On December 7, 2001, a BMS Regulatory Affairs executive reported that she was not sure ImClone fully understood the implications of the comments of a FDA medical reviewer regarding the individual contributions of the drugs in the combination trial. In the e-mail opinion of the BMS executive, based on the FDA reviewer comments, ``a refusal to file decision doesn't appear altogether unlikely at this point.'' Both FDA and officials from the two companies told Committee staff that the tone of conversations between the agency and ImClone dramatically changed following the early December discussions with FDA. By mid-December 2001, it was clear to both ImClone and BMS that FDA had serious concerns about the Erbitux drug application. After a teleconference with FDA on December 12, 2001, key ImClone executives perceived an increased probability of an RTF letter, according to their interviews with Committee staff. On December 20, 2001, FDA told ImClone and BMS to no longer contact the agency until after they received FDA's letter on filability on December 28, 2001. Some personnel from ImClone and BMS thought from the tone of this conversation that an RTF letter was likely, but some in ImClone still held out hope for a positive FDA response. On December 24, 2001, an outside consultant for BMS was able to get an incidental confirmation from a source at FDA that FDA would be sending an RTF letter to ImClone. The next day, December 25, BMS Senior Vice President for Marketing Brian Markison called Dr. Harlan Waksal, who was vacationing in Colorado, to inform him of this confirmation BMS' consultant had received from an FDA source. Dr. Sam Waksal was vacationing at a Caribbean island and returned to New York on December 26, 2001. It appears that Sam and Harlan Waksal and other key ImClone and BMS executives knew about the RTF letter by the morning of December 26, 2001. That day, ImClone sent a letter to FDA in an attempt to prevent the RTF by offering to waive its rights to the 60-day deadline that FDA had to meet by December 28, 2001. FDA declined the offer on the grounds that ImClone could not legally waive the deadline. On December 27, 2001, Sam Waksal for the first time personally interacted with FDA with respect to Erbitux, calling a senior official at FDA's Center for Biologics he knew when Waksal worked at the National Institutes of Health. The purpose of this call appears clear. Based on internal notes produced to the Committee by ImClone, dated 12:00 noon on December 27, 2001, ``Sam and Harlan [Waksal] are calling FDA to try to stop RTF.'' The senior FDA official declined to intercede, and on December 28, 2001, at approximately 2:55 p.m., FDA faxed the RTF letter to ImClone. The company in turn publicly revealed the receipt of the letter later that day, at approximately 7:14 p.m. the rtf letter and subsequent events As discussed above, on December 28, 2001, FDA issued a refusal-to- file letter in response to the ImClone submission. The RTF letter, sent in rare cases when a submission is deemed insufficient, is a non-public document containing trade secret or confidential commercial information. In its December 31, 2001 investors' conference call, ImClone executives said that FDA regulators sent the RTF letter because the Erbitux application was missing certain ``train of documentation'' information needed by regulators to accept the filing. ImClone said it would be able to answer FDA's questions by the end of the first quarter, leading, hopefully to an approval of Erbitux in the fall of 2002. On the first trading day after the issuance of the RTF letter, ImClone's shares fell $11.15, or 20 percent, to $44.10 per share. On January 4, 2002, the Cancer Letter published excerpts of the RTF letter, which indicated that FDA had greater concerns about ImClone's data than company executives stated in the December 31 conference call with analysts and investors. The Cancer Letter article reported that the RTF letter detailed a long list of FDA concerns that went far beyond record keeping. The FDA was quoted as saying that ImClone's clinical trial was ``not adequate and well controlled,'' and that additional studies would be needed. Moreover, the letter suggested that FDA had warned ImClone starting in August 2000 that its data would have to demonstrate that irinotecan, a standard chemotherapy, was needed along with Erbitux. But the data submitted by ImClone was not sufficient to distinguish the effects of irinotecan and Erbitux. After the Cancer Letter report appeared, ImClone shares fell sharply further, to open on January 7, 2002, at $34.96 per share. On January 9, 2002, after ImClone had lost nearly $1.5 billion in market value since December 28, 2001, and after the filing of at least 11 federal class action lawsuits, Sam Waksal, ImClone's president and chief executive officer, attempted to explain the company's situation at the J.P. Morgan H&Q Healthcare conference. ``What happened was that we put together a faulty package and we screwed up,'' Waksal reportedly said. The principal problem, he said, was the company's failure to provide documentation demonstrating that the patients enrolled in ImClone's pivotal trial had met the eligibility criteria. the bms-imclone partnership and imclone's loans to key officials During 1999 and 2000, ImClone invited BMS, as well as several other major pharmaceutical firms, to meet with representatives of ImClone to conduct due diligence with a view toward acquiring a majority ownership in ImClone. Over this time period, several pharmaceutical firms, including BMS, met with Sam Waksal and conducted preliminary due diligence activities. Each pharmaceutical firm, including BMS, concluded that the price being asked by ImClone was too high to continue discussions at that time. In early 2001, BMS conducted an extensive internal review of its own biologics business, and evaluated a number of opportunities to expand its biologics capabilities. BMS concluded in April 2001 that ImClone's IMC-C225 compound, Erbitux, could sustain its leadership position in oncology, significantly contribute to its corporate growth strategy, and provide a significant step towards BMS becoming a leader in biologics. In mid-April 2001, Mr. Brian Markison, BMS Senior Vice President of Marketing, contacted Dr. Sam Waksal to determine whether ImClone would be interested in pursuing a deal involving a significant equity investment in ImClone by BMS. On May 3, 2001, Dr. Waksal, Mr. Markison and Dr. Peter Ringrose, Chief Scientific Officer of BMS, met in New York City to discuss BMS' interest in ImClone. During that meeting, Dr. Waksal outlined the type of deal that would be acceptable to ImClone. Dr. Waksal's preference was that ImClone remain a publicly traded entity after the deal. As a result, Mr. Markison agreed to explore a possible transaction whereby BMS would acquire a majority interest of ImClone in return for BMS common stock, together with a separate agreement providing for the commercial rights to IMC-C225 by BMS. After further discussions, on May 19, 2001, the two companies entered into a confidentiality agreement, and BMS conducted further due diligence of ImClone. On June 1, 2001, Mr. Richard Lane, President of BMS' Worldwide Pharmaceutical Division, and Dr. Waksal met to discuss an outline of a deal prepared by ImClone's legal advisors that called for an acquisition by BMS of a 70% stake in ImClone. On June 5, 2001, BMS' Board of Directors entertained the majority ownership deal with ImClone. However, some BMS board members raised concerns about acquiring majority ownership of ImClone, and suggested that BMS seek an arrangement of less equity in ImClone while still securing the rights to C-225. On June 7, 2001, representatives of the two companies met to discuss BMS' proposed due diligence activities. Shortly thereafter, employees of BMS and representatives of its legal and financial advisors conducted an extensive due diligence review of ImClone in the areas of clinical development, legal matters, information technology, marketing and sales, tax, finance, manufacturing, intellectual property and regulatory affairs. In late June 2001, BMS concluded that the acquisition of a minority interest in ImClone, together with a separate commercial agreement relating to the co-development, co-promotion, and distribution of ImClone's IMC-C225 compound, would be a preferable structure for a deal with ImClone. Thereafter, Dr. Waksal was contacted by Mr. Peter Dolan, Chief Executive Officer of BMS, and Mr. Lane, who confirmed to Dr. Waksal that BMS no longer had interest in a deal to acquire a majority interest in ImClone where ImClone remained a publicly-traded entity. Mr. Dolan and Mr. Lane reaffirmed BMS' interest in ImClone and BMS' intent to consider other deals that met the economic and business objectives of both companies. Dr. Waksal stated that he was willing to consider alternative proposals, but emphasized that he was not interested in a commercial transaction that did not also include a significant equity investment in ImClone by BMS. Dr. Waksal also advised BMS that he felt ImClone's existing stockholders would benefit most if BMS acquired an equity interest through a tender offer to ImClone's existing stockholders. On June 26, 2001, BMS provided ImClone with an outline of a proposed commercial transaction for the co-development, co-promotion, and distribution of IMC-C225, and an equity structure that proposed an acquisition of a 19.9% interest in ImClone by BMS. During the end of June and the first two weeks of July 2001, BMS and ImClone, and their respective legal and financial advisors, met several times to discuss terms and conditions of a 19.9% equity investment and a commercial transaction relating to rights to IMC-C225. Also during this time, the two companies and their respective financial advisors discussed the price at which BMS would offer to purchase the ImClone shares, which would be at a significant premium to the publicly-traded stock price. In mid-July 2001--after ImClone was virtually assured of the 19.9% equity deal and in anticipation of the lucrative tender offer from BMS--ImClone's Board of Directors agreed to lend $35 million to Sam and Harlan Waksal and Robert Goldhammer, the Chairman of the Board, to provide them with an opportunity to exercise stock options and warrants they held to purchase a total of approximately 4.5 million shares of ImClone stock. Sam Waksal and Harlan Waksal's loans were $18.2 million and $15.7 million respectively. Mr. Goldhammer's loan was in the amount of $1.2 million. These unsecured loans were at an interest rate equal to the prime lending rate plus 1 percent (7.75 percent on the date of the note). On July 20, 2001, BMS and ImClone agreed, on a preliminary basis, to a tender offer price of $70.00 per share. On September 17, 2001, the Board of Directors of BMS unanimously approved the ImClone deal. On September 19, 2001, ImClone's Board of Directors approved the deal, and both companies issued separate press releases announcing that BMS would acquire 14.4 million shares, or about a 20 percent stake, of ImClone's common stock for $1 billion through a tender offer of $70 a share, exclusively set aside for ImClone shareholders. At the time of the announcement, ImClone shares were selling at roughly $40 per share. BMS also agreed to pay as much as another $1 billion in milestone payments in return for the marketing rights to Erbitux in the United States. On October 29, 2001, thousands of ImClone's shareholders participated in the BMS tender offer to purchase ImClone stock at $70 a share, a $20 premium over the increased trading price. Sam Waksal sold 814,674 shares, and Harlan Waksal sold 776,450 shares, or just more than 20% of each of their holdings. Although all ImClone shareholders were allowed to tender their shares of ImClone stock to BMS, only the Waksals, the Chairman of the Board, and one other board member were given loans by ImClone to purchase ImClone stock, at highly discounted prices, and then tender it to BMS at $70 per share. A number of experts in the financial and biotech areas told Committee staff that there is no precedent in pharmaceutical-biotech alliances for the BMS and ImClone deal, which resulted in the immediate personal enrichment of top executives through a tender offer to existing shareholders. The more typical alliance formed between a major pharmaceutical company and a smaller biotech firm is centered on milestone payments that provide much needed cash to the biotech firm. bristol-myers squibb due diligence of imclone The Committee's investigation also focused on BMS' due diligence into the clinical research behind Erbitux prior to its decision to strike a commercial deal with ImClone. In May 2001, BMS scientists were mobilized to examine the clinical research package. On June 14, 2001, BMS Senior Vice President Laurie Smaldone sent an e-mail to her colleagues Peter Ringrose and Beth Seidenberg concerning ImClone, stating: ``On the whole this remains a very high risk opportunity.'' Among the critical outstanding issues she cited: ``Pivotal CRC [colorectal cancer] program issues--Single agent activity. The trial which is ongoing will need to be shared with us. We should attend the FDA meeting with ICE [ImClone] when the data is final. There is no agreement that we could find that is reassuring regarding activity level needed for approval. ``Weak dose selection rationale--They have developed a PK [pharmacokinetic] rationale for dose selection, however the dose is questionable for refractory patients and the safety margin for early stage patients has not been determined. In their phase 3 first line study they are evaluating the same dose used in refractory disease. This is already seen as a problem by the FDA and by us . . . ``Safety--The safety of the product, specifically related to skin toxicity, bleeding, allergy has not been well characterized. This reemphasizes the weakness of the dose selection argument . . .'' Ultimately, concerns about the single-agent study and the 9923 study were not completely resolved before BMS entered into the agreement with ImClone. In a June 12, 2001 ``Summary of Key Findings,'' BMS executives pointed out the risks of the results of the single-agent study: ``FDA has requested that data be provided on the antitumor activity of C225 as a single agent. Preclinical data has thus far been provided to FDA to address this issue, but they have persisted in their interest that clinical data be provided. No accelerated approval has ever been granted for an oncology drug for use in a combination therapy. (emphasis added). In the event that tumor responses are observed in the ongoing single- arm single agent refractory colorectal study then it is possible that this could throw into question the approvability of the combination claim based on nonrandomized antitumor data (given that the value of CPT-11 after CPT-11 might be questioned).'' On September 4, 2001, a BMS Vice President sent an e-mail to other senior BMS executives, stating: ``Based on today's discussions with Susan and Steve our preliminary recommendation is a `go' decision. We are still trying to obtain data from the mono therapy study from ICE [ImClone]. As of 6:30 PM today we did not have any more information. I will be discussing this with Susan again in the AM.'' Despite requests to BMS, Committee staff has not been provided any evidence at this time that shows that BMS obtained the data on the single-agent study prior to making its historic deal with ImClone. In addition, the BMS independent radiology review of ImClone 9923 study lowered the ImClone reported response rate and the size of the patient pool, both significantly. In an August 30, 2001 e-mail, the BMS independent radiologist noted: ``Attached to this message you will find the latest update of the spread sheet we are using to keep track of our review of the CT's and MRI's of patients enrolled in CP02-9923. ``We are in the process of reviewing a total of 34 cases, 27 of which were initially assigned by the investigator to the PD [progressive disease] cohort and 7 of which were assigned to the SD [stable disease] cohort. To date we have reviewed 23/27 cases from the PD cohort and 6/7 cases from the SD cohort. ``In the PD cohort we can now confirm 14 partial responses. We may have 15, but one case will require adjudication. With 4 more cases to review, and the one case for adjudication, the RR in the PD cohort could be as high as 15 + 4/120 = 15.8%. ``I should mention, however, that in 4 of these confirmed partial responses our radiologists have judged the disease to be only stable at the time of patient's enrollment into the study. If these 4 cases were thrown out, then the highest possible response rate would 11 + 4/120 = 12.5%. However, we have not conducted a strict review of all of the 120 cases, and it is likely that if we carefully reviewed all of the cases we would throw many out on the same basis [emphasis added]. Indeed, it is my understanding that the study sponsor has conducted such an analysis on the basis of its own radiologists' review, and has thereby reduced the denominator of the patient population with radiographically confirmed progressive disease. ``I will review the study sponsor's data and see if I can get at the same denominator [patient pool size] as it did (? N = 89), and calculate the response rate accordingly. More cases and analysis to follow tomorrow... `` It should be noted that, if indeed the denominator in 9923 was below 100 (particularly if it were as low as 89, which the BMS independent radiologist appears to have indicated in the above e-mail), the entire study probably could no longer serve to support an accelerated approval application. As ImClone consultant, Roger Cohen MD, e-mailed to Dr. Harlan Waksal on January 4, 2002: ``9923 is a small study to begin with. It cannot get much smaller and have any hope of serving as a registration study. I think it is clear that it has to have at least 100 fully eligible and evaluable subjects (closer to 100).'' Therefore, although BMS received tentative support from its scientific leadership and outside consultants, it appears that the status of crucial issues were as follows at the time BMS entered into the alliance with ImClone in September 2001: 1. Single agent activity--BMS lacked the data from the single agent study. 2. Response rate--BMS outside radiology review indicated that a strict review could lower the response rate below the clinically meaningful standard of 15 percent. 3. The denominator, or patient pool size, of the pivotal trial appeared to be under 100, and therefore could not serve as a basis for accelerated approval according to ImClone's own consultant. bms reaction to imclone comments on the refusal-to-file letter On the evening of December 28, 2001, ImClone revealed to the public that it had received a refusal-to-file letter from FDA. On December 29, 2001, a Reuters news article reported: ``Sam Waksal, ImClone's chief executive officer, told Reuters that the agency first wants more `annotation' information, about how the company verified that patients enrolled in its trials had indeed failed previous drug regimens and that subsequent tumor reductions attributed to Erbitux were indeed real. Concerns raised by the FDA mainly involve how the data were presented and do not raise outright concerns about safety or efficacy of the drug, the CEO added.'' An internal BMS e-mail dated December 30, 2001, responding to earlier BMS e-mails on the Reuters article, states: ``I agree that some alot [sic] of Sam's comments are misleading and at this point we should continue to be silent. As you heard from yesterday's discussion, there's a lot we don't know.'' On that same date, December 30, 2001, another BMS official commented on the draft documents being prepared for the ImClone investor relations conference call: ``These draft documents leave me most uncomfortable. They gloss over the seriousness of the RTF letter and make it appear that the integrity of the study results is not in question, when in fact it is . . . We will also need to rewrite major portions of the clinical and pharmacology part of the BLA including a new 9923 study report, new 141 (monotherapy) study report, new ISS and ISE based on these revised reports. I know that this is not what ImClone wants to tell their investors, but I think it represents the reality of this situation.'' trading activity of sam and harlan waksal, their family members and close friends, and imclone directors Adding to the controversy over Erbitux has been the trading of ImClone stock by ImClone insiders a few weeks before the FDA refusal- to-file letter, and by Waksal family relatives and friends during the 48 hours before the FDA letter was issued. Committee staff examined public records and conducted interviews with Sam and Harlan Waksal, and with representatives of several of their family members and friends, to determine the degree of trading in ImClone stock by these individuals over the last year. Of particular interest were board members who tendered stock to BMS on October 29, 2001, and whether any board members or officers of ImClone sold stock during the critical month of December 2001. Committee staff also attempted to gather information on those trades of Sam Waksal's immediate family members and close friends that were identified during discussions with Dr. Waksal. Committee staff found that ImClone board members exercised stock options to acquire 8.1 million shares of ImClone common stock between the period of June 1, 2001 and October 29, 2001. Committee staff examined this time period because it represents the period of negotiations between BMS and ImClone officials regarding an equity purchase of ImClone by BMS. Of these 8.1 million ImClone shares, Sam and Harlan Waksal acquired approximately 4.1 million. Each board member who exercised stock options during this time period is shown in the table below. ImClone Incorporated Stock Options Exercised by ImClone Board Members During the Period of Negotiations with BMS June 1 Through October 29, 2001 ---------------------------------------------------------------------------------------------------------------- Options ImClone Board Members Date Exercised Shares excercised at ---------------------------------------------------------------------------------------------------------------- Barth, Richard............................................... 6/13/2001 2,500 $3.00 Barth, Richard............................................... 9/17/2001 2,500 $3.00 Barth, Richard............................................... 10/29/2001 27,328 $4.50 Devita, Vincent.............................................. N/A ............... ............... Goldhammer, Robert........................................... 7/16/2001 316,684 $.28-$6.63 Kies, David.................................................. 8/2/2001 30,000 $6.63 Kies, David.................................................. 7/25/2001 55,000 $3.00-$5.44 Kopperl, Paul................................................ 7/24/2001 120,000 $3.00-$6.63 Kopperl, Paul................................................ 10/29/2001 6,430 $39.91 Levine, Arnold............................................... 8/3/2001 16,000 $5.43 Mendelsohn, John............................................. 10/29/2001 90,226 $.53-$2.75 Miller, William.............................................. N/A ............... ............... Waksal, Harlan............................................... 7/12/2001 2,080,000 $3.03-$9.13 Waksal, Sam.................................................. 7/12/2001 2,060,000 $5.69-$9.13 ............... 4,806,668 ............... ---------------------------------------------------------------------------------------------------------------- It should be noted that ImClone awarded many of these options to the Waksal brothers in 1999 and 2000, and accelerated the vesting of these options with the rise in the stock price. According to ImClone's SEC filings, on May 24, 1999, the stockholders approved the grant of an option to Sam Waksal to purchase 1,000,000 shares and Harlan Waksal to purchase 650,00 shares of Common Stock at a per share exercise price equal to $18.25, the last reported sale price of the Common Stock on the date shareholder--approval was obtained at the annual shareholders meeting. The option was to vest no later than six years from the grant date and specified amounts were subject to earlier vesting if specified Company Common Stock price thresholds were met. On May 31, 2000, the stockholders approved amendments to a total of 1,600,000 options that were granted to Sam and Harlan Waksal the year before. The shareholders also approved amendments to a total of 3,300,000 additional options held by Sam and Harlan Waksal. All these options were amended to provide that each tranche vested immediately upon achievement of the relevant stock target price associated with such tranche, without regard to the passage of time that was a requirement in the original options. The options became fully vested and exercisable upon the approval of the amendments. As reported in a previous section, the ImClone board granted the Waksal brothers and two other directors company loans to finance the exercise of their options as part of the tender offer. In total, Committee staff found that members of ImClone's Board of Directors tendered 2.1 million shares of ImClone common stock at $70 a share to BMS on October 29, 2001. This represents approximately 15% of the stock tendered by ImClone shareholders to BMS. Sam and Harlan Waksal tendered a total of 1.6 million shares of ImClone stock to BMS for about $111 million. Simply stated, this means that the Waksal brothers received over 10 percent of the entire proceeds paid by BMS during the $1 billion tender offer, and the ImClone Board combined received nearly 15 percent of the proceeds from the BMS tender offer. The table below shows the number of shares tendered and the proceeds for each of ImClone's Board members. ImClone Incorporated Shares Tendered to BMS by ImClone Board Members October 29, 2001 ---------------------------------------------------------------------------------------------------------------- ImClone Board Members Shares Tendered Cost Per Share Proceeds ---------------------------------------------------------------------------------------------------------------- Barth, Richard............................................... 27,328 $70 $1,912,960 Devita, Vincent.............................................. 129 $70 $9,030 Goldhammer, Robert........................................... 364,781 $70 $25,534,670 Kies, David.................................................. 30,007 $70 $2,100,490 Kopperl, Paul................................................ 27,864 $70 $1,950,480 Levine. Arnold............................................... 1,329 $70 $93,030 Mendelsohn, John............................................. 90,226 $70 $6,315,820 Miller, William.............................................. 8,573 $70 $600,110 Waksal, Harlan............................................... 776,450 $70 $54,351,500 Waksal, Sam.................................................. 814,674 $70 $57,027,180 2,141,361 $70 $149,895,270 ---------------------------------------------------------------------------------------------------------------- Committee staff also examined trading by ImClone board members and officers during the critical month of December 2001 to determine if any ImClone officials who sold stock had knowledge of discussions with FDA regarding whether the agency would accept the Erbitux filing. We found that, with the exception of Harlan Waksal's disposition of 700,000 shares on December 6, 2001 (discussed below), three officers of ImClone sold stock prior to December 18, 2001. In each case, Committee staff were told that the officials involved were unaware of the details of the FDA review of Erbitux, sold less than 20 percent of their holdings in ImClone, and did so based on their brokers' advice. Even though ImClone has internal rules that require officers of the company to receive pre-clearance before trading in company stock, two of the three trades were not pre-cleared. In one case, the individual was not an officer at the time of the trade, but was since promoted. In the other case, the officer claimed to have simply forgot to pre-clear the trade. On December 21, 2001, ImClone issued an order prohibiting its employees from trading in ImClone stock until after the FDA decision on Erbitux was made public. ImClone has told Committee staff that no board member or officer of ImClone traded ImClone stock between December 21 and 28, 2001. However, Committee staff discovered that several of Sam Waksal's immediate family members or friends sold ImClone stock on December 27, 2001--the day before ImClone announced publicly that FDA had refused to accept the filing of Erbitux. This list of traders included his father, sister, two daughters, and son-in-law. In addition, Committee staff learned from discussions with Sam Waksal that the SEC has questioned him about trades made by three other friends on December 27 or 28, 2001. With the exception of Sam Waksal's father (who has not yet provided information to the Committee), attorneys for each of the family members admitted that their client sold stock on or around December 27, 2001, but asserted that they received no non-public information about ImClone and each had a reason why they sold the stock on that particular day. Although phone records and logs obtained from Sam and Harlan Waksal, covering the time period December 26-28, 2001, suggest that both men had conversations with each other and may have had conversations with members of their family and friends, both Sam and Harlan Waksal denied that they had tipped off anyone as to their knowledge that ImClone was about to receive a RTF letter from FDA. On December 6, 2001, Harlan Waksal sold 700,000 shares of ImClone stock. On October 31, 2001, Harlan Waksal notified the ImClone board members that he planned to execute a forward transaction involving 700,000 shares of ImClone common stock: Dear Members of the Board: As a result of my recent option exercise and the sale of stock to Bristol-Myers Squibb I am left with an additional tax burden that I need to meet. As I am averse to having such a great personal liability I plan to meet this obligation (and provide some liquidity), by the sale of additional shares of ImClone stock. I am moving to do this through a prepaid forward contract for the sale of stock. This will be a 700,000 share transaction, the stock will still be under my voting control for the next three years and I will retain some continued upside if the stock continues to perform as we anticipate. I plan on finalizing this transaction over the next two weeks. I look forward to seeing you at the Board dinner on the 14th. Sincerely, Harlan W. Waksal, M.D. Dr. Harlan Waksal told Committee staff that, in November 2001, he attempted to shop the sale of his ImClone stock. Dr. Waksal filed a Form 144 with the SEC, announcing his intention to sell 700,000 shares of ImClone. Dr. Waksal told Committee staff he was forced to sell the ImClone stock to come up with enough cash to pay substantial taxes generated from his prior exercise of stock options and his tendering of shares to BMS. He also stated that, because he did not want to sell shares, he entered into a forward sales contract that gave him a percentage of the cash value of the shares up front but still allowed him to control the shares and defer tax payments for another two years. Simply put, Dr. Waksal received less than what the stock was worth at the time of the sale, but he also limited his downside risk when ImClone's stock price dropped considerably in the month thereafter. It should be noted that Dr. Waksal sold the 700,000 shares on the same day that ImClone's share price hit its 52-week high. Moreover, in February 2002, Dr. Sam Waksal revealed about 50 unreported stock trades that should have been reported to the SEC and returned to ImClone about $486,000 in profit he made on some sales of company stock because he may have violated an insider-trading regulation. conclusion The key findings from the Committee staff's investigation at this point are as follows: In August 2000, the primary FDA medical reviewer handling the ImClone/Erbitux matter did not believe that ImClone's 9923 study met the criteria for accelerated approval and fast-track designation. Her view is substantiated by the opinions of leading oncology experts who reviewed the 9923 protocol for the Cancer Letter in 2002 and found serious protocol design flaws. At the August 11, 2000 meeting between ImClone and FDA to discuss a possible accelerated approval strategy, FDA relied on the wrong version of the 9923 protocol, which had a tighter inclusion criteria than the one actually used in the amended protocol. ImClone did not correct FDA's mistake. At the same August 11, 2000 meeting, the senior FDA medical official in effect overruled the primary medical reviewer and said the protocol design was probably acceptable. The senior FDA official now believes she was misled by ImClone about its claim that a human clinical trial showed no single agent activity. This official said that this claim was a key factor in her decision to allow ImClone's application to proceed. FDA's decision to grant fast-track designation to ImClone's Erbitux appears to have been based on the wrong version of the 9923 protocol, and was made before it had the single-agent data on Erbitux. The 9923 study was afflicted with many problems. The BMS independent radiology review showed that strict scrutiny of the study data resulted in a response rate of only 12.5% (as opposed to the claimed 22.5% response rate) and that the number of evaluable patients was only approximately 89 (as opposed to the original 120). If these data were in fact correct, the 9923 study failed to meet the 15 percent clinical endpoint set by ImClone and the study would be too small to support an accelerated approval by itself. BMS scientists were aware of the issues involving the response rate and the size of the patient pool, and BMS apparently did not have the single-agent data prior to entering into its agreement with ImClone in September 2001. Nevertheless, BMS went ahead with the ImClone agreement. The results of the single-agent study showed enough activity in Erbitux alone to throw into doubt the assumption used for the pivotal 9923 study--that the toxic chemotherapy, irinotecan, needed to be used in combination with Erbitux to produce stronger and more meaningful response rates. Because of this doubt, FDA needed additional studies to resolve this issue, which would mean a substantial delay in launching Erbitux. ImClone knew the results of the single-agent study on October 12, 2001, but its then-CEO appeared to portray these results in a positive light to the BMS Chief Scientific Officer. On October 29, 2001, BMS consummated the tender offer with ImClone. As a result, Sam and Harlan Waksal made about $111 million from the sale of stock. In acquiring their shares, the Waksal brothers had received loans from ImClone to finance the exercising of options. On November 30, 2001, key FDA reviewers recommended a refusal- to-file letter for the Erbitux application. On December 4, 2001, ImClone's Regulatory Affairs Vice President confirmed in a conversation with one of the FDA reviewers that an RTF letter is a realistic possibility. On December 5, 2001, senior FDA management at the Center for Biologics determined that an RTF letter would be sent to ImClone. It took several days for all members of the FDA review team to learn of this decision and it did not become official until a team meeting held on December 17, 2001. On December 20, 2001, FDA informed ImClone and BMS that a decision had been reached and that the decision letter would be sent on December 28, 2001. ImClone and BMS officials suspect an RTF. On December 24, 2001, an outside consultant to BMS obtained confirmation from an FDA official that an RTF letter will be issued. On December 25, 2001, a BMS executive informed Dr. Harlan Waksal that ImClone would be getting an RTF letter. On December 26, 2001, key ImClone and BMS officials were aware of the RTF. ImClone sent a letter to FDA to try to prevent the RTF letter. On December 27 and 28, 2001, Waksal family relatives and some friends sold ImClone shares. On December 28, 2001, ImClone received the RTF letter. [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] Mr. Greenwood. The Chair thanks our witnesses for your testimony and for your help of this subcommittee with its work and excuses you. The Chair now calls forward Dr. Samuel Waksal, Ph.D., who is the former chief executive officer of ImClone Systems. Would you please pull the microphone forward very close to you and push the button on it so that it is on. Mr. Samuel Waksal. It should be on. Mr. Greenwood. Thank you. Thank you. It is on. Dr. Samuel Waksal is a former ImClone chief executive officer and is here with us today under subpoena. On April 19, 2001, Dr. Waksal did submit to an interview--2002, excuse me--Dr. Waksal did submit to an interview with committee investigators that lasted for about 4 hours. Dr. Waksal was scheduled for another staff interview on May 30 but withdrew from this scheduled interview on advice of counsel. My understanding is that Dr. Waksal authorized his counsel to advise the committee that he will rely on his constitutional right not to testify at today's hearing. I believe that this privilege should be personally exercised before the members of this subcommittee, as we have done in the past, and that is why we have requested Dr. Waksal's appearance today, and I thank you for joining us, sir. I would urge you, given the importance of your testimony, to reconsider your decision to invoke your Fifth Amendment rights, especially since you may need to amend statements you made earlier to the committee investigators during your interview which, if the Government criminal and civil complaints filed against you yesterday are true, may not be wholly accurate. Dr. Waksal, you are aware that the committee is holding an investigative hearing, and in doing so we have the practice of taking testimony under oath. Do you have any objection to testifying under oath? Mr. Samuel Waksal. No. Mr. Greenwood. The Chair also advises you that under the rules of the House and the rules of the committee, you are entitled to be advised by counsel. Do you desire to be advised by counsel during your testimony today, sir? Mr. Samuel Waksal. I have counsel here with me. Mr. Greenwood. Okay. Would you please identify your counsel for the record or your counsel may identify himself. Mr. Liman. Yes. It is Lewis Liman from the law firm Wilmer, Cuttler and Pickering. Mr. Greenwood. Thank you. At this time, Mr. Waksal, if you would stand and raise your right and I will swear you in. [Witness sworn.] Mr. Greenwood. Okay. Thank you, Dr. Waksal. You are now under oath, and you may give a 5-minute statement for the record if you choose. Do you care to, sir? TESTIMONY OF SAMUEL WAKSAL, FORMER CHIEF EXECUTIVE OFFICER, IMCLONE SYSTEMS, INC. Mr. Liman. Dr. Waksal will not be giving a statement for the record at this time. Mr. Greenwood. Very well. Then the chairman will recognize himself for questioning of the witness. Mr. Liman. We have submitted a letter to the subcommittee. Mr. Greenwood. Without objection, your letter will be entered into the official record of these proceedings, sir. Mr. Samuel Waksal. Thank you. [The letter follows:] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] Mr. Greenwood. Dr. Waksal, on October 29, 2001, you and your brother sold $1.6 million of shares of ImClone to Bristol- Myers Squibb for about $111 million, a sale helped, in part, by all of the hype ImClone generated about its purported wonder drug, Erbitux and made possible, in part, by unsecured loans of about $35 million that you and your brother received from ImClone so you could exercise options to purchase ImClone stock at highly discounted prices. During the same time period, ImClone was running the pivotal clinical trial aimed at supporting an accelerated FDA approval for ImClone's cancer drug, Erbitux. The study turned out to be riddled with severe problems with no apparent quality control by ImClone. As a result, FDA refused to even accept the Erbitux application for filing. Given the contrast and outcomes, the financial gain of $111 million for you and your brother before the FDA application was even filed and the failure to deliver on your promise to thousands of very sick cancer patients to have Erbitux on the market in spring of 2002, would it be fair to say that your strategy at ImClone was to put personal profiteering ahead of patients, sir? Mr. Samuel Waksal. Unfortunately, upon the advice of counsel, I wish to assert my constitutional rights and respectfully decline to answer. Mr. Greenwood. We thank you, sir, and we respect your right to do so. But let me be clear, Dr. Waksal. Are you refusing to answer the question on the basis of the protections afforded to you under the Fifth Amendment to the United States Constitution? Mr. Samuel Waksal. Yes. Mr. Greenwood. Dr. Waksal, do you intend to invoke your Fifth Amendment rights in response to any and all questions posed to you here today? Mr. Samuel Waksal. Yes. Mr. Greenwood. Okay. Then you are excused from the witness table at this time, but I advise you that you remain subject to the processes of this committee, and that if this committee needs such, then we may recall you, sir. Mr. Samuel Waksal. Thank you. Mr. Greenwood. Okay. You are excused, sir. The Chair then calls forward Dr. Harlan Waksal, M.D., who is now the chief executive officer of ImClone Systems, Inc.; Dr. Laurie Smaldone, M.D., senior vice president, Global Regulatory Sciences for Bristol-Myers Squibb Company. And accompanying Dr. Smaldone is Mr. Brian Markison, vice president, the Division of Oncology at Bristol-Myers Squibb Company. The Chair welcomes our witnesses. You are both aware, all three of you are aware that this committee is holding an investigative hearing, and it is the practice of this subcommittee to take testimony in such hearings under oath. Do any of you object to giving your testimony under oath this morning? Mr. Harlan Waksal. No. Ms. Smaldone. No. Mr. Greenwood. Okay. It is also the responsibility of the Chair to advise the witnesses that you are entitled to be represented by counsel. Do either of the witnesses choose to be represented by counsel? Dr. Waksal, do you? Mr. Harlan Waksal. I do have counsel here, sir. Mr. Greenwood. Okay. Your counsel may join you at the table, if he chooses. Would you identify your counsel by name, sir? Mr. Harlan Waksal. Chip Lowenson. Mr. Greenwood. Would you pull the microphone much closer to yourself, sir, and make sure that it is turned on. Mr. Harlan Waksal. Is that okay now? Mr. Greenwood. That is perfect, sir. Would you identify your counsel, please? Mr. Harlan Waksal. Chip Lowenson. Mr. Greenwood. Okay. Dr. Smaldone, do you choose to be represented by counsel? Ms. Smaldone. I have my counsel here with me. Mr. Greenwood. You are going to have to do the same thing with your microphone. Ms. Smaldone. Sorry. I do have my counsel here with me today. Mr. Greenwood. And would you identify your counsel, ma'am? Ms. Smaldone. Evan Chesler. Mr. Greenwood. Pardon me? Ms. Smaldone. Evan Chesler. Mr. Greenwood. Okay. If you would then both rise and raise your right hand. Mr. Markison, if you would rise as well and raise your right hand. [Witnesses sworn.] Okay. The Chair advises you that you are under oath. And, Dr. Waksal, you are recognized for 5 minutes to provide an opening statement. Do you choose to? Mr. Harlan Waksal. I do indeed. Thank you. Mr. Greenwood. Please proceed. TESTIMONY OF HARLAN WAKSAL, CHIEF EXECUTIVE OFFICER, IMCLONE SYSTEMS, INC.; LAURIE SMALDONE, SENIOR VICE PRESIDENT, GLOBAL REGULATORY SCIENCES, BRISTOL-MYERS SQUIBB COMPANY; AND BRIAN MARKISON, VICE PRESIDENT, DIVISION OF ONCOLOGY, BRISTOL-MYERS SQUIBB COMPANY Mr. Harlan Waksal. Chairman Greenwood, Congressman Deutsch and members of the subcommittee, my name is Harlan Waksal, and I am the President and CEO of ImClone Systems. I have held that position for only 3 weeks, but I have been with the company since it was founded 17 years ago. Thank you for this opportunity to tell you about Erbitux. Since we licensed this compound 9 years ago, ImClone has invested hundreds of millions of dollars in research and testing Erbitux. Our effort reached a critical point 2 years ago. Doctors at preeminent research centers like Memorial Sloan-Kettering Cancer Center started to report success in using Erbitux in combination with chemotherapy to treat terminally ill patients. These doctors and their patients were telling us that the Erbitux combination therapy was shrinking solid tumors in patients with no other treatment options. So we set out to make this drug available to cancer patients as quickly as possible. Congress created the Fast Track process to encourage expedited review of drugs that have the potential to address an unmet medical need related to a life-threatening illness. If ever a drug was a good candidate for Fast Track, Erbitux was it. And in fact, the FDA granted Erbitux Fast Track status in January 2001. During this same period, we had many meetings with the FDA to determine whether the clinical trial we had underway for colorectal cancer patients could serve as the basis for regulatory approval. After the FDA reviewed our study protocol, we reached an understanding with the agency that this trial could be the pivotal study for our application. Over the next few months, we worked closely with the FDA to develop an application for approval. When the FDA asked questions, we answered them. When the FDA asked for more data, we got it for them. Such give and take is a common part of the application process. We were very pleased with the results of the clinical trial. It found that roughly 20 percent of patients responded to that treatment. These results were reported by independent physicians at preeminent cancer centers--doctors with no stake in the outcome, who saw the drug at work, first hand, in their patients. These conclusions were then confirmed by an independent committee, known as an IRAC. Twenty percent was an impressive result, since the FDA had approved Irinotecan, a chemotherapy drug, with a 13 percent response rate. But we were not the only ones excited by the potential of Erbitux. In May 2001, doctors at the leading oncology conference reacted enthusiastic to the data presented by Dr. Leonard Saltz on the Erbitux trial. And in September of last year, after months of due diligence by their top scientists, Bristol-Myers Squibb committed to invest $2 billion in ImClone, a huge vote of confidence for Erbitux from the world's leading cancer drug company. Despite these encouraging signs, the FDA refused to file ImClone's application. Today, this hearing will be filled with questions as to why the FDA refused to file our application, and I am happy to answer those questions. But in brief, let me say that with the benefit of 20/20 hindsight, we could and should have done a better job in documenting the clinical evidence. Many of our critics have suggested that the pilot trial was too small and that our results were not proven by the most rigorous testing standards. But I would remind those critics that Congress explicitly created Fast Track to bring drugs to market that had not been through the rigors of a Phase III test, wisely deciding that when patients are dying and drugs demonstrate potential for treating them, the balance should be struck in favor of getting those drugs to patients quickly. Today, ImClone and its partners continue to work closely with the FDA to move forward in the approval process. Erbitux remains on the FDA's Fast Track. We will be submitting new data as it comes in and still hope to win accelerated approval. We also have other clinical tests underway, including large Phase III trials. Mr. Chairman, in conclusion, I would like to make two points. First, while we had the right intentions in trying to get Erbitux through the filing process in 2001, we failed. Yes, setbacks in regulatory strategies occur, in fact they are common, and ImClone is hardly among the only biopharmaceutical or pharmaceutical companies that have failed in gaining swift approval for a drug. But that does not change the fact that we let patients down, and for that, I am truly sorry. Second, as the company's new CEO, I am committed, absolutely committed, to getting this drug approved. I will work closely with the FDA and try to continue the cooperative relationship we have had with the agency. We want to get them the information they need as quickly as we can so that hopefully Erbitux can be available to cancer patients in desperate need of more treatments. I appreciate the opportunity to be here today to answer your questions. [The prepared statement of Harlan Waksal follows:] Prepared Statement of Harlan Waksal, President and Chief Executive Officer, ImClone Systems Chairman Greenwood, Congressman Deutsch and Members of the Subcommittee, my name is Harlan Waksal, and I am the President and Chief Executive Officer of ImClone Systems. I have held that position for only three weeks, but I have been with the company since it was founded, 17 years ago. Thank you for this opportunity to tell you about Erbitux--a potential new treatment for cancer that attaches itself to growth factor receptors on cancer cells, depriving tumors of the ability to grow. Since we acquired the license for this compound nine years ago, ImClone has invested hundreds of millions of dollars to support its clinical program of research and testing. Our efforts reached a critical point two years ago. Over the course of the year 2000, doctors at preeminent research institutes such as the Memorial Sloan-Kettering Cancer Center reported success in using Erbitux in combination with chemotherapy to treat terminally ill patients. These doctors--and their patients--were telling us that the Erbitux combination therapy was shrinking solid tumors in patients who did not have other treatment options. As a result, we set out to make this drug available to cancer patients as quickly as possible. As this Subcommittee knows, Congress created the ``Fast Track'' process to encourage the expedited review of drug applications where the drug in question has the potential to address an unmet medical need related to a life-threatening illness. If ever a drug was a good candidate for ``Fast Track,'' Erbitux was it. And in fact, the FDA granted Erbitux ``Fast Track'' status in January 2001. During this same period, we had multiple meetings and conversations with the FDA, to determine whether the clinical trial we had underway for colorectal cancer patients--giving Erbitux and chemotherapy in combination to patients who had failed chemotherapy alone--could serve as the basis for regulatory approval. After the FDA reviewed our test protocol, we reached an understanding with the agency that this clinical study could be the pivotal study for our application to win approval for Erbitux. Over the next few months, we worked closely with the FDA to develop an application for approval. When the FDA asked questions, we answered them. When the FDA asked for more data, we got it for them. Such give and take is a common part of the application process. We were very pleased with the results of the clinical trial. It found that roughly 20 percent of patients responded to the treatment. These results were reported by independent physicians at preeminent cancer centers--doctors without any stake in the outcome, who saw this drug at work, first hand, in their patients. These conclusions were then confirmed by an independent review committee, commonly known as an ``IRAC.'' The approximately 20% response rate was an impressive result, since the FDA had approved irinotecan--a chemotherapy drug--with a 13% response rate in a similar patient population. But we were not the only people excited by the potential of Erbitux. In May of 2001, doctors at the leading oncology conference-- after hearing a presentation from Dr. Leonard Saltz regarding the clinical trial--reacted enthusiastically to the data. And in September of last year, after months of extensive due diligence by their top scientists, Bristol-Myers Squibb committed to investing $2 billion in ImClone and Erbitux--a huge vote of confidence from the world's leading oncology pharmaceutical company, which clearly believed that Erbitux showed great potential. As the Subcommittee knows, despite these encouraging signs, the FDA refused to file ImClone's application for Erbitux. Today's hearing will be filled with questions as to why the FDA refused to file our application, which I am happy to answer. But in brief, let me say that with the benefit of 20/20 hindsight, we now know that we could and should have done a better job in putting together our application package. Many of our critics have suggested that our pivotal trial was too small, and that our results were not proven by the most rigorous testing standards. But, I would remind those critics that Congress explicitly created Fast Track to bring drugs to market that had not been through the rigors of a Phase III test--wisely deciding that when patients are dying, and there is a drug that demonstrates ``potential'' for treating those patients, the balance should be struck toward getting new drugs to those patients quickly. Notwithstanding our setbacks, ImClone and its partners continue to work closely with the FDA to move forward in the approval process. Today, Erbitux remains on the FDA's ``Fast Track.'' We will be submitting new data as it comes in, and still hope to win accelerated approval. We also have underway a variety of other clinical tests, including large, Phase III trials. Mr. Chairman, in conclusion, I would like to make two points. First, while we had the right intentions in trying to get Erbitux through the filing process in 2001, we failed. Yes, setbacks in the regulatory process are common, and ImClone is hardly alone among drug companies in failing to win swift approval for a drug. But that does not change the fact that we let patients down, and for that, I am truly sorry. Second, as ImClone's new CEO, I am committed--absolutely committed--to getting this drug approved. I will work closely with patients and the advocacy community to see this through. And I will also work closely with the FDA, to continue the open and cooperative relationship we have had with the agency. We want to get them the information they need, as quickly as we can, so that hopefully Erbitux can be available to cancer patients in desperate need of more treatment options. I appreciate the opportunity to be here today, and will be glad to answer your questions now. Mr. Greenwood. The Chair thanks you, Dr. Waksal, for your statement. The Chair also thanks you for your presence and your willingness to come here without subpoena. And let me personally say that I certainly hope that you succeed in having this drug approved if it will in fact help patients. Dr. Smaldone, you are recognized to give your opening statement for 5 minutes, please. TESTIMONY OF LAURIE SMALDONE Ms. Smaldone. Yes, thank you. Thank you, Mr. Chairman and thanks to the committee. My name is Laurie Smaldone, and I am senior vice president of Worldwide Regulatory Science at the Bristol-Myers Squibb Pharmaceutical Research Institute, and a physician specializing in oncology. I have been with Bristol- Myers Squibb for 17 years, and before that I was an oncologist in academic practice. While the scope of my responsibilities at Bristol-Myers Squibb today crosses therapeutic lines, a great deal of my professional experience has been in the area of cancer and, more specifically, cancer treatments. I am pleased to have the opportunity to address the subcommittee, as well as respond to its questions, about Bristol-Myers Squibb's commitment to the anti-cancer drug, Erbitux. First, I would like to say that from a scientific and clinical perspective, we believe that Erbitux is an active anti-cancer agent. Evidence suggests that Erbitux shows anti- tumor activity in several tumor types but in particular in patients with late-stage colorectal cancer that is refractory, or, in other words, unresponsive to available treatments. These are patients who otherwise have few if any treatment options available to them. We believe this about Erbitux now, just as we believed it when we invested in ImClone Systems and entered into a commercialization agreement with ImClone relating to Erbitux back in September 2001. It is important for the subcommittee to understand that one of the diseases for which Erbitux is being investigated as a possible treatment, advanced refractory colorectal cancer, is particularly insidious. For individuals diagnosed with it, the prognosis is uniformly grim; this is an incurable disease. Still, many patients are desperate for any treatment that will give them additional time with family and loved ones, and in some cases, Erbitux has helped provide this additional time. While the difficulties in finding adequate treatments for cancer are well known, it is useful to point out that great progress has been made in understanding the course and complexities of cancer over the last many years. Nonetheless, beyond early detection and surgical intervention, major impact with chemotherapy and biologic therapies is limited, and still most tumors go undetected until quite an advanced stage, which makes any treatment effect at that time far more difficult to achieve. As the world's leading provider of cancer therapies, Bristol-Myers Squibb has focused much of its research and development on finding better treatments, more targeted and less toxic therapies than those currently available. And our strategy also has been to look outside our company for promising compounds such as Erbitux, which itself represents a new and potentially revolutionary way of fighting cancer through a more targeted approach. Still, we realize that these advances, while significant, are not the ``magic bullet'' against cancer, but they do represent real progress. My second point is that it is important, in the midst of all the issues identified, that we together find a way to address these issues and make Erbitux available to patients as quickly as possible. That is why we continue to work closely with ImClone to further the development of Erbitux and to resubmit the application to the U.S. Food and Drug Administration as soon as possible. While some patients have been able to benefit from Erbitux in clinical trials and compassionate use programs, we know that only after approval and commercialization will all those who truly need the drug actually get it and will physicians be able to further evaluate its role in different settings. Finally, I wish to stress that this is about everyday people, more than 100,000 each year, who 1 day go to their doctor and have their entire life turned upside down by a diagnosis of colon cancer. For these people, Erbitux is not an exciting scientific advance or a compelling idea or a promising investment. It is a treatment option and a way to have more time and hope. I can say this with some conviction because I had the honor recently of meeting an Erbitux patient who told me quite candidly what the drug has meant to her. And she has permitted me to share her story with the committee, which I will do very briefly. A little over a year ago, when she was 38 years old, Michael Ann Mullinix of Belvidere, Illinois, was told by her doctor that she had stage 4 metastatic colon cancer that had spread to her ovaries. Even with surgery, she was given a short time to live. A wife and a mother of teenage children, Michael Ann decided she wanted to go on an Erbitux regimen. Following surgery, she began treatment with Erbitux and other chemotherapeutic agents last August as part of a clinical study. And as of today, she is essentially cancer free and continues to respond. In the course of our conversation, Michael Ann told me that she was worried not that her cancer would return, or how she was coping with this serious illness. She was worried about the future of Erbitux, about its continued availability as a therapy alternative, not just for her benefit but for many others who could potentially benefit as well. When she heard that I was coming to testify before this subcommittee, she asked me to convey this message that I have stressed in this statement: We need to work together to do all that we can to get Erbitux to all the patients who need it as quickly as possible. I should point out that there are risks involved in this project, just as there are risks involved in all of biomedical research. We have no guarantee that Erbitux ultimately will be the important therapeutic advance we expect it to be. But knowing what we know about it today, there is every reason to be hopeful about its promise and to move forward with the clinical development and registration process. Once again, I am grateful for the opportunity to address the committee on this important subject. I will be happy now to answer any questions you have. [The prepared statement of Laurie Smaldone follows:] Prepared Statement of Laurie Smaldone, Senior Vice President, Worldwide Regulatory Science, Bristol-Myers Squibb Pharmaceutical Research Institute Thank you, Mr. Chairman. My name is Laurie Smaldone, and I am senior vice president of Worldwide Regulatory Science at the Bristol- Myers Squibb Pharmaceutical Research Institute, and a physician specializing in oncology. I have been with Bristol-Myers Squibb for 17 years, and before that I was an oncologist in academic practice. While the scope of my responsibilities at Bristol-Myers Squibb crosses therapeutic lines, a great deal of my professional experience has been in the area of cancer and, more specifically, cancer treatments. I am pleased to have this opportunity to address the subcommittee, as well as respond to its questions, about Bristol-Myers Squibb's commitment to the anti-cancer agent Erbitux. First, I would like to say that--from a scientific and clinical perspective--we believe that Erbitux is an active anti-cancer agent. Evidence suggests that Erbitux shows anti-tumor activity in patients with late-stage colorectal cancer that is refractory--or, in other words, unresponsive--to available treatments. These are patients who otherwise have few if any treatment options available to them. We believe this about Erbitux now, just as we believed it when we invested in ImClone Systems and entered into a commercialization arrangement with ImClone relating to Erbitux back in September 2001. It is important for the subcommittee to understand that the disease for which Erbitux is being investigated as a possible treatment-- advanced refractory colorectal cancer--is particularly insidious. For individuals diagnosed with it, the prognosis is generally grim. Still, many patients are desperate for any treatment that will give them additional time with family and other loved ones. And in some cases, Erbitux has helped provide this additional time. While the difficulties in finding adequate treatments for cancer are well known, it is useful to point out that great progress has been made in understanding the course and complexities of cancer. Nonetheless, beyond early detection and surgical intervention, major impact with chemotherapy and biologic therapies is limited, and still most tumors go undetected until quite an advanced stage. As the world's leading provider of cancer therapies, Bristol-Myers Squibb has focused much of its research and development on finding better treatments--more targeted and less toxic therapies than those currently available. And our strategy also has been to look outside our company for promising compounds such as Erbitux, which itself represents a new and potentially revolutionary way of fighting cancer through a more targeted approach. Still, we realize that these advances--while significant--are not the ``magic bullet'' against cancer, but they represent real progress. My second point is that it is important--in the midst of all the issues identified--that we together find a way to address these issues and make Erbitux available to patients as quickly as possible. That is why we are working closely with ImClone to resubmit the application for Erbitux to the U.S. Food and Drug Administration as soon as possible. While some patients have been able to benefit from Erbitux in clinical trials and compassionate use programs, we know that only after approval and commercialization will all those who truly need the drug actually get it, and will physicians be able to further evaluate its role in different clinical settings. Finally, I wish to stress that this is about everyday people from all walks of life--thousands of them each year--who one day go to their doctor or to the hospital and have their entire life turned upside down by a diagnosis of colon cancer or other solid tumors. For these people, Erbitux is not an exciting scientific advance or a compelling idea or a promising investment. It's a way to have more time. I can say this with some conviction because I had the honor recently of meeting an Erbitux patient who told me quite candidly what the drug has meant to her. And she has permitted me to share her story with the committee, which I will do now, briefly. A little over a year ago, when she was 38 years old, Michael Ann Mullinix of Belvidere, Illinois, was told by her doctor that she had stage 4 colon cancer that had spread to her ovaries. Even with surgery, she was given just 9 months to live. A wife and a mother of teenage children, Michael Ann decided she was going to fight the odds by going on an Erbitux regimen, which she had heard about on television. Following surgery, she began treatment with Erbitux and other chemotherapeutic agents last August as part of a clinical study. And as of today, she is essentially cancer free. In the course of our conversation, Michael Ann told me that she was worried. Not that her cancer would return, or how she was coping with this serious illness. She was worried about the future of Erbitux-- about its continued availability as a therapy alternative, not just for her benefit but for many others who would potentially benefit from it as well. And when she heard that I was coming to testify before this subcommittee, she asked me to convey the message I have stressed several times in this statement: we need to work together to do all we can to get Erbitux to all the patients who need it as quickly as possible. I should point out that there are risks involved in this project, just as there are risks in all biomedical research. We have no guarantee that Erbitux ultimately will be the important therapeutic advance we expect it to be. But knowing what we know about it today, there is every reason to be hopeful about its promise and to move forward with the clinical development and registration process. Once again, I am grateful for this opportunity to address the committee on this important subject. I'll be happy now to answer any questions you may have. Mr. Greenwood. Thank you, Dr. Smaldone. We appreciate your presence and your testimony. Ms. Smaldone. Thank you. Mr. Greenwood. The Chair recognizes himself for 5 minutes for purposes of inquiry. Let me address my questions initially to Dr. Waksal. When ImClone filed the Erbitux biologics licensing application, otherwise known as a BLA, on October 31, 2001, did you expect that ImClone was in fact on a glide path toward approval? Mr. Harlan Waksal. Absolutely. We did file it at that time. In fact, it was a rolling BLA. That was the last piece of it. We thought we were well on the track to moving this drug through approval. Mr. Greenwood. And did you expect that Erbitux BLA to go before the February 2002 FDA Advisory Committee called ODAC? Mr. Harlan Waksal. Well, we were hopeful that based on timing of the review clock that the February ODAC would be the appropriate time for this drug to be in front of the Oncologic Drug Advisory Committee. Mr. Greenwood. Okay. Does Lilly Lee, ImClone's Regulatory Affairs vice president report directly to you? Mr. Harlan Waksal. Yes, she does. Mr. Greenwood. And was she reporting to you her contacts and communications with FDA during the approval process? Mr. Harlan Waksal. Yes, she was. Mr. Greenwood. Okay. Dr. Lee, could you please come forward to be sworn in and answer a few questions? Welcome, Dr. Lee. You may be seated for a moment and then we will ask you to stand again. You have heard me say, Dr. Lee, that this is an investigative hearing, and it is our practice to take testimony under oath. Do you have any objections to giving your testimony to us under oath? Ms. Lee. No. Mr. Greenwood. Okay. You also should be advised that you are entitled to counsel. Do you wish to be advised by counsel? Ms. Lee. Yes, please. Mr. Greenwood. Okay. And could you identify your counsel for us, please? Ms. Lee. Mr. Richard Emory. Mr. Greenwood. Mr. Richard Emory? Ms. Lee. Yes. Mr. Greenwood. Okay. Thank you. In that case, would you now rise and raise your right hand? Ms. Lee. Sure. [Witness sworn.] Mr. Greenwood. Thank you, Dr. Lee. Did you have a face-to- face meeting with the FDA reviewers on December 4, 2001? Ms. Lee. Yes, I did. Mr. Greenwood. Okay. Did the FDA reviewers raise serious questions about the documentation of the study at that time? Ms. Lee. They had raised questions about the documentation. Mr. Greenwood. Okay. Did you ask the FDA reviewers whether the FDA was going to send ImClone a refusal-to-file letter? Ms. Lee. No, I did not ask that. Mr. Greenwood. Okay. Did it come up in the conversation? Was there any discussion of the possibility of a refusal-to- file letter? Ms. Lee. The only mention of a refusal-to-file was in the context of the FDA reviewer laying out the next steps, and it was one of the three possible outcomes after the would have the internal filing meeting. The three outcomes that he had laid out is, one, the FDA could accept and review; two, since this was a rolling submission, ImClone may decide that the last piece was actually not the last piece that complete the BLA; and three, is the FDA may issue a refusal-to-file, RTF. So these three options are really any drug that filed an application, any BLA would face those three same scenarios. Mr. Greenwood. Did you not tell our committee staff in your interview that after your conversation an RTF letter for the first time became a possibility in your mind? Ms. Lee. For me it was on December 13 that the possibility that the review--issues that we were working on with the FDA may lead to an RTF. Mr. Greenwood. Okay. Let me turn back to you, Dr. Waksal. Mr. Harlan Waksal. Yes, sir. Mr. Greenwood. Do you recall Dr. Lee telling you about this meeting? Mr. Harlan Waksal. Yes, she did. Mr. Greenwood. And were you aware of the FDA issues at this point in time, what their concerns were? Mr. Harlan Waksal. Yes. Dr. Lee articulated very clearly the issues, the documentation questions that were being raised by the FDA. Mr. Greenwood. Weren't the nature of these issues--when did that happen? Mr. Harlan Waksal. We spoke many times, but December 4 was--you are referring to the December 4 meeting, so it was in the afternoon on December 4. Mr. Greenwood. Okay. Weren't the nature of these issues such that it was obvious that whether FDA refused to file or not, ImClone wasn't going to the February 2002 Advisory Panel? Mr. Harlan Waksal. No, not at all. At the time, we felt very confident about our ability to go ahead and address those issues. In fact, we were putting into place a plan to go ahead and make sure that we could address the FDA's concerns and issues that were being raised and felt that indeed we could go ahead and continue to move this drug forward. Mr. Greenwood. And be ready for the February Advisory Panel. Mr. Harlan Waksal. Well, the preparation for any advisory committee is not dependent on the company, it is dependent on the FDA and their feeling that they are ready in fact to go ahead and present it and move it forward. We don't really have control over that. Obviously, it is always our hope to get it to an advisory committee as quickly as possible. Mr. Greenwood. December 4 was also an important date for another reason. Wasn't that the date that ImClone filed the rest of the single agent study? Mr. Harlan Waksal. That is right. In fact, the real purpose of the meeting, why the meeting took place, was we were delivering the last portion of the package to the FDA, and that was the final results, the final study report on the single agent trial on 57 patients. Mr. Greenwood. And were the results of the single agent study a factor cited in the FDA refusal-to-file letter? Mr. Harlan Waksal. Yes, it was. Mr. Greenwood. According to public records, you gained almost $50 million from a carry-forward stock transaction on December 6, 2001; is that correct? Mr. Harlan Waksal. That is correct. Mr. Greenwood. This is the transaction you said in an October 31, 2001 letter to the ImClone Board that you would execute in 2 weeks, and on December 6, ImClone was trading near its 52-week peak price. Dr. Waksal, did you not have important non-public information about the status of the Erbitux application when you executed the December 6 sale of ImClone stock for almost $50 million? Mr. Harlan Waksal. That is correct. There was no material information, in my opinion, at the time. In fact, my transaction was quite independent of everything else taking place. That transaction was one that I defined and identified months earlier, identified the board of directors on October 31, and these are complicated transactions, and it took until the beginning of December for it to be finalized. Before the December 4 meeting, I, in fact, had already transferred the stock and had engaged in that effort, but the event on December 4 was not a material event. We didn't believe it would be---- Mr. Greenwood. But it was non-public. Mr. Harlan Waksal. Pardon me? Mr. Greenwood. It was not public, though. Mr. Harlan Waksal. No, it was not public, but there was no material information---- Mr. Greenwood. Your argument is that while it was non- public, it was not material. Mr. Harlan Waksal. That is correct, sir. Mr. Greenwood. Okay. My time has expired. The Chair recognizes the gentleman, Mr. Stupak, for 5 minutes. Mr. Stupak. Thank you. Dr. Waksal, in August 2000, when you met with the FDA, were you present at that meeting? Mr. Harlan Waksal. I was. Mr. Stupak. Okay. And who set up the protocol that you would use to get this Fast Tracked? Mr. Harlan Waksal. The protocol was set up by a variety of people. We generally work with a group of oncology consultants, the people who are going ahead and doing the trial, in conjunction with our in-house people who are responsible for writing it. It goes through review committees and we get feedback till we get to the final form. Mr. Stupak. But, basically, ImClone sets forth the protocol. Mr. Harlan Waksal. That is correct, ImClone is responsible for the protocol. Mr. Stupak. And that is what you were presenting to the FDA in August of 2000 and hoped to get to Fast Track. Mr. Harlan Waksal. That is right. Mr. Stupak. And, actually, on January 12, 2001, you did receive the Fast Track authority from FDA to proceed. Mr. Harlan Waksal. That is correct. Mr. Stupak. And there is some question as to what protocol was being used, protocol No. 1 or protocol No. 2; is that correct? Mr. Harlan Waksal. That is not correct. Mr. Stupak. Well, in the letter of January 19, from FDA, where they laid it out for you what you were supposed to be doing with the--and also that there would have to be a small study of the single data, was that news to you or---- Mr. Harlan Waksal. Well, that was the first time that was mentioned. But just to get back to the first question, the FDA had both protocols, and it wasn't as if there were two protocols. Mr. Stupak. You presented two protocols in August 2000? Mr. Harlan Waksal. We presented two protocols well before August 2000. Mr. Stupak. Okay. Mr. Harlan Waksal. The protocol was amended, so it was slightly modified, and the FDA had both protocols in their hands while this study was underway, without any question, sir. Mr. Stupak. But when you met with them in August 2000---- Mr. Harlan Waksal. Yes. We were talking about the protocols---- Mr. Stupak. You had both protocols. Mr. Harlan Waksal. Yes, the FDA had both protocols. Mr. Stupak. And it was clear to everyone that there were two protocols here and it is clear to everybody? Mr. Harlan Waksal. There was never an issue or suggestion that that was a problem in any way. The protocol modifications were minor. Mr. Stupak. They were minor? Mr. Harlan Waksal. Yes, sir. Mr. Stupak. Who sets the modifications of the protocol? Mr. Harlan Waksal. It is usually done in conjunction-- again, ImClone sets them in conjunction with the oncologists when they believe there is a change that is necessary in a protocol. Mr. Stupak. But Dr. Weiss had just testified that the dosage and the amount of--and the time of receiving some of the drugs, the---- Mr. Harlan Waksal. Irinotecan. Mr. Stupak. [continuing] Irinotecan---- Mr. Harlan Waksal. Yes. Mr. Stupak. [continuing] that was determined by the doctors doing the testing on the patients, correct? Mr. Harlan Waksal. Well, actually, the protocol set out very clearly what should take place with Irinotecan treatment. There were protocol deviations that took place where doctors had gone ahead and made changes in that dose of Irinotecan, primarily decreasing the amount of Irinotecan that was being used in those patients. In a very few number of patients, very few, it was increased. And in fact only one of those patients has responded. Mr. Stupak. But those modifications were fatal to your application, were they not, one of the three reasons why your application failed. Mr. Harlan Waksal. I think the application failed for a number of reasons, primarily documentation. But I think that certainly the review---- Mr. Stupak. Wait a minute. Documentation? You had to have had at least 100 people go through this thing. In the final analysis, there is maybe 89 at best. That is not a documentation issue, that is a fact issue that you didn't have enough people in your small study. And when you have a small study, as been testified earlier, it is critical that everyone makes it through and you do not fall below that 100 number; isn't that correct? Mr. Harlan Waksal. That is not correct, and if I could---- Mr. Stupak. That is not correct? Dr. Weiss was wrong in his testimony earlier today? Mr. Harlan Waksal. I didn't hear Dr. Weiss' testimony, but if I could just go ahead and comment on this. Mr. Stupak. Sure. Well, I don't want you to filibuster an answer, I just want an answer. Mr. Harlan Waksal. I have no intention of filibustering. Mr. Stupak. Okay. Mr. Harlan Waksal. The study was 138 patients. One hundred and twenty of those patients were considered refractory. Mr. Stupak. Correct. Mr. Harlan Waksal. The documentation is not on patients on study, it has to do with patients before they came on to trial, and in fact---- Mr. Stupak. Doctor, if it is just a matter of documentation, just a matter of documentation and not the size of study and not when dosage is, as you say, it is just documentation, why haven't you provided the proper documentation into the FDA and get this drug approved? Mr. Harlan Waksal. We, at the time, didn't recognize that there was a shortcoming in the documentation, and that was a quality problem within our company, and it is something that I have agreed was a problem. We have since gone out and have collected with our partners as many scans as we can, collected 133 of the 138 patient scans. They haven't been reviewed yet. We are waiting and talking to the agency, and it will be a component, hopefully, of a resubmission in conjunction with additional data. Mr. Stupak. So you are still under the impression it is just a documentation issue and that is all it is. And once that documentation is provided, you expect to get your approval? Mr. Harlan Waksal. In no way am I trivializing the importance of this documentation. It is critical to the study and its integrity. And not only is that important but the other issues that you have raised are important as well. But the real issue is the question of whether or not these are major or minor deviations or protocol problems. And for the most part, our review continues to establish that the vast majority are not major protocol problems and in fact the study hopefully will continue to be in tact once we reevaluate it. That has not taken place yet. But it is more than documentation, without a question. Mr. Stupak. You know, some of the documents we have here indicating that three prominent oncologists say, and let me quote, ``Overall, this is a protocol,'' NCR protocol, right? Mr. Harlan Waksal. Yes, sir. Mr. Stupak. ``That asks the wrong questions and then is not tightly written and efficient. The protocol generates far more questions than it could ever answer. It is a blueprint for production of vague answers.'' Mr. Harlan Waksal. I believe you are reading from the Cancer Letter, three clinicians who reviewed the protocol, who were not involved with the study or the study design. I think what is very critical in this study was---- Mr. Stupak. So your answer is only those doctors who were involved in the study can answer or review your BLA? Mr. Harlan Waksal. No, not at all. No. I believe the importance of how we got to this place is very critical, and unfortunately those physicians weren't involved in that process. What is critical is that this study was not designed as a registration trial. It was a Phase II study early on in the development of this drug. It was only because of the unexpected results that we were able to go ahead and move it forward, sir. Mr. Stupak. It is no longer a Phase II study. You are asking for accelerated Fast Track to put it out to the general population. You are past Phase II. We call it Phase III, and Phase IV is when you put it out in the real world. Therefore, if it is only Phase II, you still had two more phases to go through if you went through the regular process. Mr. Harlan Waksal. Actually, it was Congress who stipulated in Fast Track designation---- Mr. Stupak. That is true. Mr. Harlan Waksal. [continuing] that studies exactly like this could be designated to be moved forward toward approval. Mr. Stupak. Exactly. Mr. Harlan Waksal. Phase II studies, sir. Mr. Stupak. And Congress also said that if you are going to do a Fast Track legislation, it has to be tightly controlled, tightly regulated, and you must follow the regimen to a tee; otherwise, we are not going to allow it. Mr. Harlan Waksal. And we have agreed that there were problems in the protocol. Mr. Greenwood. Time of the gentleman has expired. The Chair recognizes the chairman of the full committee, Mr. Tauzin, for inquiry. Chairman Tauzin. Thank you, Mr. Chairman. Gentlemen, let me take you back to December 20. Are you aware of the fact that the FDA called both ImClone and I think Bristol-Myers Squibb on that date to say, ``The decision has been made. Don't call us, don't bother us anymore. We will announce the decision on December 28.'' Is that correct? Mr. Harlan Waksal. Well, Congressman, what took place is we actually had called the FDA to find out what the status was, and we were informed at the time that a decision had been made and that it would be coming sometime the next week, right. Chairman Tauzin. Is that correct, Mr. Markison? Mr. Markison. That is correct. Chairman Tauzin. Turn your mike on please, sir. Is that correct? Mr. Markison. Yes, that is correct. Chairman Tauzin. Did you get a call from FDA saying, ``Don't call, don't bother us anymore. We are going to have the decision--it is already made, we will announce it next week on the 28th.'' Mr. Markison. Was that question directed to me or Dr. Waksal? Chairman Tauzin. Yes, sir. Directed to you, sir. Mr. Markison. I never received a call from the FDA. Chairman Tauzin. Did you know that FDA had called ImClone? Mr. Markison. I was aware of the teleconference that Dr. Waksal referred to. And I was aware subsequently of a dialog around that within both companies, and we acknowledged the fact---- Chairman Tauzin. All right. Mr. Markison. [continuing] that that was a very difficult call. Chairman Tauzin. Now, on December 21, Christmas day, you tracked Dr. Waksal down to talk to him. Where did you find him? Mr. Markison. Well, sir, first I must apologize to the chairman as well, I am also represented by counsel. I wasn't asked to point that out. I feel that I should point that out. Mr. Greenwood. Please identify your counsel. Mr. Markison. Mr. Hamilton, behind me. Mr. Greenwood. All right. Say his name clearly in the microphone, please. State his name. Mr. Markison. Mr. James Hamilton. Mr. Greenwood. Okay. Mr. Markison. The only reason I didn't offer his name, I wasn't asked previously, sir. Mr. Greenwood. Fair enough. Chairman Tauzin. All right. We got your counsel on the record. Now, let us see if we can get the question answered. The question is on December 25 you apparently tracked down Dr. Waksal by phone to have a conversation with him, Christmas Day, December 25. Where did you find him? Mr. Markison. I was able to reach Dr. Waksal at his house in Telluride. Chairman Tauzin. That is in Colorado? Mr. Markison. I believe so, yes. Chairman Tauzin. So what was the purpose, why were you calling him on Christmas Day at his house in Colorado? Mr. Markison. The reason I called Dr. Waksal was because on Christmas Eve I had heard from outside counsel to BMS, Mr. Allan Bennett, that through a contact at the FDA we had heard that a refusal-to-file letter was a distinct possibility. And then I tried to reach Dr. Waksal that evening, called his home, but did not leave a message on his machine and then called him on Christmas Day to relay that information. Chairman Tauzin. All right. Now, Dr. Waksal, you tried to reach your brother the next morning, you called him three times, I think, starting at 6:30 a.m.; is that correct? Mr. Harlan Waksal. In fact, I called many members of ImClone senior management, including Sam. I was unable to reach him. Chairman Tauzin. Where was he? Mr. Harlan Waksal. I believe he was somewhere--he was on vacation down in the Caribbean. I don't know---- Chairman Tauzin. St. Barts, you think. Mr. Harlan Waksal. That may be correct. Chairman Tauzin. And why were you trying to call him? Mr. Harlan Waksal. I had just heard from our colleagues at Bristol-Myers that we had a refusal--a high potential, a high likelihood of receiving a refusal-to-file, and I was calling all the senior members of management to participate in a conference call that was scheduled for 10 a.m. eastern time where we could discuss our options. Chairman Tauzin. Now, for the record, both of you are testifying that the most you got from this contact with a consultant who had a contact with somebody at FDA that a refusal-to-file letter was probable, likely? What did you hear exactly, Mr. Markison? Mr. Markison. I had a dialog with Mr. Bennett where he described that a refusal-to-file letter was probabilistic, highly probable. And then, subsequently, in an e-mail to me, he did point out, in no uncertain terms, that a refusal-to-file letter would be coming. Chairman Tauzin. No, no, wait a minute. So when did you get that e-mail? Mr. Markison. On Christmas Eve. Chairman Tauzin. So before you called Dr. Waksal, you already had an e-mail saying that a refusal-to-file is coming definitely. Mr. Markison. Yes, sir. Chairman Tauzin. Did you convey that information to Dr. Waksal on Christmas Day? Mr. Markison. I conveyed the information that was in the e- mail and also my subsequent dialog with Mr. Bennett that it appeared a refusal-to-letter was coming. Chairman Tauzin. Now, Dr. Waksal, you just said you were conveying the message to everyone that that was a problem. Are you telling us that you did not convey to your officers and directors and try to convey to your brother the fact that an e- mail had been received saying one was definitely coming? Mr. Harlan Waksal. No, I didn't say that at all. I was---- Chairman Tauzin. Tell me what you did convey. Mr. Harlan Waksal. I was very clear. I relayed the conversation I had with Mr. Markison to the team. I asked them all to participate so that we could hear directly from the people involved what was going to take place, and in fact we had that telephone conference call with all parties at 10 a.m. on the 26th. Chairman Tauzin. On the 26th. Mr. Harlan Waksal. That is correct. Chairman Tauzin. So that by the 25th you all knew that in fact a letter, the refusal-to-file decision had been made and it was going to be announced; is that right? Mr. Harlan Waksal. Actually, I don't know who knew on Bristol's side. I was the only person who knew on the 25th, and I did not contact anyone on the 25th of December. I didn't feel it was appropriate to wreck Christmas for the people at the company. Chairman Tauzin. Now, I have got in my hands a document marked, ``Confidential treatment requested by ImClone Systems, Inc.'' We are going to make a copy available to you, Dr. Waksal. Mr. Harlan Waksal. Thank you. Chairman Tauzin. It is a series of memos, handwritten memos. We don't know who wrote it, but the date on top, if you will follow it, is December 27, 2001; is that correct? Mr. Harlan Waksal. That is correct, sir. Chairman Tauzin. Would you read the second item for us? Mr. Harlan Waksal. ``A rejection letter will include points: study size small, truly refractory, data base flawed.'' Chairman Tauzin. So that at least by the 27th you all knew not only that a rejection letter was coming, but you knew exactly what the points of rejection would be; is that correct? Mr. Harlan Waksal. What we knew is what is written here. What was relayed to us was that there are both--there are review issues, and these were the possible review issues that we were going to see in that letter; yes, sir. Chairman Tauzin. Where did you get that information? Mr. Harlan Waksal. I believe that was part of our conference call dialog on the 26th and possibly on the 27th. Mr. Markison. Mr. Markison, was that information relayed to you in that e-mail as well, not only that the rejection letter was coming, but it was coming for the following reasons? Mr. Markison. No, sir, it was not. Chairman Tauzin. Do we have a copy of that e-mail that you received? Mr. Markison. You should have it, yes. Chairman Tauzin. All right. I would like to turn to the second page, Dr. Waksal. The first item says, ``No press release by BMS.'' The second item interests me, ``Brian understands that Sam and Harlan are calling FDA to try to stop RTF. Our press release should be as vague as possible. A question, do we need to do anything at all?'' Is that correct? Did you and your brother begin calling FDA to try to stop the RTF at that point? Mr. Harlan Waksal. Not entirely. We were having discussions to try to decide how to move forward and what to do. I think I mentioned earlier one of the things we decided to do was to put a letter together to the FDA to try to go ahead and stop the RTF from coming. I did not call the FDA. As you mentioned, we were not able--we were asked not to contact them. I do know that Sam Waksal did try to contact the FDA. Chairman Tauzin. What is confusing about these documents is that in press releases you and your brother, either one of you, both of you have said that you were shocked on the 28th to find out that the RTF came down. You were shocked, utterly, to find out that the agency would reject filing. And yet these documents indicate that you knew at least on the 27th and your testimony is that Mr. Markison advised you on the 25th that the rejection letter was coming. Why would you say publicly on the 28th that you were shocked? Mr. Harlan Waksal. Well, I was shocked, sir. When I received the RTF letter, the tone, the content was a big surprise. We were surprised at the number of issues that were raised and the deficits that were noted in the RTF letter. Chairman Tauzin. But you had to know it was coming. You just testified you knew it was coming. Mr. Harlan Waksal. I knew that it---- Chairman Tauzin. And you knew why it was coming. Mr. Harlan Waksal. I felt very certain that an RTF--no, these were issues--these were some of the issues, but we didn't have the extent of which were reviewed and which were going to be refusal to file issues. Chairman Tauzin. I want to go back if I have just a minute, Mr. Chairman, to that date when--in August of 2000. Mr. Harlan Waksal. Yes, sir. Chairman Tauzin. When ImClone and FDA met to discuss a possible accelerated approval strategy. Our investigators tell us that very clearly FDA relied upon the wrong version of the 9923 protocol. And then they tell us that ImClone did not correct the FDA's mistake. We further learned from the senior FDA official who overruled the medical reviewer handling the case that she believes she was misled by ImClone about its claim that a human clinical trial showed no single agent activity. We have two instances here where, one, the FDA relied upon a wrong version and our investigators tell us that no one at ImClone corrected the FDA's mistake. Did you know in August of 11, 2000 when FDA made the decision to rely upon the wrong version of the protocol that they were making a mistake? Mr. Harlan Waksal. First of all, the FDA had both versions of the protocol prior to our meeting on August 2000, and indeed we assumed, and I still believe, that the FDA was fully aware of what those protocols are. It is a surprise to me that it is suggested that we were somehow trying to fool them into thinking we were working under Version 1.0 versus Version 2.0. There would be no reason for us to---- Chairman Tauzin. Well, clearly, they made a mistake, but our investigators said it was within your power to correct the FDA mistake in August 11, 2000. Why wouldn't you, for the sake of getting this drug approved more quickly and correctly, have corrected the FDA's mistake on that date? Mr. Harlan Waksal. We would have absolutely corrected the mistake had we known about it. The first I have heard about this issue of Version 1.0/Version 2.0, sir, is here. Chairman Tauzin. We were also told, however, by the FDA official who overruled the local review, that they believe they were misled by ImClone about the claim that a human clinical trial showed no single agent activity. Do you deny that? Mr. Harlan Waksal. Yes, absolutely deny that. We were very clear with the FDA that the best way to use this drug, based on the information we had in animal studies and even in the single human study that we had engaged in, did not show major single agent activity, that it is primarily a cytostatic drug. The only study that was performed in humans was the study we did in renal cell cancer, and we articulated those results, albeit in a different tumor type. Chairman Tauzin. I am looking at the protocols---- Mr. Harlan Waksal. Yes, sir. Chairman Tauzin. [continuing] that are in dispute here. And staff is pointing out to me, and I am trying--I am getting this correctly, that the protocol, the original version, says that following two courses of Irinotecan, patients' tumors were measured and based on the results. Was there a change in that protocol? Mr. Harlan Waksal. Yes. Medical practice doesn't allow doctors to continue patients on a drug if they have new lesions or progression. So the doctors, in conjunction with the company, made a modification to the protocol to allow patients who were failing the drug to be on the protocol in combination with 225, or Erbitux. Chairman Tauzin. Well, I am looking at the minutes of the meetings with the FDA. Mr. Harlan Waksal. Yes. Chairman Tauzin. A meeting on August 11. And they are saying that in fact this is the original version and that it was changed later and that that is what they relied upon in literally making the decision to overrule the medical reviewer and to approve this protocol. Do you deny that? Mr. Harlan Waksal. I am not aware of any of that. I am aware of the fact that both protocols have been submitted to the FDA, and I felt that both protocols---- Chairman Tauzin. We were told that you saw these minutes, did you not? Mr. Harlan Waksal. The minutes to---- Chairman Tauzin. To the meeting. Mr. Harlan Waksal. Yes, I have seen the minutes to the meeting. I would like to see them again. I am not quite sure which part you are referring to. Chairman Tauzin. Well, we will come back to it. We will get you copies and I will ask the chairman to give me a unanimous consent to come back to it in a minute. I want you to see it as we discuss it. Mr. Harlan Waksal. I would appreciate it, Congressman Tauzin. Mr. Greenwood. The Chair thanks the gentleman. The Chair recognizes the gentlelady from Colorado for 5 minutes. Ms. DeGette. Thank you, Mr. Chairman. Dr. Waksal, it is your view that the problem with this Erbitux application is irregular paperwork, right, in essence? Mr. Harlan Waksal. Well, that is one of the major problems, and I think---- Ms. DeGette. Well, what are the other major problems? Mr. Harlan Waksal. I think it was pointed out very carefully, when you have a problem in documentation, it affects the entire study. Ms. DeGette. So, in essence, it is documentation, right? Yes or no. Mr. Harlan Waksal. Yes. Ms. DeGette. Okay. Mr. Harlan Waksal. But there are other issues as well. Ms. DeGette. Okay. What are the other issues---- Mr. Harlan Waksal. Well, the---- Ms. DeGette. [continuing] unrelated to documentation? Mr. Harlan Waksal. The other issues that need to be resolved are the protocol violations that took place as well. Ms. DeGette. And those are serious problems too, right? Mr. Harlan Waksal. Every clinical study has protocol violations--every study. Ms. DeGette. Right. Mr. Harlan Waksal. The real question is whether the protocol violations affect the integrity of the trial. Ms. DeGette. Okay. Sir, I apologize, they only give me 5 minutes. Mr. Harlan Waksal. I understand. Ms. DeGette. And so with respect to the documentation, now have you--you have had 6 months since you heard about this, roughly. Mr. Harlan Waksal. That is correct. Ms. DeGette. Have you fixed the documentation problems? Mr. Harlan Waksal. What we have done--we can't just fix the problems, we have to fix the problems the right way. Ms. DeGette. Okay. So the answer would be no. Mr. Harlan Waksal. No, that is not---- Ms. DeGette. In 6 months you have not. Mr. Harlan Waksal. [continuing] really the answer. The answer is what we have done is we have gone down the process and started discussions with the FDA to make sure---- Ms. DeGette. The answer is--Okay. I am sorry, I only have 5 minutes. The answer is you have not fixed the documentation problems. Your view is you are working on it, right? Mr. Harlan Waksal. That is right. Ms. DeGette. When do you think they will be fixed? Mr. Harlan Waksal. I can't give you that answer. Ms. DeGette. Okay. Now, the other problem, that is a harder problem just to fix than documentation; is that right? Mr. Harlan Waksal. Which one is that? Ms. DeGette. The problem of the irregularities, the protocol violations. Mr. Harlan Waksal. No. We believe that the vast majority of these, the vast majority don't affect the ability to evaluate this study and program. Ms. DeGette. So how are you working to fix that problem? Mr. Harlan Waksal. The same way. We are going through, making sure we can identify which of these violations have any impact on the ability to interpret the data and we are doing it patient-by-patient, making sure that can indeed, at the end of the day, have an intact trial. Ms. DeGette. When do you expect to have all of that data to the FDA? Mr. Harlan Waksal. Well, what we are doing is that is an analysis plan. Ms. DeGette. So you don't have a firm time when you expect to have that. Mr. Harlan Waksal. Until we have guidance from the FDA, we cannot give you a time on that. Ms. DeGette. So it is their fault? Mr. Harlan Waksal. No, it is not. Ms. DeGette. Okay. Mr. Harlan Waksal. It is something that is being done in conjunction with them. Ms. DeGette. All right. Mr. Harlan Waksal. It is not something we can do alone. Ms. DeGette. Okay. I mean I hope--I frankly hope Erbitux works too. There are not very many drugs for colorectal cancer. Mr. Harlan Waksal. I completely agree with you. Ms. DeGette. And I understand that. But here is the thing: The reason Congress approved this Fast Track procedure is so that we could get drugs that we think that would work in very serious patients. Mr. Harlan Waksal. That is right. Ms. DeGette. And if we don't have any protocols at all or if we have very bad protocols, for all we know people may be applying for laying out a hand, and I don't think that is any of our goals here. Let me talk to you, Dr. Smaldone, for a minute. Now, you say that the reason to have Erbitux approved is to get these patients who know they are dying more time, more time with their families, more time to get their affairs in order, right? Ms. Smaldone. That is correct. Ms. DeGette. But are you aware that neither the 9923 or the 0141, the smaller trial, have measured life extension but rather they have measured tumor shrinkage? Ms. Smaldone. I am very well aware of that. Ms. DeGette. So in fact we don't know whether or not life extension is one of the benefits of this drug at this point, do we? Ms. Smaldone. That is absolutely correct. That is---- Ms. DeGette. Thank you. Now, I was really touched by the patient that you talked about, and this is all about the patients, Michael Ann Mullinix. I am glad that her cancer seems to be gone. But I think we should be clear, as far as we know, she is the only patient who has had this result from this drug. Wouldn't that be fair to say? Ms. Smaldone. That is not the way I would put it. Ms. DeGette. You know other patients who have had this same result? Ms. Smaldone. I would like to go back to our own analysis of--a reanalysis of 9923 that we conducted during the due diligence, which was done with yet another independent review group outside radiologists evaluating the scans. And---- Ms. DeGette. And they say that other patients have been cured aside from this one patient? Ms. Smaldone. There are other patients who have responded. And at the worst case of that particular---- Ms. DeGette. But none of them have had the cancer go away. They have had the tumor shrink, right? Ms. Smaldone. We cannot comment on cure at this point in time; it is way too early. These are response rates, which---- Ms. DeGette. And that is even true with Michael Ann Mullinix, isn't it? Ms. Smaldone. At this point in time, that is true, it is a response. Ms. DeGette. Thank you. Okay. I have a couple of other questions. Now---- Mr. Greenwood. The Chair will be lenient with the time. Ms. DeGette. Oh, I am sorry. Mr. Greenwood. The Chair also would note that we are going to two rounds with this panel. Ms. DeGette. Thank you. Thank you, Mr. Chairman. Mr. Greenwood. The Chair recognizes the gentleman from Kentucky, Mr. Fletcher, for 5 minutes. Mr. Fletcher. Thank you, Mr. Chairman. Let me first ask Dr. Waksal some questions. You started when the initial protocol or the initial treatment protocols were enacted at some of the cancer centers, you mentioned Sloan-Kettering as one, a very well-respected cancer center, started reporting back that the results seemed very positive. Is that--how is that documented? Is that just kind of what we used to call hallway discussions, when you are on rounds and things are going very well? Mr. Harlan Waksal. Very much so. We were getting case reports--we were getting information back that was written, data was starting to come in, a lot of it was discussions with the doctors at these various institutions around the country. There were about 20-some different centers who were using the drug in this trial. A lot of it I think you could characterize it as hallway type of, anecdotal type of discussions, sir. Mr. Fletcher. Do you have documentation of that from reputable oncologists that participate in these protocols that from their experience say that, yes, in fact this drug seems to be effective, people who have had experience in a number of protocols and wouldn't say that without adequate experience? Mr. Harlan Waksal. I think every one of the physicians who were involved in our trial, every one of them, are very reputable, and---- Mr. Fletcher. Do you have documentation, written documentation, memos, et cetera, coming from those in the early parts of these trials? Mr. Harlan Waksal. We have better than that. We have their case report forms. We actually have the documentation of the effects it was having in their patients, the fact that they were seeing shrinkage. And that is documentation that forms the basis for what we did. Mr. Fletcher. So these are early reports that are made throughout the protocol of the effectiveness. Mr. Harlan Waksal. Exactly. That is right. Mr. Fletcher. Let me go on. There appears substantial failures, or Dr. Weiss mentioned 20-some percent of those that were enrolled should have been ineligible, at least that was the number that I recall him giving. Now, apparently, you acknowledged there was some failure in following the eligibility criteria. Is that correct or not? Mr. Harlan Waksal. Yes, I do, sir. Mr. Fletcher. And you have said that that happens or at least problems happen in all or most protocols. Mr. Harlan Waksal. Yes. And if I could elaborate, I will give an example. The major protocol deviation that took place was for patients who had an abnormal liver test that was done, and doctors will also use their judgment to decide if an abnormal liver test put the patient at any increased risk. The doctors would go ahead and put patients on this trial in spite of that, and in fact it was their decision that it wasn't a risk to these individuals. Mr. Fletcher. So these very well-respected clinicians would enter someone in the trial that was not eligible because of elevated liver function test which was part of the protocol. I mean they had to have normal liver function tests, I assume. Mr. Harlan Waksal. Yes. Mr. Fletcher. Do you think that was because of the optimism that they saw in the response in patients that were looking for some sort of treatment? Why would that occur if they knew that it may possibly prevent this from being approved through the FDA? Mr. Harlan Waksal. I don't think that was part of their consideration. It was their clinical judgment that these patients were not being put at any type of risk by enrolling them in the study, and---- Mr. Fletcher. But aren't they under sort of obligation to follow the protocol? Isn't it not approved for those patients to be on this under the FDA guidelines of this protocol if they do not meet the criteria? Mr. Harlan Waksal. There is no question. These doctors don't have the protocol in their hands as they go ahead and make the decisions at times. Mr. Fletcher. Is that normal that physicians are not fully familiar with the protocol when they are using it? Mr. Harlan Waksal. They are familiar with the protocol, but, as I said, mistakes happen in every study regardless of what that study is. Mr. Fletcher. I am just trying to get to the basis of why there seemed to be an excessive amount of failure in meeting the protocol in this study compared to other studies. Any answer to that? Mr. Harlan Waksal. I can. I think that the most important issue with this trial is that it was never initiated as a registration study, it was a Phase II study. Mr. Fletcher. Well, the Phase II, but also the Fast Track aspect, do you think that influenced it? Mr. Harlan Waksal. No. It actually--it wasn't planned for Fast Track until after we had the data. It was really the fact that we had such robust responses in patients that led us to go ahead and move this drug forward. So it was the positive data that indeed stimulated our desire to move this forward. Mr. Fletcher. Thank you, Dr. Waksal. Let me ask Dr. Smaldone a question. Given the fact that your company obviously being one of the leading providers for oncology therapies has been through the FDA process multiple times, you have a tremendous--much greater experience than ImClone has, in your experience, in looking over what happened here, do you think this is an FDA failure or is it a failure on ImClone's part to not follow the protocol and not adequately communicate with FDA what they are doing? Ms. Smaldone. I can't answer that directly, but I would like to provide you my perspective that hopefully can give you---- Mr. Fletcher. If you can do that briefly, we would appreciate it. Ms. Smaldone. I will try to give you some perspective here. I think as we came into this picture, what we saw before us was a product that had a substantial pre-clinical profile that was very exciting, very strong potential for what it may be able to do in terms of inhibiting this particular receptor. There was data that was conducted by reputable oncologists, already presented to ASCO, which is a premier Scientific Congress for Oncology, that validated our understanding of the data. ImClone Systems was in very advanced discussions with the FDA, was already in Fast Track, already with a rolling BLA submission process underway, and the BLA responsibilities, the responsibility of ImClone. And as we went through all of this, as well as very extensive due diligence, from our perspective, what we saw was a promising anti-tumor agent, there were issues, in fact issues that you have before you that were raised that were both scientific and regulatory issues. But from our perspective, in conversations with ImClone, it seemed that these were issues that were under discussion with the FDA and that people seemed to be at least aware of them. Mr. Fletcher. So let me say, given this perspective--and my time has expired, so let me just finish with this--is this an FDA Fast Track procedural problem or is this an ImClone problem? Ms. Smaldone. I believe that what we saw was an FDA Fast Track that appeared to, in a sense, that was a validator that the protocol and the data that was coming forward was appropriate, because we didn't have any reason to believe otherwise. We were not in direct contact with the FDA. Everything was happening through ImClone Systems. Mr. Fletcher. A company doesn't invest that much money without probably substantial oversight with the experience you have. Back to it, FDA problem, ImClone or both? What do you think? Ms. Smaldone. I really can't comment specifically. Mr. Fletcher. Okay. Thank you. My time has expired. Mr. Greenwood. The Chair thanks the gentleman. The Chair recognizes the gentleman from Florida for 5 minutes. And before doing so would inform the committee that after Mr. Stearns' inquiry we will then recess for the series of votes until 2:30. Mr. Stearns. Thank you, Mr. Chairman. Dr. Waksal, you had indicated when the chairman was talking to you that if the information was not public, you didn't think it was material. I think that is what you said or did you not, sir? Mr. Harlan Waksal. No, I did not say that. I said that---- Mr. Stearns. Do you remember what you said? Mr. Harlan Waksal. Yes. We didn't have material or public information at the time. There was not material information to disclose to the public, sir. Mr. Stearns. Okay. And so when Dr. Lee, at least we understand that Dr. Lee heard from the FDA about the possibility of this refusal-to-file letter. You are saying you did not know from her whether this was fact or not or she told you and you knew? Mr. Harlan Waksal. The conversation is similar to someone driving down the street and coming to a stop light. Mr. Stearns. Okay. Mr. Harlan Waksal. Red, yellow or green. Mr. Stearns. Right. Mr. Harlan Waksal. And it was not a conjecture of what---- Mr. Stearns. No, I understand. But you had the impression that there could be a refusal-to-file letter from the FDA after talking to Dr. Lee on December 4; is that possible? Mr. Harlan Waksal. No, I did not. Mr. Stearns. Okay. Did you have any inkling at all? Mr. Harlan Waksal. No, I did not have any inkling until after December 12, sir. Mr. Stearns. Okay. Dr. Smaldone, you have indicated that this drug has great possibilities, and you have indicated a women has taken it and has been successful. That was your testimony. Ms. Smaldone. Thus far, yes. Mr. Stearns. Thus far. Ms. Smaldone. Yes. Mr. Stearns. So your company, the impression of you and the executives of Bristol-Myers is that this drug someday will be available and will be effective; is that true? Ms. Smaldone. That is correct. The assessment of our company was, and continues to be to this day, that this drug has promise and has activity as an anti-tumor agent. And in fact we have a number of dedicated personnel, probably over 50 people, that continue to work on it across the company. Mr. Stearns. I understand. Did you see the ``60 Minutes'' CBS story about it? Ms. Smaldone. I did not. Mr. Stearns. Did you read the Business Week story about it? Ms. Smaldone. I did not. Mr. Stearns. Okay. Mr. Markison, did you see the ``60 Minutes'' story? Mr. Markison. No, sir; I did not. Mr. Stearns. Okay. And Dr. Waksal, did you see the ``60 Minutes'' story? Mr. Harlan Waksal. Yes. It was a story we did not participate in, sir. Mr. Stearns. Did you think it was hyped or was it accurate? Mr. Harlan Waksal. The story was about compassionate use of the drug, and it highlighted two families, one that received it and one that did not. Mr. Stearns. Well, the claims that the story indicated by inference, did you think they were exaggerated or were they accurate? Mr. Harlan Waksal. You would have to remind me about specifics. I looked at the story as a very negative one for the company, sir. Mr. Stearns. You did. Mr. Harlan Waksal. Yes, sir. Mr. Stearns. Okay. In 1999 and the year 2000, during ImClone's annual shareholders meeting, they were asked to approve the right for yourself and your brother Sam to acquire millions of stock options to exercise at certain prices to acquire ImClone common stock in the future; is that correct? Mr. Harlan Waksal. That is correct. Mr. Stearns. And why was that done? Mr. Harlan Waksal. We had been building the company, invested--well, I can speak for myself, I have invested 18 years of my life in building this company from the ground up, and I believe the stock options are reflective of the effort and the time and the hard work that I have done over this course of time. Mr. Stearns. And how much total did you have in stock options at that point, approximately, just approximately? Mr. Harlan Waksal. I can tell you where I ended up at the end of the day, just so you know. Mr. Stearns. Okay. Mr. Harlan Waksal. In terms of stock option, 2 million shares as of 2001, and warrants of 500,000. Mr. Stearns. Okay. And at the height of the market, so they would be worth, what, $100 million? Mr. Harlan Waksal. They would be worth at the height of the market? That didn't include my shares as well. I had a total of 3.6 million shares. Mr. Stearns. Okay. Mr. Harlan Waksal. So at the height of the market, $210 million. Mr. Stearns. $210 million. Mr. Harlan Waksal. That is correct. Mr. Stearns. Okay. On December 6, it shows you disposed of 700,000 shares, valued at roughly $75 for $50 million. Mr. Harlan Waksal. That is partly correct. I didn't dispose of them. I did not sell shares. What I did I entered into a pre-pay which allowed me voting rights on those shares and the upside potential of those shares, and it was part of a plan that I had had for months and months to go ahead and not only diversify but pay the taxes I owed on stock options that I had gone ahead and purchased as well as a result of the Bristol transaction. Mr. Stearns. Did you execute the trade so that you actually received $50 million? Mr. Harlan Waksal. Actually, $44 million. Mr. Stearns. $44 million. Okay. Did the company loan you money to do this? Mr. Harlan Waksal. No, it did not. Mr. Stearns. Okay. So you just based it then on a transaction put or call so that you wouldn't have to have a loan then or you had the money? Mr. Harlan Waksal. No. That was--I believe you are mixing up a couple transactions. Mr. Stearns. I probably am. Mr. Harlan Waksal. Yes. And if I could help with this, I wouldn't mind, sir. Mr. Stearns. Oh, sure. You can help me with this. Mr. Harlan Waksal. In July--well, in January of 2001, I purchased my warrants, 500,000 shares. Again, a strong vote of confidence on my part about the company and where it was going. In July of 2001, I purchased a little bit over two million shares. It was trading at around $42 a share, and I am sure you are aware that when you purchase stock options, you need to pay taxes on that. Mr. Stearns. Oh, yes. Mr. Harlan Waksal. And it was for those shares that I received a loan from the company at prime interest plus 1 percent. Subsequently, I also engaged in the Bristol-Myers tender offer that took place and sold stock into that, and that paid for the loan I had taken from the company, the stock I had--the taxes on the stock I had purchased, the stock options. And, subsequently, I had another tax that I needed to pay on the monies that I had gained from Bristol Myers, since I didn't have any cash other than what was going to pay for the stock and go to taxes, sir. Mr. Stearns. Okay. I will just conclude because my time is up and we have to vote. Mr. Harlan Waksal. No problem. Mr. Stearns. I mean it seems to me you are intimately aware of the money that you are going on your stock options and how you are going to buy it. Yet the 9923 protocol that your company prepared and when we asked Dr. Weiss earlier about it, he said there were three serious problems with this: Patient eligibility criteria was not strictly defined, he talked about changing the dose and administration frequency, and he also said that the whole thing was such that you get so many vague answers. And we have a prominent oncologist who said that the overall protocol that was asked, that was created by your company, was not tightly written and efficient. The protocol generated far more questions than could be answered. It was just a production for vague answers. Yet it seems like you understood intimately all this about your own money, but the actual protocol that your company developed seemed to be vague and prominent oncologists say that it wasn't a good criteria. And then the FDA asked you to come back because the clinical procedures, you didn't even complete the application, and you admit in your opening statement that the application had flaws to it. So I am just a little puzzled why you seem to be so knowledgeable on everything about your warrants and about your own money, yet when it comes to actually applying to the FDA for the proper clinical procedures, you didn't get the full information in. And in developing the 9923 protocol, you missed out in terms of the criteria. Does that make sense? Mr. Harlan Waksal. Well, I think your confluence of information is---- Mr. Stearns. Interesting interpretation. Mr. Harlan Waksal. [continuing] a little questionable. I don't really see the point that we were not paying attention. We were indeed. It happens to be that I differ on some of the opinions you have raised about---- Mr. Stearns. You would agree you were paying attention with your own money, though. Mr. Harlan Waksal. Well, I was paying attention to the company. Mr. Stearns. Your warrants and all your options, yes. Thank you, Mr. Chairman. Mr. Greenwood. The time of the gentleman has expired. The Chair would note that there is 1 minute and 14 seconds before this vote closes. The committee will recess until 2:30 with apologies to the witnesses. [Brief recess.] Mr. Greenwood. The Subcommittee will come to order. The Chair thanks the witnesses for their forbearance. We do not expect any more interruptions today. And the Chair recognizes the chairman of the full committee, Mr. Tauzin, for inquiry. Chairman Tauzin. I thank you, Mr. Chairman. I believe we have copies now, Dr. Waksal, of the documents that I was referring to. Do you have those copies? Mr. Harlan Waksal. Yes, I do. Chairman Tauzin. Let me make sure that you have them now, and will the staff make sure that he has them. What I would like to have you have in your possession is the copy of the minutes that you have indicated that you had reviewed, and a copy of the January 12 letter from the Department of Health and Human Services to ImClone approving the fast track designation. Staff, would you make sure that those copies are available to the witness. While we are doing that, let me ask you a couple of questions and then we will get you those copies. Do you know whose handwriting these notes are in? Could you help me with that? Mr. Harlan Waksal. Yes, I do. They are notes taken by my chief financial officer, Dan Lunch. Chairman Tauzin. Okay. So all three of these pages are taken by him? Mr. Harlan Waksal. I believe so, sir. Chairman Tauzin. And I see a snake at the bottom of page three I take it? Mr. Harlan Waksal. Excuse me? Chairman Tauzin. There is a snake on the bottom of page three, I thought. I thought it would be a pretty identifiable little scribble, and it is his work; is that correct? Mr. Harlan Waksal. I don't know about his art work, sir. Chairman Tauzin. But it is his handwriting? Mr. Harlan Waksal. But it is his handwriting. Chairman Tauzin. It is his notes? Mr. Harlan Waksal. Yes. Chairman Tauzin. Thank you. Mr. Harlan Waksal. And by the way, for the record, happy birthday. Chairman Tauzin. Thank you, sir. Mr. Harlan Waksal. You are welcome. Chairman Tauzin. And while we are doing the handouts to you, you said that on the 26th that you began calling the team, the offices of the team, to let them know that you have received this information that a refusal to file letter was coming? Mr. Harlan Waksal. We had a working group from Bristol- Myers and ImClone, which was a routine call that we were having at the time. Chairman Tauzin. Right. Did you ever get to talk to your brother? Mr. Harlan Waksal. I don't remember when, but I believe on the 27th I did. I'm sure that at some point that I did, but I don't recall any specific call. Chairman Tauzin. Did you similarly call family members and advise them as well? Mr. Harlan Waksal. Absolutely not. I did not call any family members or friends. Chairman Tauzin. Can you give us any explanation why so many family members sold stock on the 27th? Mr. Harlan Waksal. I can't give any insight into that, sir. Chairman Tauzin. All right. Let's look at the documents now if you don't mind. The documents that I referred to are, first of all, the minutes. And if you look at page two of the minutes, which I understand are exchanged after these meetings so that both sides approve the minutes, and confirm that this is what really occurred at the meeting. Is that correct? Mr. Harlan Waksal. We do exchange minutes. Chairman Tauzin. Right. And if you look at page two, you will see that this is a phase two open label study following-- it says following two courses of irinotecan, patients tumors are measured, et cetera. Is that correct? Mr. Harlan Waksal. I'm sorry, but I not with you quite yet. But, yes, I see it. On page three? Chairman Tauzin. I think page two. Mr. Harlan Waksal. Page two? One second. Chairman Tauzin. Page two, the middle of the page. Mr. Harlan Waksal. Yes, I see it. Chairman Tauzin. This defines a protocol, and this literally is the criteria of protocol; is that correct? Mr. Harlan Waksal. Well, it actually--it should. What we discussed in the August meeting in the slide presentation that was given to the FDA, and also that has been shared with this committee as well, is very clear. It speaks to protocol, the second protocol, and the amendment that was taking place, and the enrollment criteria within that, and I shared that with committee members. Chairman Tauzin. But I want you to look at the letter of January 12, 2001 that we also gave you. Mr. Harlan Waksal. Yes. Chairman Tauzin. And in the second paragraph, it clearly refers to the fact that the fast track development program is being designated, and where refractory is defined as progressive disease during at least two cycles of standard doses of these chemotherapy drugs. Is that correct? Mr. Harlan Waksal. It says where refractory is defined as progression of disease during at least two cycles of standard doses of 5-fu irinotecan. Chairman Tauzin. Right. And read the next sentence for us if you don't mind. Mr. Harlan Waksal. ``Please note that if the clinical development program you pursue does not continue to meet the criteria for fast track designation, the application will not be reviewed under the fast track program.'' Chairman Tauzin. Wasn't this a very clear statement from the FDA that if you deviated from the two cycle requirements of the criteria that you would not be reviewed on the fast track? Mr. Harlan Waksal. Well, it clearly shows some confusion. However, I---- Chairman Tauzin. Well, what is confusing about that? I mean, here the FDA is saying very clearly that they are designating you on the fast track, where in fact these two cycles of standard doses apply, and this is the criteria. And it says in the next sentence, ``please note that if the clinical development program that you pursue does not continue to meet the criteria for fast track designation,'' that the application will not be reviewed. How confusing is that? Mr. Harlan Waksal. In March of 2000, we submitted version two, and was stamped in and received by the agency. In August of 2000, we reviewed with them specifically the only content that was specific to the protocols was version two. And I recognize this, and I must say I didn't spend a lot of time reviewing this in this kind of detail. However, in the patients who were treated, the average number of cycles of treatment that these patients received wasn't two, but four cycles of treatment. Chairman Tauzin. Well, that may be an average, but the bottom line is that the FDA was clearly telling you that this is the basis upon which you are being approved. We are not going to continue you on the fast track if you deviate from it, and yet changes were made that you could have alerted the agency about, or you could have discussed with the agency. You could have informed the agency that they were working on the wrong protocol, and you could have corrected this misconception by the agency. And I am not being mean. I am just trying to understand. If you really wanted to get the drug approved, and you were being told this is what we believe we are approving you on, and this is the criteria that you have got to follow under what we believe we are approving you under for fast track. And you know that is not really what you are working on. You are working on some other iteration of it. Why didn't you inform the agency that they had approved you under a misconception? Mr. Harlan Waksal. Well, one, we always informed the agency what we were doing well before our August meeting, and during that August meeting, the only discussions presented by the company was version two. I think we were very clear throughout the time that we worked with them. Chairman Tauzin. But the minutes reflect something very different, and these are minutes that you reviewed and exchanged with the agency. The letter reflects something very different. And the letter is a document we can look at, and not a conversation that was not recorded. What I am looking at in documents is very clear evidence that the agency was approving you on the fast track under the misconception that the protocol was based upon this criteria when you knew that it wasn't. And I am not throwing and heaping blame on you. I am just wondering why if this approval process was so important to you as I know it is. Mr. Harlan Waksal. Absolutely. Chairman Tauzin. If it was so important to these cancer victims as you knew it was, and we know it is, why would you not at some point say to the agency that you have approved us under a misconception? Mr. Harlan Waksal. I believe I said right at the beginning when we started the questioning on this issue that at no time did I even have an understanding of the version one and version two until it was raised at this meeting. I was always under the assumption---- Chairman Tauzin. But you did review these minutes? Mr. Harlan Waksal. Well, the company reviewed the minutes, and I am ultimately responsible for making sure that is done, yes, sir. Chairman Tauzin. But you are telling us that you personally did not know what I have shown you today until today? Mr. Harlan Waksal. I am telling you that, one, I didn't really look at that issue until today, but more importantly, I am still not certain that it really is an issue. That these patients were treated by their doctors using what is the standard of care. And if a patient fails a cycle of treatment, a single cycle of treatment, with tumor enlargement or new tumors, it is unethical to continue to treat them with a second cycle of irinotecan. That's why we made the modification. It wasn't to move away from the standard of care, sir. Chairman Tauzin. I am not saying that you were wrong to make a modification. I am not saying that may not have been the right thing to do. But having made the modification, according to the letter, you would not have been entitled to the fast track approval process. That's the point that I am making. And yet having made the modification, and knowing that the agency was operating under this misconception, that you were going to require a criteria based upon two cycles of standard doses, you never said to them, hey, you have approved us on the basis of a wrong protocol, and I don't understand why you would not have done that. Mr. Harlan Waksal. Well, again---- Chairman Tauzin. You did review the letter did you not, Dr. Waksal? Mr. Harlan Waksal. I have. I have reviewed the letter today. Chairman Tauzin. I mean, did you review it when you received it? Mr. Harlan Waksal. I clearly would have read this letter when I received it. Chairman Tauzin. I would have thought that you would have, too. And it very clearly says that if the development program that you have pursued does not continue to meet this criteria, which you just described in the paragraph above, the application will not be reviewed under the fast track program. I don't know how that could be any clearer. Mr. Harlan Waksal. Well, there was no deception on our part on what we were doing. We were very clear with the agency, and I believe if the agency will be given the opportunity to respond, maybe they could clarify whether or not this was a relevant issue. I don't believe that this was a major problem as we move this forward. Chairman Tauzin. Well, apparently this becomes the major reason why the letter is--a refusal arrives. I mean, the agency finally recognizes that it was pursuing a course of approval here based upon a misconception. Mr. Harlan Waksal. I am not aware of that, sir. Chairman Tauzin. I am being corrected. I am told that they didn't realize that either until we pointed it out to them, which is really perhaps even more damning. Let me---- Mr. Harlan Waksal. I don't believe that was an issue that the agency or the company focused on as being important. Chairman Tauzin. But that is amazing to me. It really is. Mr. Harlan Waksal. Well, I think it is because it really was not an issue that spoke to the heart of whether or not this drug was working or not. I don't believe that that is a critical component. Chairman Tauzin. Well, all we know is what the documents tell us, and what is concerning to us is that when an agency-- our problem is looking at this process to see whether it works well, and whether it fails or not. Mr. Harlan Waksal. Yes, sir. Chairman Tauzin. And we are seeing a process whereby the agency approves you for this fast track, which is a special procedure, based upon a criteria clearly defined. It gets changed, and the investigators for our committee, and in interviewing the senior FDA official, believes that in fact that they made their decisions based upon the wrong version of the protocol, and they also state, which you have denied under oath, that ImClone mislead them about the claim of single agent activity. So we have got a situation where we are going to have to find where the truth lies in between those two statements. Mr. Harlan Waksal. There is no question that at no time did we mislead the FDA regarding what we were doing, and again I want to emphasize that the fact that the FDA didn't emphasize this issue, even at the refusal to file time, and the fact that I didn't recognize it until today, this does not seem to be a major issue regarding why we received the refusal to file. Chairman Tauzin. Well, they seem to think it was a major issue when it was pointed out to them finally. Mr. Harlan Waksal. That's very possible. Chairman Tauzin. I want to take you to statements that your brother, Sam, made when he was chief executive officer on the 29th, as reported by Reuters. Do you have a copy of that, too? Mr. Harlan Waksal. I do not. Chairman Tauzin. I am going to read it to you, and we will make a copy available to you as I read it to you. Mr. Harlan Waksal. I believe I have a copy now. Chairman Tauzin. All right. It says that Sam Waksal, ImClone's chief executive officer, told Reuters that the agency first wants more annotation information about how the company verified that patients enrolled in these trials had indeed failed, et cetera. It says also further down that there is a prediction that it would take only--Waksal said that company officials hope to meet with the FDA within 10 days to supply necessary information to the agency 6 to 10 weeks. There were a lot of statements made minimizing the effect of this letter apparently of denial, and then we have something that I hope the Bristol-Myers witnesses will help me understand. We have got a confidential document. Do you have it in front of you? It is B019629. And let me read it to you. It says, ``Nancy, I agree that some, a lot, of Sam's comments are misleading, and at this point we should continue to be silent.'' What does that mean, and what is Bristol-Myers doing at that point? I mean, you are hearing the chief executive officer of the company make these comments publicly, and then an e-mail is exchanged saying that we agree that some, a lot, of Sam's comments are misleading. At this point we should continue to be silent. What is the meaning of that kind of an e-mail? Mr. Markison. Mr. Markison. Well, sir, these are the comments of two people that are within the company. I am not quite sure they represent the entire company. However, we were certainly going through a period where we were trying to determine the best course of action, and that is where we were at that time. Chairman Tauzin. But of course the problem was that you were a partner in this operation, and you are aware that the chairman of the company is making misleading statements to the public in the middle of this crisis, or at least the comments were that you were, and that people in your company were saying that we should continue to be silent. Mr. Markison. Well, sir, these again--and I am sorry to point this out, but these are just two folks within the company. And again we were struggling with the new information received, and attempting to determine for ourselves---- Chairman Tauzin. Were these two people pretty key people in the development of this product? Mr. Markison. Absolutely not, sir. Chairman Tauzin. They were not? Mr. Markison. In the development of this compound, they had no relevant roles. Chairman Tauzin. No, not in the development of the compound, but in the development of or the marketing of it. They were part of the team were they not on this particular drug? Mr. Markison. Both of them were part of the team. Chairman Tauzin. And they are saying in an e-mail that Sam is making misleading comments. But let's just be silent. Mr. Markison. Sir, I can't tell you if they are talking to themselves. I am not a party to this. This is the first time that I have seen it. I am acknowledging clearly that Bristol- Meyers Squibb was trying to assess for themselves the exact extent of what needed to be done as we go forward, and that's clearly where we were. Chairman Tauzin. Well, Mr. Chairman, again, I think part of what I hope we will discern, and perhaps as we proceed further with the investigation, is how in fact the fast track process can be improved. I would hate for this hearing to somehow in any way cast dispersions upon what is an incredibly important process to make incredibly important drugs more quickly available to people once they have been properly tested. But at the same time, I suspect that we have some real problems with the way that the system works, and when an exchange of letters that looks so clear to me at this point can be so confusing to the partners involved here, and the parties involved here. And when approvals can be based upon wrong versions of protocols, and at least in the testimony of one FDA official on a misleading claim, the bottom line is, and I think you have said it, Mr. Waksal, and you apologized for it. But we all could have done a better job with your company and the FDA in making this process work so that an important drug could have been properly processed, and perhaps available today to the American public. And if we can straighten it out for the future, Mr. Chairman, I think we will have learned a lot from this hearing. Thank you very much. Mr. Greenwood. The Chair thanks the chairman, and recognizes the gentleman, Mr. Stupak, from Michigan, for 5 minutes. Mr. Stupak. Thank you, Mr. Chairman. Dr. Smaldone, you indicated that you were part of the due diligence review for Bristol-Myers Squibb before they agreed to go in with ImClone, correct? Ms. Smaldone. Yes, I was. Mr. Stupak. And in fact you sent an e-mail to your colleagues, a Peter Ringrose, and a Beth Seidenberg, concerning ImClone. And it states that on a whole, and I am quoting now from the e-mail, ``that on a whole this remains a very high risk opportunity.'' Is that correct? Ms. Smaldone. That is correct. That was in June. Mr. Stupak. Right. In June. And then you went on and you pointed out certain critical outstanding issues that you cited. One--and again I am going to quote them There were three issues that you had here. The pivotal CRC colorectal cancer issues, single agent activity. ``The trial which is ongoing will need to be shared with us. We should attend the FDA meeting with ImClone when the data is final. There is no agreement that we could find that is reassuring regarding the activity level needed for approval.'' Is that correct? Ms. Smaldone. That is correct. Mr. Stupak. Okay. You go on to say that the weak dose selection rationale, ``they have developed APK pharmacokinetics rationale for dose selection. However, the dose is questionable for refractory patients, and the safety margin for the early stage patient, has not been determined. ``In their phase three first line study, they are evaluating the same dose used in refractory disease. This is already seen as a problem by the FDA and us.'' Is that correct? Ms. Smaldone. That is correct. Mr. Stupak. And safety, you indicated again, and quoting, ``that the safety of the product specifically related to skin toxicity, bleeding, allergy, has not been well categorized. This reemphasizes the weaknesses of the dose selection argument.'' Is that correct? Ms. Smaldone. Yes, that is correct. Mr. Stupak. And then you went on to your executive, and you point out the risk of the results of the single study agent, and again let me quote you. That ``the FDA has requested that the data be provided on the anti-tumor activity of C-25 as a single agent. Pre-clinical data has thus far been provided to FDA to address this issue. ``But they have persisted in their interests that clinical data be provided. No accelerated approval has ever been granted for an oncology drug for use in a combination therapy.'' Is that correct? Ms. Smaldone. This is coming from the same memo? I'm sorry. Mr. Stupak. This is coming from the memo, yes, and the concerns about the single agent study and 9923 study were not completely resolved before you entered in your agreement. In fact, we have a copy of it if you would like to see it. Ms. Smaldone. If I may, please. Thank you. Mr. Stupak. Sure. Can we provide that to the witness. Here, give her this one right here, Alan. Ms. Smaldone. Thank you very much. Yes. Mr. Stupak. Okay. So no accelerated approval, and that is what you are going for here before you enter into this agreement, and this is June of 2000. No accelerated approval has ever been granted for an oncology drug for use in a combination therapy. Is that correct? And that's really what ImClone was asking to do? Ms. Smaldone. Right. Mr. Stupak. And whether we agree if it was protocol one or protocol two here you had to have, this approval fast track was based upon the combination therapy; is that correct? Ms. Smaldone. That is correct. Mr. Stupak. Even after the rejection though. So there should be no question here that we have to have a combination therapy and there is some weaknesses here. Bristol-Myers Squibb reviewed ImClone's application again after it was rejected in January of 2002, correct? Ms. Smaldone. In January of 2002, this was after the refusal to file letter, went through a full assessment again, yes. Mr. Stupak. Correct. Were you a part of that review? Ms. Smaldone. Certainly my team was, yes. Mr. Stupak. So you are familiar with it? Ms. Smaldone. Yes. Mr. Stupak. Dr. Weiss says that BMS review, and that performed by the independent review assessment committee. That is part of your team, right? Ms. Smaldone. I believe that may be referring to the independent radiology review that we pulled into place in August of 2001. Mr. Stupak. Okay. So, yours, plus this independent review committee, agreed that only 16 of the 21 patients admitted to the 9923 study has having progressive disease show a partial response to the combination therapy. This is 13.2 percent. Has the FDA ever approved an oncological drug with a response rate that low using only clinical end points? Ms. Smaldone. Yes, they have. In fact, if I may, Congressman---- Mr. Stupak. And what drug did they use it on? Ms. Smaldone. For irinotecan itself---- Mr. Stupak. But irinotecan was not used in combination. It was used as a single agent, correct? Ms. Smaldone. That is correct. Mr. Stupak. And it also increased life expectancy of the patient as we talked about with Ms. DeGette earlier, and your drug does not increase the life expectancy of a patient. It may at best shrink a tumor. Ms. Smaldone. At the present time under accelerated approval regulations, which is evaluating the effect on a surrogate marker, which in this case was response rate, at the same time it is necessary to evaluate the full clinical benefit if you will with long term data, which was the plan for this program in any event. If I may just make one clarification if I may. Mr. Stupak. Sure. Ms. Smaldone. In June 1901, what I was referring to were a series of issues, scientific and regulatory issues, that were bubbling forward at that point in time, which are part and parcel of what is seen throughout the due diligence process. One point in particular, just to get the sequence here, is that because of some of those issues that were raised, and further discussion within the company, as well as with outside experts, both oncologists, regulatory experts, we did create a separate independent review panel with radiologists that were identified to look at the 9923 data specifically, and reevaluate the responders in that particular study. So as a result of these issues and discussions on collapsing time here, Bristol-Myers Squibb took this step to reevaluate with a separate review panel of experts that particular study on those data. Mr. Stupak. Right. And in the review panel and all of this review, and rightfully so, Bristol-Myers Squibb did it, and it was in January of 2002 after refusal, right? That's what I am talking about, the refusal now. Ms. Smaldone. No, this was before. This is prior to the time of the agreement. Mr. Stupak. Okay. Now, we have all of this in June when you did your memo, and you agreed with me that no accelerated approval has ever been granted for an oncology drug for use in a combination therapy. And that was your statement back then, and that's true of what you said in June of 2001? Ms. Smaldone. Right. Mr. Stupak. Now, I am bringing you to January of 2002. Ms. Smaldone. Yes. Mr. Stupak. And you have gotten your RTF, and you have been rejected, and there is an internal review that you are doing; isn't that correct? Ms. Smaldone. Yes. Mr. Stupak. You are doing it with this independent committee, and Bristol-Myers Squibb, and you are saying what happened here. And your own document says that it was agreed upon by your independent assessment committee that the 9923 study has having progressive disease show a partial response to a combination therapy. This is 13.2, because only 16 of the 121 patients responded. And that is less than the 15 percent that it was supposed to be, correct? Ms. Smaldone. What we did at that point in time--and this, Congressman, was in August. Mr. Stupak. No, no, January, 2002. You are not familiar with any of that? Ms. Smaldone. I'm sorry? Mr. Stupak. You are not familiar with the Bristol-Myers Squibb review in January of 2002? Ms. Smaldone. In the January-February timeframe, we went through several internal reviews within Bristol-Myers Squibb, as well as again another panel of experts that were brought in to assess all of the information. And at that point in time, what I believe is that the reassessment that was done in August was put forth to this group. Mr. Stupak. Forget August. In January of 2002, here is your draft document, confidential, Bristol-Myers Squibb, you are going through to see why you were refused, right? Are you familiar with this? It is January 11, 2002. Ms. Smaldone. I really couldn't say specifically. There are so many documents, and I would be happy to see it and comment if I may. Mr. Stupak. Okay. Did you tell our staff, the Congressional staff--you have been interviewed by them, right? Ms. Smaldone. Yes. Mr. Stupak. Right. Did you tell the staff that you would never have permitted Bristol to submit an application to the FDA of the quality of the ImClone submission of their application? Did you tell our staff that you would never allow your company to submit an application like that? Ms. Smaldone. The discussion was as it relates to quality and study conduct, and quality assurance. We within Bristol- Myers Squibb work at very high standards, and after the refusal to file letter, and the extent, and the depth of the issues that were raised in the refusal to file letter, it was very clear that there were some very substantive--what I would call study conduct quality assurance types of issues, that is correct. Mr. Stupak. So you did tell our staff that you would never let---- Ms. Smaldone. That's correct. Mr. Stupak. Okay. So, Bristol sent in an application such as what ImClone did, and you said there was some substantive issues, and that's why the refusal letter, right? Ms. Smaldone. Yes. Mr. Stupak. So it is more than just documentation? Ms. Smaldone. In its cumulative, it certainly appeared to be more than documentation. Mr. Stupak. And then in the substantive issues that the FDA raised in its refusal, the FDA was fully justified in sending ImClone an RTF based on the application that they submitted in the fall; isn't that correct? Ms. Smaldone. When we say, Congressman, the refusal to file letter, and went through a thorough review and evaluation of it, it became apparent that in accumulative of all of the issues that were raised there, it appeared difficult for--and I can't speak for the FDA, but based on my experience, it appeared difficult for them to reconstruct the datasets and follow the chain of evidence. Mr. Stupak. So if they couldn't follow the chain of evidence, and if they couldn't reconstruct it, they were certainly justified then in putting out the RTF were they not in your 17 years of experience as you said? Ms. Smaldone. If I can make some qualifications to that, sir. I have never seen a refusal to file letter before, and I have never since. Mr. Stupak. Well, the refusal to file was based upon those substantive issues that you said were lacking, correct? Ms. Smaldone. That is correct. Mr. Stupak. So if the refusal is based upon substantive issues, then the FDA was correct in putting an RTF on? Ms. Smaldone. I believe that it had some justification based on what I was able to see. Mr. Stupak. Okay. On December 4, there is starting to catch wind that maybe ImClone or that ImClone might be receiving an RTF or that there application would not be approved. Did you or anyone from Bristol-Myers Squibb call up and say, look, what do you need to make this thing work, and can we withdraw it, or can we rework it? Did anyone do anything like that that you know of? Ms. Smaldone. Excuse me, sir. With the FDA, or with---- Mr. Stupak. With the FDA. Did you call the FDA and say how can we rework this. Can we withdraw. Let us do further work on this? Ms. Smaldone. We are not responsible at that point in time and still are not for the BLA or any of the dialog with the FDA. Mr. Stupak. Thank you. Mr. Greenwood. The gentleman's time has expired. The Chair recognizes himself for--well, first off, to--well, without objection, the Chair would enter into the record certain documents. The first of these is three pages of handwritten notes referred to by Mr. Tauzin. The second is a Department of Health and Human Services document, reference number BBIND5804, dated January 12, 2001. The third is a Department of Health and Human Services memo, dated September 22, 2000. And fourth is the e-mail referred to that is addressed to Nancy. [The information follows:] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] Mr. Greenwood. The Chair recognizes himself for 5 minutes for inquiry. Dr. Markison, I would like to go back to the way that you learned of the refusal to file letter. How did you learn that was going to happen? Mr. Markison. Well, sir, there was a series of events throughout the month of December, an inkling it seems on December 4, and as the month progressed, certainly there was-- -- Mr. Greenwood. It is an inkling that Dr. Lee described as three equal possibilities? Mr. Markison. That's the way that Dr. Lee described it. Mr. Greenwood. But you had an inkling that there was a greater likelihood of the three possibilities? Mr. Markison. There was an inkling, sir, and quite frankly that was in essence the beginning in my mind anyway of---- Mr. Greenwood. It was an inkling in your mind? Mr. Markison. It was an inkling in my mind, yes. Mr. Greenwood. And how did that inkling get into your mind? Mr. Markison. That it was mentioned as a possibility. Mr. Greenwood. Mentioned by whom? Mr. Markison. Dr. Lee reported it from the FDA dialog. Mr. Greenwood. But did she say that it was more likely that there would be a refusal to file letter than that there would be an approval? Mr. Markison. No, sir. Mr. Greenwood. She just mentioned it as one of two or three equal possibilities? Mr. Markison. Dr. Lee just reported to our group on the results of her conversation. Mr. Greenwood. Okay. All right. And then on December 20th, there was a teleconference, which we referred to earlier where it was apparent that the FDA had made or come to a decision and told ImClone not to call them, and that they would receive their decision on the 28th. At that point, we had been working with Alan Bennett, outside counsel, for some time off and on, and he was familiar with the project, and I asked him if he could find out any more information that would be helpful, because at this point it was not definitive. Mr. Bennett then responded to me on Christmas Eve, as I have stated, in writing, and was---- Mr. Greenwood. What time of day was that on Christmas Eve? Mr. Markison. I believe it was in the early evening because I was trying to head out the door with my children for Christmas mass. Mr. Greenwood. Okay. So you were in the office when you received that? Mr. Markison. No, I was at home, sir. Mr. Greenwood. You were at home when you received that information from Mr. Bennett early in the evening? Mr. Markison. Yes. Mr. Greenwood. And then who was the next person--who was the first person with whom you shared that information? Mr. Markison. Well, I left the house, and came home, and tried to reach Harlan Waksal, and again failed, and did not leave a message on his machine. I called him the next day and also---- Mr. Greenwood. So you didn't share this information with anyone else over Christmas Eve? Mr. Markison. On Christmas Eve, no, sir. But on the next day, Christmas Day, it was shared within my company certainly. Mr. Greenwood. Well, Mr. Bennett knows the information, and Mr. Bennett gives the information to you. Does Mr. Bennett give the information to anyone else? Mr. Markison. He was also corresponding with Mr. Keene, legal counsel to Bristol-Myers Squibb, and Mr. Costa, also legal counsel to Bristol-Myers Squibb. Mr. Greenwood. So Mr. Bennett informed those two gentleman on Christmas Eve, as well as he informed you? Mr. Markison. They received a copy of the same e-mail that I did. Mr. Greenwood. A copy of the same e-mail. Okay. So the first person that you shared this information with was whom? Mr. Markison. I believe it would have been Harlan Waksal, or additionally I spoke to Cheryl Anderson, who is in regulatory affairs in our company as well. Mr. Greenwood. This is on Christmas Day? Mr. Markison. On Christmas Day, yes, sir. And I wanted to make sure that Cheryl communicated with the appropriate---- Mr. Greenwood. Did you share the information with anyone else at ImClone? Mr. Markison. I only spoke to Dr. Waksal on this Christmas Day. Mr. Greenwood. And did you call anyone else at Bristol? Mr. Markison. Yes, sir, I did. I called Cheryl Anderson. I believe I also called my supervisor at the time, Mr. McBlaine, to inform him, and I believe I may have spoken to other people in the company at that time, but quite frankly I can't remember all of them. Mr. Greenwood. Did you inform those folks at Bristol before or after you spoke to Harlan Waksal? Mr. Markison. I can't recall exactly, sir, because I know that I made a number of attempts to call Dr. Waksal, and I did not want to leave this message on his machine. Mr. Greenwood. Mr. Waksal, I have a copy of a letter signed by your brother, Sam Waksal, and sent to the ImClone Board of Directors, on July 18, 2001. It appears that the purpose of the letter is to inform the Board that you and your brother had borrowed over $30 million from the company to exercise over 4 million options. Is that true? Have you seen that letter? Mr. Harlan Waksal. Can I see a copy of that letter, please? Mr. Greenwood. While Mr. Waksal is looking at that, Mr. Markison, do you know how Sam Waksal did find out? You couldn't reach him, but do you know how Sam Waksal found out about the refusal to file letter? Mr. Markison. No, sir, I do not. Mr. Greenwood. You have no idea? Mr. Markison. No. Mr. Greenwood. Harlan Waksal, Dr. Waksal, do you have any idea how your brother learned of the refusal to file letter? Mr. Harlan Waksal. As I mentioned, I had told the senior management team about the refusal to file letter, or the potential for the--the strong potential for a refusal to file letter, and I believe he spoke to the head of investor relations at the company, Andrea Rabney, when he arrived sometime in the evening of the 26th. Mr. Greenwood. Have you had a chance to glance at that letter? Mr. Harlan Waksal. I'm sorry, I was. Just 1 second. But I am familiar with it. It was asking for permission to get a letter, a promissory note from the company to go and exercise the stock. Mr. Greenwood. So did you and your brother borrow the $35 million to exercise the 4 million shares on July 12, knowing that you would use these shares during the tender offer from Bristol? Mr. Harlan Waksal. No. We did exercise our options, and we did enter into a promissory note with the company at the time that the Bristol deal was not completed, and due diligence was still ongoing. And, in fact, at the time we already had strong discussions with outside counsel that we could go ahead and do conditional exercise of the stock options. But I certainly would not have had to purchase the options, but could have used the stock options themselves in the offer if indeed we went down that pathway. So they were different types of issues. I exercised the stock because of the price of $42 a share, and my feeling that the company was going to continue to do strong, and continue to move forward, and in flexion points would add value to this, and that I wanted to gain the long term value of that equity in the company, and that is why I have so many shares today. I still believe that. Mr. Greenwood. Did you know by the end of June that Bristol-Myers Squibb was going to purchase roughly 20 percent of the company? Mr. Harlan Waksal. At the end of June, we had various discussions with Bristol, and options included them purchasing more, but 20 percent was around the number that we were negotiating at that time. Mr. Greenwood. How likely did you think that by the end of June that that was to happen? Mr. Harlan Waksal. In truth, I had been down this pathway so many times with companies that I felt at that time that it had probably a 50-50 chance of taking place. Mr. Greenwood. And did that have anything with the decision of you and your brother to exercise those options at that time? Mr. Harlan Waksal. I can't speak for Sam. But it had no impact on my exercising. If it had to do with a tender offer, and the question is economically what would have made more sense, it would have been simply to tender my stock options rather than exercise them, which would still have resulted in whatever financial gain. What I did was buy a stake in ImClone. It was a promissory note that was paid back. No money was given to me. I bought a large stake in my company, which I still hold today. I still have two million shares of ImClone stock, sir. Mr. Greenwood. My time has expired. The Chair recognizes the gentleman from Kentucky, Mr. Fletcher. Mr. Fletcher. Thank you, Mr. Chairman. I wanted to ask just a few questions following up. Mr. Greenwood. Excuse me, but the gentlelady is being very polite in allowing Dr. Fletcher to go ahead. Mr. Harlan Waksal. I hope this level of politeness continues in this direction as well. Mr. Fletcher. Dr. Smaldone, when we asked Dr. Waksal about compliance with the protocol, it mentioned that--and let me preface this by saying is this going through the refusal to file letter here, there seems like--and maybe it is just in retrospect, but I think you probably share that. But there is a lot of discrepancies here that are rather obvious. If you can document CT scans on results with irinotecan before you begin the combined therapy, you have no base line, and there was some problems there. But one of the things that was stated is that--for example, it mentioned the elevated liver function test and some other things of folks who have may been entered into the study that were not eligible, was that the oncologist may not have had the specific protocol right there in front of him. And my recollection, and we have had patients entered into protocols, and we have worked with protocols personally, and generally there is a whole team that works. Often times nurses that screen these patients, and they are very thorough, and the protocol is very clear. It is outlined in fact to assure that you meet the FDA criteria. All of these things are checked off and file forms are written, and all the criteria is written down. So how does that happen that these were entered and maybe some oncologist didn't know that they met the protocol? That seems odd to me. Ms. Smaldone. It seems odd to me, too, sir. I really can't comment beyond that. Mr. Fletcher. I mean, these are not fly by night oncologists. These are probably the world's experts. Oncologists is what we are talking about. I mean, is the protocol that poorly structured, and was it that poorly organized. I know that there are mistakes and things like that that we make, and we are humans, and there are times where there are deviations, or because of clinical reasons that you have to depart from the protocol. But these are things that are clearly aberrations, and I just wondered from your standpoint if you have ever seen anywhere where protocols are done where the clinician doesn't have the protocol in front of him. Ms. Smaldone. Normally, that is not the case, sir. Mr. Fletcher. Okay. Dr. Waksal, if you could maybe respond to that. I know that you said, well, maybe they didn't have it in front of them. I assume you are a clinician as well. Mr. Harlan Waksal. I am, but I can't give an explanation on it. It was not because of a lack of clarity in the protocol. Why it took place, I don't know. I can tell you that the majority of these had to do with what I mentioned before, the liver function test problems. And in fact that is something that makes the patient sicker. It means that these patients were a little bit more else. So the doctors must have felt, and I am speculating, must have felt that they still were going to be given a drug that would not result in an adverse event. But I am really speculating. I don't know why it took place. Mr. Fletcher. Well, I just find that very concerning, because most of the oncologists that we have worked with, as well as other clinicians in different areas, have done FDA studies, phase two. Mr. Harlan Waksal. This study was done at the University of Colorado, at Memorial-Sloan-Kettering, at the University of Alabama, at UCLA. It was done at prestigious institutions across the country, and with clinicians that were very good at doing these types of trials. Mr. Fletcher. Let me ask Dr. Smaldone. Are those normally done with a lot of intervention, or at least oversight from a company that is sponsoring these, to go in and make sure that there is compliance all along the protocol, and was that a problem with ImClone? Ms. Smaldone. I can tell you what we do, Congressman, which is there is significant oversight on the part of our clinical teams, our clinical monitors, or indeed the contract research organization if the study is contracted out to a research organization to assist in the clinical monitoring and study conduct. That's what we do, and I can't say exactly what the---- Mr. Fletcher. To ensure things like some of these patients where they simply did not have any adequate CAT scans, which are pretty obvious that those kind of mistakes are not made. But let me ask you--and I want to ask both of you. Dr. Smaldone, from your standpoint, how much communication took place in your review, and I assume that you have reviewed this, especially since the refusal to file letter. How much communication took place on these concerns prior to the refusal to file, because I think Dr. Waksal, you said that on December 28, or even a few days before, that you were quite surprised at the refusal to file. Mr. Harlan Waksal. Yes. Mr. Fletcher. So obviously in your mind there was not the adequate information from the FDA that the data that you were giving them was not adequate or that the protocol was not stringent enough as they said it wasn't conducted properly. Mr. Harlan Waksal. Actually, my comment was that I thought it was reparable, and I knew that there were issues, but I thought that they were all issues that we could go ahead and fix. Mr. Fletcher. Okay. Dr. Smaldone. Ms. Smaldone. Sir, we did not review the clinical program of ImClone. So we---- Mr. Fletcher. But did you review all the communications and everything that answered between--Dr. Lee, I assume that you were seeing the clinical aspects of that. Did you review all the communications to see where in the world--I mean, it is bound to have caught you by surprise as well. Ms. Smaldone. Congressman, we did a very extensive due- diligence review of the scientific aspects, pre-clinical aspects, and clinical, regulatory, financial, full-team of people reviewing this. There are however certain levels of expectations on the part of the proposed partner that the study conduct, ways of approaching good clinical practice, and quality assurance, would be conducted as would be conducted with any pharmaceutical company according to guidelines. So it was with total hindsight at this point that some of those expectations were not met, but we did not review the program, and we were certainly not there to participate in any of the specific dialogs between ImClone as a sponsor in any of their clinical investigators. Mr. Fletcher. Okay. Thank you. Well, it is just that in my experience that clinicians rarely deviate from a protocol that is pretty well understood, especially if it is done well. Let me just say that the thing that really concerns me here is that you have got obviously the financial ramifications, the investors, and some of the other things. It is very, very important. And not only that, but it is just as important, and probably even more so, is the expectations, and it appears that the financial influence of this, particularly from the executives of ImClone, drove raising patient expectations, and that is very concerning. And I just wondered, Dr. Waksal, in retrospect, what would you have done differently to have prevented this debacle and tragedy actually? Mr. Harlan Waksal. Well, it is a tragedy, and I think most importantly one point that seems to be left out, and we talk about certain documentation, and one point that is left out is the response rates in these patients, and the response rates, which is really critical. And it wasn't survival, but other drugs have been indeed approved based on response rates, including irinotecan. Survival data came later that these types of effects that we are seeing in patients were remarkable, and we tried to give some testimonials. In fact, there is a patient here today, Amy Cohen, who again has been treated with this drug, and who had benefit, and I think that the most important thing that we did wrong--we are a small company, and we didn't have the resources to do some of the quality checks that needed to be done. We worked with outside groups, and clinical research organizations to do that work with us and for us. Unfortunately that is where the errors took place, in the quality and making sure that quality was intact. And we are working now continuously to reconstruct this to the best of our ability. Mr. Fletcher. Thank you. Mr. Chairman, one thing I would just recommend. If we have clinical trials that are FDA approved, and they are being conducted, and clinicians are not--in other words, if a company requires to have the kind of oversight to ensure that clinicians are not following the protocol, I think we have got some significant problems here. And I just wanted to add that to my closing. Thank you. Mr. Greenwood. The Chair thanks the gentleman and recognizes the gentlelady from Colorado, Ms. DeGette, for 5 minutes. Ms. DeGette. Dr. Waksal, you said that you have provided testimonials from patients who have been helped by this drug. Would that include the letters that we have received in this committee? Mr. Harlan Waksal. That's correct. Ms. DeGette. And if I understand it, all of the letters that we have received in this committee have been received because the patients are getting the drug under the compassionate-use doctrine, which does not require pre-approval by the FDA; is that correct? Mr. Harlan Waksal. I believe that is correct. I am not sure, but I believe that could be correct. Ms. DeGette. And, Dr. Smaldone, is that your understanding as well, that these patients who have been helped, have been helped under the compassionate-use doctrine, and that in fact for these colorectal cancer patients who have no other help, that your company and ImClone can provide the drug to them without pre-approval by the FDA. Would that be correct? Ms. Smaldone. I am not aware of what testimonials were sent to the committee. I am very sorry. So I really can't comment. Ms. DeGette. Okay. But as far as you know, Erbitux could be provided to colorectal cancer patients without any other alternative under the compassionate-use doctrine. Ms. Smaldone. Under compassionate-use, it can, yes. Ms. DeGette. Thank you. Now, I just have a couple of more questions, Mr. Chairman. I do apologize, but I am going to have to leave to go get on an airplane because of the forest fires in my State, and so I will try to be quick because I want to hear a lot of what the FDA says. As I understand it, Mr. Markison, and also Dr. Smaldone, your company invested $2 billion in ImClone, right, Mr. Markison? Mr. Markison. Well, we invested $1 billion for nearly 20 percent of the company, and then we paid--we structured a transaction that would have us paying another billion dollars for the right to market the product. Ms. DeGette. So that answer would be yes, $2 billion? Mr. Markison. We have not paid the $2 billion. Ms. DeGette. You have paid only $1 billion? Mr. Markison. $1 billion, plus $200 million up front. Ms. DeGette. Thanks. So I would think as a business man that you would want to make sure that there was some efficacy to a drug before you invested $1 billion plus, correct? Mr. Markison. That's correct, ma'am. Ms. DeGette. And, Dr. Smaldone, as I understand it, the due diligence review that was done before this business decision was made was that the patient who had a positive response were the only ones that were looked at, is that correct? Ms. Smaldone. The patients that had a positive response to Erbitux were reevaluated by an outside expert group that we brought in as part of the due diligence, that is correct. Ms. DeGette. And what else was done as part of the due diligence? Ms. Smaldone. We went through extensive evaluation of this product that identified many of the issues that we had talked about, and also evaluated this product and the entire arrangement, including the manufacturing capacity, and there were other things that were looked at as part of this. Ms. DeGette. But in terms of the efficacy of the drug, what else was done aside from this independent review of the 27 patients that had a positive result? Ms. Smaldone. This was discussed internally and externally, and we went to outside experts. It was discussed with many individuals, including individuals that have since come to the company who had been experts in the field at the National Cancer Institute in the U.S. Ms. DeGette. So you didn't recreate any of the critical trials? Ms. Smaldone. We could not recreate any of the critical trials. Those were not possible to do. Ms. DeGette. Those were done in 1999, right? Ms. Smaldone. That was accepted as work done by ImClone, correct. Ms. DeGette. Okay. So when you had your independent experts review, the 27 patients with the positive response, the results went down from 22 percent to 13 percent, correct? Ms. Smaldone. That is correct. Ms. DeGette. And yet based on that, with 27 patients out of a roughly 130 some patients study, 27 patients with a positive response, in your independent review, it went down by 11 percent; from 22 percent to 13 percent. But yet your team felt that was worth a $2 billion commitment for financing? Ms. Smaldone. After everything was said and done, and all the assessments were made in this review, which was essentially doing everything against the drug, and this was the worst case scenario analysis that was done, we believe that this drug had positive potential, and that at the end of the day was an agent that had promise for cancer. And again if you consider a 13 percent response rate with an unmet medical need in a setting where patients have no other alternative, and if this were a family member of anyone of the committees, I would think that this would be seen as something very important. Ms. DeGette. Now, wait a minute. First of all, Dr. Smaldone, if there was no other alternative, they could get the drug under compassionate use, right? I mean, the question that we are asking today is should the FDA approve this drug as a drug to be used by all patients in colorectal cancer, which would mean that you would want to have some kind of--I mean, that's why we do trials, is to make sure that the drugs work. And not just on one patient, but at a high level of percentage, and what I am asking you is a pretty simple question. You felt that 13 percent was adequate. Ms. Smaldone. Not only did we feel, but this was reviewed with many experts, and that was thought to be an important response rate in this particular setting of metastatic colorectal cancer, where really a response rate at this point in time of something of that magnitude is really unheard of. Ms. DeGette. Mr. Chairman, excuse me, but I am out of time. I just want to say, Mr. Chairman, that I think something else for us to look at here is how a company could be so dead sure of the efficacy of a drug to put a commitment of $2 billion in, and then only a few months later come back in January and say, oh, we reexamined the data, and we found it very, very defective. That is a mystery to me. Mr. Greenwood. The Chair recognizes Mr. Stearns of Florida for 5 minutes. Mr. Stearns. Thank you, Mr. Chairman. There was a 1993 article in Barrons, and it talked about some of the loans that you folks made, and it said that ImClone loaned Sam Waksal $70,000 and gave him a miscellaneous cash advance of almost $90,000. And the loans in advance were repaid with interest, but the following year another loan of $117,000 non-interest bearing cash advance was made to him again. And then in the end, 9 months ending December 31, 1992, the company loaned him another $275,000. These loans of course were on top of his salary and bonuses, and made him one of the best paid biotech CEOs. Now, according to Barrons, because of failed business ventures, Waksal needed the money to renovate his apartment, where he featured a collection of modern art and ancient relics. And when Barrons raised the question of the issue of borrowing, your chairman, Robert Goldhammer, disclosed a new no loan policy. He said the money is paid back, and would not be loaned to him again. So it is a historical event, rather than an ongoing one. But according to the SEC's filings, your company continues to make personal loans, and no interest cash advances to Sam Waksal over the last several years. So the question is are you continuing to make loans, and did Mr. Goldhammer not tell the truth about his no loan policy, or did you change it again, and what is the policy today? Mr. Harlan Waksal. Well, I can speak about the policy today, and I think it is critical for you to know that the company has appropriate governance in place that loans to officers will not be made. There are certain circumstances that will allow monies to be--promissory notes to be given. For example, stock option types of exercises, which is part of the stock option plan, as long as one can support the ability to pay it back. Mr. Stearns. Well, Barrons is talking about the personal loans, and it was said back in 1992 that we will not do this any more the chairman said, and so now you are saying that it is a policy now of no personal loans; is that what you are saying today? Mr. Harlan Waksal. As the president of the company, I am telling you that there will not be further loans to officers of this company. Mr. Stearns. Okay. But you understand that they were done in the past, even after Mr. Goldhammer said that we won't do it any more. Isn't that true? Mr. Harlan Waksal. I don't know the context of the interview, but I do know that loans were given after that comment was made. Mr. Stearns. Okay. At the time that you and your brother granted millions of more options in 1999, weren't you and your brother trying to sell the company? Mr. Harlan Waksal. Many times during the course of this company, in 1998, 1999, 2000, we met with a variety of companies, and entertained possibilities of ventures, including mergers and acquisitions. Mr. Stearns. Okay. At the time that ImClone accelerated the vesting of these options so that they would vest if the stock price climbed, wasn't ImClone trying to sell a majority equity interest in publicizing its attempt to get FDA approval? Mr. Harlan Waksal. Well, no, sir. Actually, the stock options that were granted, the stock option itself was one that was triggered by increases in stock prices. The incentive was based on an increase in stock price. The company at the time was having discussions, and it wasn't as if we were---- Mr. Stearns. Did you change the policy? I don't think in the original policy it was set up that way? Mr. Harlan Waksal. Not to my knowledge. Mr. Stearns. Okay. At the time that you and other ImClone insiders got millions of dollars in loans from ImClone in mid- July, weren't you deep in negotiations over the tender offer with Bristol, and it was clear that the premium price for shares tendered would be $70 when it was trading at $50? Mr. Harlan Waksal. We had a discussion on this earlier, and indeed, as I pointed out, my exercise of the stock at that time was based on my belief and faith in the company. I was able to tender into that offer with a conditional-- with just using my stock options. I didn't need to exercise those stocks. In fact, one that did was it raised money for the company because the monies weren't borrowed. Although I had a promissory note, they were repaid to the company. And what it did was increase my position in the company, which I still hold today, quite considerably. Mr. Stearns. Were other shareholders aware, and did they have the opportunity to get loans? Mr. Harlan Waksal. Shareholders, or people with stock option plans? Mr. Stearns. Either one. Mr. Harlan Waksal. It is a part of the stock option plan, yes. It is a standard part of our stock option plan. Mr. Stearns. But the shareholders could not get these loans that you and your brother could get? Mr. Harlan Waksal. Well, shareholders don't have stock options, sir. These are stock options. Mr. Stearns. But the point is that you were able to get these loans and the shareholders were not, right? Mr. Harlan Waksal. It was a promissory note. We didn't get cash from the company. We owed the company money, and it was an exercise of those options. And, yes, that is not something that the shareholders can do unless they would have stock options in the company. Mr. Stearns. Now, when you get these promissory notes, did you sign them personally? Mr. Harlan Waksal. Yes, I did. Mr. Stearns. And what did you put up for collateral? Mr. Harlan Waksal. What I had to represent to the company was my stock, and the stock---- Mr. Stearns. You put up stock for collateral? Mr. Harlan Waksal. There was no stock transfer to the company, but I demonstrated to the company where the stock was, and that it was unencumbered. Mr. Stearns. Because if I go to the bank, I have to put up either collateral or I have to sign personally? Mr. Harlan Waksal. I signed personally and I needed to show to outside counsel, as well as counsel of the company, my ability to use my stock to repay that loan. Mr. Stearns. So the collateral was the stock? Mr. Harlan Waksal. Yes, it was. Mr. Stearns. On a promise that it would go to X, Y, Z? Mr. Harlan Waksal. No, sir, it was on no promise of anything. This was a non-recourse promissory note. They could ask for it back and it had nothing to do with stock price. In fact, if I had chosen at the time to go out and to sell my stock, at where it was trading at $42 a share, I could have done so. Mr. Stearns. And this is the last question, Mr. Chairman, and I will let you go. Is the advantage of a tender offer that it allows the largest shareholders to sell massive amounts of stock in 1 day without the disruption caused by day to day selling to work off a block of shares? Mr. Harlan Waksal. No, I don't believe that at all. I think the benefit of a tender offer is to make sure that all shareholders can equally participate if they choose to in an opportunity to divest whatever percentage of shares that would be. Mr. Greenwood. The Chair thanks the gentleman. We are just about to dismiss you, and I have one quick line of questioning for Mr. Waksal, and I would have preferred to ask these questions of your brother were he willing to testify. Do you have the same secretary that he had when you took over as CEO? Do you have the same secretary as your brother had on at least the 27th of December? Mr. Harlan Waksal. I have a different administrative assistant. However, the administrative assistants are now part of a corporate office that I have established to administer to the other senior people in the company. Mr. Greenwood. I think you have in front of you a phone log from December 27, and of course the committee has been interested, as the SEC has, and others, in who knew what that might have been inside information. And this shows--and I am just looking at some of the names and some of the messages that might have had something to do with the selling of shares. Carl Icon called at 11:05. A Mr. Weissbroad--do you know who Mr. Weissbroad is? Mr. Harlan Waksal. Yes, I do. Mr. Greenwood. Who is he, sir? Mr. Harlan Waksal. I believe he is a fund manager. Mr. Greenwood. Okay. He called regarding shares. Bob Cicuchi; do you know who he is, sir? Mr. Harlan Waksal. I do not. Mr. Greenwood. Okay. Martha Stewart. Something is going on with ImClone, and she wants to know what. She is on her way to Mexico, and staying at Las Ventanas. Jarrett, and I assume that is Jarrett Posner, a son-in-law of Sam, called. Mr. Harlan Waksal. That's correct. Mr. Greenwood. Do you know from discussions with the person who made this phone log, or by any other means, whether Sam conveyed information back to any of these folks about the status of the company with regard to their refusal to file a letter? Mr. Harlan Waksal. I have no information regarding that. Mr. Greenwood. Okay. And you have not learned from an administrative assistant or secretary, and whether any of these calls were returned? Mr. Harlan Waksal. I have not. The only information that I have heard is what has been really in the press, and otherwise, I am not familiar with any calls being returned or the kind of calls. Mr. Greenwood. Was your brother, Sam, in the office that day? Mr. Harlan Waksal. I believe so, but I would have to tell you that I was in Colorado at that time, and so I can't tell you absolutely. Mr. Greenwood. Well, did you speak with your brother on that day? Mr. Harlan Waksal. I did. Mr. Greenwood. And where was he when you spoke to him, or where did you reach him? Mr. Harlan Waksal. I don't remember. I just don't remember if I called him or me. It could have very well been at the office, or on his cell phone. I just don't recall. Mr. Greenwood. Okay. And you were in contact with other company officials that day in the office. You called the office and talked to other folks at ImClone? Mr. Harlan Waksal. We had a conference call that morning and certainly we were in discussions during that time, yes, sir. Mr. Greenwood. But you have no way of knowing whether any of these phone calls were returned by Sam or by anyone else? Mr. Harlan Waksal. I would have no way of knowing that. Mr. Greenwood. I thank you, Mr. Waksal, and I thank you, Dr. Lee, and thank you, Mr. Markison, and thank you, Dr. Smaldone. Mr. Stearns. Mr. Chairman, I think there has been some requests to put some documents in the record. Just so the record is clear, I had asked about the BMS memo of January 11, 2002. We have a copy here, and I would ask that this copy in its entirety be placed in the record. Mr. Greenwood. Without objection, the document will be placed in the record. [The information referred to follows:] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] Mr. Stearns. Thank you, Mr. Chairman. Mr. Greenwood. The Chair thanks the witnesses for their patience, and calls our third and final panel, consisting of Dr. Patricia Keegan, Deputy Division Director, Center for Biologics Evaluation and Research at the Office of Therapeutic Research and Review, Division of Clinical Trials Design and Analysis, at the U.S. Food and Drug Administration; Dr. Richard Pazdur, Director of the Division of Oncology Drug Products, Office of Drug Evaluation, Center for Drug Evaluation and Research, at the FDA; Dr. Lee H. Pai-Scherf, M.D., Medical Officer, Clinical Reviewer, Center for Biologics Evaluation and Research, Office of Therapeutic Research and Review, Division of Clinical Trials Design and Analysis, Oncology Branch, FDA; Dr. George Mills, Acting Chief, Team Leader, Center for Biologics Evaluation and Research, Office of Therapeutic Research and Review, Division of Clinical Trials Design and Analysis, Oncology Branch, FDA; and Dr. Susan Jerian, M.D., Medical Officer, Team Leader, Center for Biologics Evaluation and Research, at FDA. Thank you all for your presence, and I thank you all for your forbearance and patience. You are aware that this is an investigative hearing, and that it is the practice of this subcommittee when holding such hearings to take testimony under oath. Do any of you object to giving your testimony under oath? [No response.] Mr. Greenwood. You are also aware that you are entitled pursuant to the rules of the House and this committee to be represented by counsel. Do any of you wish to be represented by counsel? Mr. Pazdur. Yes. I have my personal lawyer, Stephen Lieberman. Mr. Greenwood. Stephen Lieberman is with you? Mr. Pazdur. Yes. Mr. Greenwood. Very well. Anyone else? Yes, Dr. Keegan? Ms. Keegan. I am represented by the FDA General Counsel. Mr. Greenwood. You are represented by the FDA General Counsel? Ms. Keegan. Yes. Mr. Greenwood. Dr. Jerian. Ms. Jerian. I am represented by the FDA General Counsel. Mr. Greenwood. Okay. Anyone else? Mr. Mills. Dr. Mills, FDA General Counsel. Mr. Greenwood. And could you name the General Counsel for us that is representing all of you? Ms. Keegan. Michael Landa. Mr. Greenwood. The Chair would note that each of you is here under subpoena. The Chair would also note that it what we call a friendly subpoena, and that we felt that it was important to issue to protect any legal concerns that might come from your rules and regulations with regard to confidentiality. Would you please all rise and raise your right hand. [Witnesses sworn.] Mr. Greenwood. Okay. Thank you. And you may be seated, and I understand that you have chosen not to have opening statements, but are here to respond to our questions, and we thank you for that. TESTIMONY OF PATRICIA KEEGAN, DEPUTY DIVISION DIRECTOR, CENTER FOR BIOLOGICS EVALUATION AND RESEARCH, OFFICE OF THERAPEUTICS RESEARCH AND REVIEW, DIVISION OF CLINICAL TRIAL DESIGN AND ANALYSIS, U.S. FOOD AND DRUG ADMINISTRATION; ACCOMPANIED BY RICHARD PAZDUR, DIRECTOR, DIVISION OF ONCOLOGY DRUG PRODUCTS, OFFICE OF DRUG EVALUATION I, CENTER FOR DRUG EVALUATION AND RESEARCH, U.S. FOOD AND DRUG ADMINISTRATION; LEE H. PAI-SCHERF, MEDICAL OFFICER, CLINICAL REVIEWER, CENTER FOR BIOLOGICS EVALUATION AND RESEARCH, OFFICE OF THERAPEUTICS RESEARCH AND REVIEW, DIVISION OF CLINICAL TRIAL DESIGN AND ANALYSIS, ONCOLOGY BRANCH, U.S. FOOD AND DRUG ADMINISTRATION; GEORGE Q. MILLS, ACTING CHIEF, TEAM LEADER, CENTER FOR BIOLOGICS EVALUATION AND RESEARCH, OFFICE OF THERAPEUTICS RESEARCH AND REVIEW, DIVISION OF CLINICAL TRIAL DESIGN AND ANALYSIS, ONCOLOGY BRANCH, U.S. FOOD AND DRUG ADMINISTRATION; AND SUSAN M. JERIAN, MEDICAL OFFICER, TEAM LEADER, CENTER FOR BIOLOGICS EVALUATION AND RESEARCH, DIVISION OF CLINICAL TRIAL DESIGN AND ANALYSIS, ONCOLOGY BRANCH, U.S. FOOD AND DRUG ADMINISTRATION Mr. Greenwood. And let me begin---- Ms. Keegan. Mr. Chairman, we were wondering if you would be interested in having us present, or having myself present, some background on the FDA chronology of this application as it might streamline your questioning. Mr. Greenwood. Sure. If you are prepared to do that, that would be most helpful, please. You are recognized. Ms. Keegan. I am Dr. Patricia Keegan. I wanted to say that the application, the IND, for ImClone's Erbitux, was filed in 1994, and that the IND application was filed in order to conduct clinical studies in humans in the United States with the FDA. A number of studies have been submitted to that IND, and in the late spring of 2000, ImClone contacted us to talk and to request that we have a meeting to talk about what they thought were some very promising results with a Phase II study that has been submitted to that IND, and the study conducted in 1999 as you have heard. We agreed to meet and talk about the results of that study, and we met with the company in August of 2000. The discussion at that time was centered on whether or not the promising results that were being reported to us, which was a response rate of about 20 percent in patients with metastatic colorectal cancer, with no available therapy, might be sufficiently promising to warrant consideration for an accelerated approval based on that end point of that observation of tumor response or tumor shrinkage. We discussed at that meeting the adequacy of the trial itself, and I would say that we concur with the statements made by Dr. Waksal that that trial was not intended either by ImClone or ourselves to be a registration or a major efficacy trial. And the specific design elements of that trial had not been evaluated critically by the FDA. At the time of the meeting, we sat to discuss whether or not the data, which indeed appeared to be promising based on the report, could be used, or some portion of the study results could be used. Also, what the limitations of that data were and what additional information that the FDA might need to consider whether or not there might be enough data to submit an application. The critical elements of that protocol that we looked at were that a significant proportion of the patients, close to 90 percent, were purported to have had tumor growth, progressive disease, while receiving irinotecan therapy. We understood at the time that there was progressive disease in the face of at least two cycles of irinotecan therapy so that the patients had an adequate amount of drug in order to determine whether or not their tumor would shrink or would grow. In addition, patients whose tumors had not shrunk on irinotecan that were enrolled in the study went on to receive not only Erbitux, but irinotecan at the same dose and schedule that they had received earlier. These design elements were critical in our considerations because we felt that they were necessary to determine whether or not the results that were being observed might be attributed to Erbitux, the addition of Erbitux, or whether we could not discern that. And it was on that basis that we felt that the design might be adequate to assess whether the addition of Erbitux was causing tumor shrinkage. We also recognized that the design was not adequate to identify other aspects that were important here. And the other aspect was whether or not irinotecan was contributing to that effect. At the meeting, we discussed ImClone's perceptions of their drug and how they felt that it worked. Specifically, that Erbitux would not act alone, but would only act in collaboration with a chemotherapy drug such as irinotecan. And in fact the way that Erbitux worked was to overcome the tumor resistance to that prior therapy, the irinotecan, in this case. And that was the way in which it was effective. We have asked where the data to support that statement might exist. And the response that we received was that it was based upon prior other studies conducted in human beings, and animal studies that were conducted. And that that data resided currently in the application as of August 2000. Based on those discussions, we informed the company that we thought that there might be reasonable promise to go forward and pursue discussions of a license application. Subsequent to that time, we conducted an extensive review of the information in the file, and we reached a different conclusion from that provided by ImClone, which was that we did not think that the information currently in the file showed that Erbitux would not be active by itself. Our conclusion was that there was insufficient information to judge whether it would work alone or not, and that the only way to address that was to conduct an additional trial. In January of 2001, we conveyed to the company, both by letter and in a subsequent telephone conversation, that we disagreed with their assessment of the data in the file, and that they needed to conduct another study. The representatives of ImClone did in fact begin another study that was begun in April of 2001, and that study was considered critical to provide a critical piece of evidence for the license application that they were intending to file. That is the study that I think some refer to as 0141. And in June of 2001, the initial portions of the license application were filed and submitted to the FDA, and the last portion of that application, which was the clinical study data, was submitted in October 2001 as you have heard. And I think the rest is obvious to the committee that upon review of that information, we felt that there were multiple deficiencies in the application, primarily arising not only from the inconsistencies and defects in the data and missing data, but also issues with regards to the conduct of the clinical trial. Mr. Greenwood. Thank you. Dr. Keegan, why don't I start my questioning with you, and I would ask anyone else if you feel that you can add to her response, please do, or maybe you feel it is more appropriate to respond. According to an October 12, 2001 e-mail from BMS chief scientific officer Peter Ringros to other BMS executives, Bristol-Myers Squibb executives, which reads, ``I just had Sam Waksal on the phone regarding the single agent data. Apparently, it came out at 13 percent, which he feels is half the C225, plus CPT-11, data. They have informed the FDA, who were pleased, and confirmed that they would be on for the February 28 ODAC,'' which is the Oncological Drug Advisory Committee. ``He reckons that they will be on the market by March. I am planning to meet with Sam in New York the week after next.'' Did any of you ever get contacted by ImClone about the results of the study testing Erbitux alone before ImClone completed its application submission on October 31, 2001? Ms. Keegan. I don't believe I can recall any contacts regarding that before the end of the submission. Mr. Greenwood. Anyone else? [No response.] Mr. Greenwood. Okay. Did any of you ever inform anyone at ImClone that they would be on the agenda for a February 2002 ODAC meeting? Ms. Keegan. I did not. Mr. Greenwood. Anyone else? [No response.] Mr. Greenwood. Dr. Pazdur, the FDA announced as the protocol design of the ImClone 9923 is seriously flawed, not adequate, or well controlled. Are you familiar with the protocol design? Mr. Pazdur. That was the original protocol that had irinotecan, plus CPT-11, plus Erbitux, correct? The original study? Mr. Greenwood. Yes. Mr. Pazdur. Yes, I believe--you are asking for my opinion regarding that trial? Mr. Greenwood. Yes. Mr. Pazdur. I believe that trial was a flawed trial for a registration trial. It really never answered the question do you need irinotecan with Erbitux, and that is a critical question to be answered here. The whole development of this drug, I think, was one of very--it put the drug in very serious regulatory jeopardy, and violated several principles of medical oncology. First of all, a heavy reliance on pre-clinical activity and pre-clinical design is based on animals models. We know that animal models can give us an inclining or a suggestion of where to go. But to conduct a whole development plan and a sole development plan on an animal model is a very risky venture. Second, they are asking patients to continue a drug, irinotecan, after they have progressed, or after their tumors have gotten larger on this. This violates every principle that I know of in medical oncology, and in order to do that, you better have very good evidence that that is the thing to do here before you just go ahead and do it. The drug, irinotecan, is a fairly toxic drug, and in the original registration trials for that drug, there were at least a 3 to 5 percent death, as well as a 20 percent hospitalization rate for toxicity related to irinotecan. Again, if you are using this drug in a relatively unconventional study after the tumors have grown, it again points to the need to have adequate confirmation that this is a thing to do. The way that this drug should have been developed is in a randomized trial. If they really believed that you needed the combination, they needed to do a randomized trial, which is being done now, looking at irinotecan, plus their drug, plus Erbitux alone. That would be the correct way of developing this drug. Mr. Greenwood. Well, did the FDA share that information or make that suggestion to ImClone? Did you say to them--I mean-- -- Mr. Pazdur. Could I say just one thing? Mr. Greenwood. Please. Mr. Pazdur. I am not a member of the review team, and I am from a different center here, although my expertise is in colorectal cancer. Mr. Greenwood. Okay. What Dr. Pazdur just said was pretty damming information. He said that this is a risky venture, and he said that if you really want to get this drug approved, you should have developed a randomized trial. That is language that even I can understand. Did the FDA--do you agree with Dr. Pazdur, and if you do, is that a recommendation that the FDA shared with ImClone at any time in this long tortured history? Ms. Keegan. What I would say is that the company believed based on data which we didn't find as compelling as they obviously did, that this drug would not be active on its own. And if one truly believed that to embark on a large randomized controlled trial, might not be in the best interests of patients who got the Erbitux by itself, because one would enter it with the presumption that none of those patients would respond, and I think we would all find that to be a disturbing way to develop the drug if one was truly convinced by the data. We did not find that data compelling, but we actually reviewed that data after the fact, after the Phase II study was completed. Based upon that, we recommended that a randomized study be performed. The company was persistent in their belief that Erbitux is not going to be an active agent, or would not have been an active agent when give alone. And they requested permission to conduct a small study in which the premise, the hypothesis, was that no patient would respond. And if they showed that in a relatively small number of patients, it could stop the exposure to patients of what they felt would be an ineffective therapy. We recognized that could have been a risky approach because their premise could have been wrong, and in fact it turned out we believe to be wrong, although I would have to say we have not yet verified any of the data even in the single-agent study. Mr. Greenwood. Given the limited time we have, I had two more questions of a very general nature. Where did this company go wrong? Where did ImClone make its gravest errors? Because what strikes every one of us is that there is this enormous gap between the buzz on this drug. This is attracting capital by the hundreds of millions, and this was attracting a company with the prestige of Bristol-Myers Squibb, and they put $2 billion on the table. This was a drug that was touted as the wonder drug or perhaps the best drug ever developed for cancer, and on, and on, and on, with highfalutin buzz on this drug, and yet as we have sat here all day long, what we have seen is a risky venture. What we have seen is a dearth of information or we have seen lots of sizzle, but not a lot of steak here. So that is what this hearing is all about. How could such a disparity between the promise made to the patients about this drug, and the promise made to the investors, could have existed when in fact just last December this was a fizzling dud? Ms. Keegan. Well, I think there is sometimes a discrepancy between the promise as it may sound to outsiders, and to an oncologist, who would actually find a response rate of 20 percent in patients with no available therapy for colorectal cancer to actually be something of significance clinically and medically. So if that were in fact the case, I think we would find that probably compelling and that was why we were willing to listen to the company in August 2001 and when we pursued this. One of the major deficiencies that I see was in the conduct of the clinical trial, and in the oversight of the clinical trial, and in ensuring that the investigators followed the clinical trial, and that the data that the protocol required to be collected, was collected, and that the records were available for review. I think that was one major deficiency. And as Bristol-Myers Squibb said earlier, that was a basic expectation of Bristol, and that was a basic expectation of the FDA that that would have been done. We did not even discuss that issue. We presumed that it had occurred, and it did not, and I think that is a significant failing that none of us anticipated. Mr. Greenwood. And to what would you attribute that? The thing that is remarkable about this is that if you tell the world that you have in your possession the Holy Grail of cancer treatment, and then when it comes to the conduct of the clinical trials, you have this half-hazard conduct, the two--I can't get these two things to compute. How could that happen? Dr. Pazdur. Mr. Pazdur. It is called good drug, bad development plan, and there is nothing that we can do about that at the present time. For example, we may have a meeting with the company, and talk to them about a development plan, and they could walk out of this office and do another development plan if they wish. I cannot take a gun to somebody's head basically and say you must do what I say here. Nor do I have any recourse to publicly address that issue. Mr. Greenwood. One final question. When the FDA approves of a drug, it is very, very prescriptive in what you may and may not say about the efficacy of that drug, very, very prescriptive. Very complicated labels as to the claims that may be made. In the period prior to approval of a drug, or prior to the refusal to file a letter of disapproval, it seems that the company can say just about anything. I mean, it seems that the company has this tremendous latitude to say this drug will enable you to fly to the moon and back. The FDA has some pre-market jurisdiction with regard to such claims, and so could someone help me here with again the discrepancy between--what I am wondering is does the FDA need more power to rein some of these companies in, because a phenomena in which a company pumps up its potentiality to draw investor capital dollars, and to draw in big players in mergers and acquisitions, and so forth, they have tremendous power to do that. And regardless of whether what they have is really going to do what it says, and very few investors are going to be able to understand the complexities of a cancer treatment. So is there a problem here that the FDA needs to have a little bit more regulatory ability with regard to the claims that companies can make while their product is pending? Ms. Keegan. What I would say is that we actually do have the ability if we believe that somebody is clearly making false and misleading statements. But what we don't have are the resources and the staff to continually monitor for this. Mr. Greenwood. Well, someone said that some of the FDA staff were cringing as they were watching 60 Minutes, and so forth. Were any of you among the cringers watching 60 Minutes? Ms. Keegan. My personal recollection of that 60 Minutes was very much like Dr. Waksal's, which is the focus of that meeting was really on access for patients, and how that was not equitable. I don't recall a lot about things that made me cringe in that. Mr. Greenwood. But what you have said is that if you had more resources and personnel that you could do a better job of perhaps making certain that the claims that are made about pending drugs and other products are reasonably close to accurate? Ms. Keegan. Yes. That is actually done by a different group. I mean, our particular staff are medical officers, and that is not our function. But if there was better resources in order to monitor, I don't think we have a systematic program for doing that. We usually are reactive in that sense if somebody brings a particular claim, or a particular egregious statement to our attention. Mr. Greenwood. Thank you. Mr. Pazdur. Here again, most of these are made--most of DDMAC, which handles the advertising, and looks over advertising of drugs, okay? These claims of pre-approval are usually press releases, et cetera. And which I am not quite sure how much DDMAC gets into. But we have really no regulatory authority over, I don't believe, of press releases after a meeting with the FDA. For example, where we could have a very contentious meeting, and this is not uncommon that our medical officers then pull something off Reuters News or something like that, that says that the meeting with the FDA was a very fruitful and productive meeting, which is exactly the opposite of what it was. And we have no way to basically counteract that in essence. Mr. Greenwood. The Chair recognizes the gentleman from Michigan, Mr. Stupak. Mr. Stupak. Thank you, Mr. Chairman. But doesn't the FDA get concerned when as in Business Week, the first question I asked today, that this drug was the furthest along of a handful of new cancer treatments that precisely home in on a growth signal found in up to 50 percent of all cancer types? Isn't that an over-hype of the statement? Ms. Keegan. I am not certain that it is. It is the one for which we have had a pre-BLA meeting the earliest, and it does work against the growth factor receptors. So I am not certain what about that statement that you find particularly disturbing. Mr. Stupak. Well, in the cancers that we have heard about thus far today is colorectal, and I think there might have been some renal, and there was some questions about neck cancer. There is more than six times of cancer isn't there? Ms. Keegan. That's correct. The epidural growth factor receptor that Erbitux reacts with, and that other drugs are working on, are found on a variety of solid tumors. Mr. Stupak. So 50 percent would be a rather misleading statement would it not? Ms. Keegan. I think that is where that comes from, yes. Mr. Stupak. So even though you were in the process of doing an accelerated statement, you didn't think the FDA as a public health agency had a right to comment on this? Ms. Keegan. I am not sure that I am finding it to be as problematic as you are. Mr. Stupak. Well, maybe we see it as problematic of all the investors, of all the patients, and all their family members who were basically led down the road on this miracle drug that is going to cure up to 50 percent of the growth in cancer tumors in the United States. In fact, after the USA Today article ran, they were receiving 400 calls a day. I am sure that the FDA must have received at least one call. I mean, I see that you are laughing, but I don't find that a laughing matter. We are having a hearing because if we are going to have people out there over-hyping their drugs, and the FDA knows that it is not true, and they don't say anything, how does the American people, the investors, large and small, know what the heck is going on here? And when it shoots up into the top 100 drugs of NASDAQ, that is a concern here. And we look to the FDA, at least us up here, and some of us who have been on the committee for a while at O&I, to at least set the record straight when misstatements are being made that not only harm people who have cancer, but also investors, and companies, and individuals who may finally put their faith in there because they are at a very desperate stage in their life, especially those who have cancer. And so I think there is a responsibility here of the lead public health agency in the United States to at least say something, and not just write it off as, oh, well, it is just another hype story. Ms. Keegan. I'm sorry. I smiled because you said you figured that the FDA got at least one phone call, and I am certain that we got way more than one following the publication of that. I completely agree that it is extremely unfortunate when this information is provided and when cancer patient's hopes are raised. I would say that particularly for pre-market applications that we don't always have all the information in hand, and we rely on the investigators who are publishing results, and on the company who are providing summary data to provide accurate information. And we don't always have all the information available to know if every statement being made is true or false, and we certainly don't have the resources to review every statement made about every drug in the pre-market phase and determine its accuracy. Mr. Stupak. We are not asking for every statement or every press release to be reviewed. It's just that in your area of expertise of cancer oncology--I mean, you are looking at a drug here which is the second most prevalent--I'm sorry, a cancer that is the second most prevalent, and probably one of the most deadliest. And I think that there is some responsibility there for the FDA to at least when they see, whether it is 60 Minutes, or USA Today, or Business News, to at least say something to inform the public. After all, it is the public that you are supposed to keep foremost in your mind. Let me ask you this. Fast track. Is it used only for life- threatening drugs, or is it used for drugs where there is an unmet medical need? Ms. Keegan. It should be used for both those conditions; either life-threatening, or serious disease where there is an unmet medical need. Mr. Stupak. And fast track has been around since Congress granted it in 1997. Has any other drugs other than cancer drugs where fast track has been used to get cancer drugs up there? Ms. Keegan. I don't know the history of all the others, but I would guess that there are some other drugs that have been evaluated, and AIDS would certainly fall in that classification. Mr. Stupak. So AIDS would be one of them. Dr. Pazdur, are there any others? Mr. Pazdur. I was just going to say AIDS is the most common one now. Mr. Stupak. And that was the one that really spurred the 1997 amendments to PDUFA? Mr. Pazdur. Yes. Mr. Stupak. All right. There was a pre-meeting of your August 2000 meeting with ImClone, and in the pre-meeting, the primary FDA medical review officer indicated her reservations concerning the 9923 study, and that is Dr. Jerian. Is that you? Ms. Jerian. Yes, that's me. Mr. Stupak. Who is part of this team that met in August of 2000 with ImClone? Ms. Jerian. This the IND Review Team, which would typically consist of the clinical reviewer, the oncology reviewer, often including the supervisors of those reviewers, and the regulatory project manager. And at times also including the product reviewer. Mr. Stupak. So your recommendation that this not be--or at least your reservations, that was shared with everybody was it? Mr. Jerian. I shared my opinion about the request of the sponsor at that meeting. Mr. Stupak. At the meeting? Mr. Jerian. At the pre-meeting. Mr. Stupak. And then you had the meeting of August 11, correct, with ImClone? Mr. Jerian. Yes. Mr. Stupak. And you were there? Ms. Jerian. Yes. Mr. Stupak. Okay. What transpired and did you change your mind about those reservations at this meeting? Ms. Jerian. I did not change my mind. Mr. Stupak. Okay. How then was this allowed to proceed then if you did not change your mind? You are the medical officer, and you are the person who is primarily responsible for overlooking this application, or this request for fast track; is that not correct? Ms. Jerian. I am the primary medical officer, and I report to my supervisors, and my supervising medical officer at that time during the meeting felt that a different approach would be appropriate. Mr. Stupak. Okay. Just one person thought that, your supervisor, or did everyone thing that? Obviously, you didn't, but I mean, did the rest of the people there think that? I guess I am trying to figure out how did this come about? I mean, you are at a meeting, and you have this memo or pre- meeting at which yo decide that they have to go a long way to convince us. And you are in the meeting, and you are the primary medical review officer, and they have not convinced you, but somehow they get this application to go forward. Ms. Jerian. If I am in a meeting with a sponsor, and my supervisor has made a decision, that person is my supervisor, and I defer to them. Mr. Stupak. Okay. So is the decision made upon review of medical or new medical evidence, or just upon hierarchy? Ms. Jerian. I would have to defer to my supervisor to answer that question, because it---- Mr. Stupak. Well, let me put it like this. Was there new medical evidence submitted on August 11, which would change your opinion? Ms. Jerian. In my recollection, there was no new medical evidence based on my review. Mr. Stupak. Well, your supervisor was Dr. Keegan then, right? Ms. Jerian. That's correct. Mr. Stupak. So then, Dr. Keegan, why was the medical review overruled if you will, or the supervisor overruled the decision, or the medical review officer's indications? Ms. Keegan. I would attribute it to a difference of opinion in looking at the information. It was my assessment that a drug that is purported to give an approximately 20 percent response rate in patients with refractory disease was something that should be evaluated further. And we should provide guidance to the company on the kinds of information, and the way they should go about providing evidence to the FDA so that we could consider that and review the data. Mr. Stupak. So before August 11 then, did you review the medical evidence that had been submitted? Ms. Keegan. I did not review the entire file. I reviewed the pre-meeting package, which was provided to us, which was the summary data. Mr. Stupak. And in that pre-meeting documentation, it had Dr. Jerian's recommendation that we not move forward with this, correct? Ms. Keegan. Could you repeat that? Mr. Stupak. Sure. You said that you reviewed the pre- meeting documentation, and you read some of it, and there was a summary, and I expect that would include Dr. Jerian's recommendation that you not move forward with this? Ms. Keegan. Dr. Jerian's recommendations were really verbal. We had a meeting, a discussion, for which there were no minutes kept, and I think the handwritten notes were really her assessment written down, but there was no formal memo written. I think it was just the discussion of the review team. Mr. Stupak. Okay. Well, her memo, and her notes from the meeting, state that ORR, overall response rate, equals 15 percent clinically significant for colorectal track--I'm sorry, for colorectal CPT-11 failure, correct? That is one of her concerns, right? Ms. Keegan. Yes. Mr. Stupak. Is that correct? Ms. Jerian. May I clarify? Mr. Stupak. Sure. Ms. Jerian. I believe what you are reading from, although it would help if I could see the document, are the questions that the sponsor was asking of us. Mr. Stupak. Okay. And then there is another one that says CP02-9923, and that is the protocol that we are talking about, meet accelerated approval criteria in fast track, and then after that it says no. So that would be from your notes, right? Ms. Jerian. Those are from my notes, yes. Mr. Stupak. Okay. So was it the 20 percent then, because the medical review officer was saying 15 percent; and is it the 20 percent that was in that you decided that we should shoot for? Ms. Keegan. Well, actually, it was the precedent that has been set by the approval of the irinotecan, which was approved on an overall response rate of 13 percent. And if 13 percent was sufficient to approve irinotecan, it is hard for me to believe that we should judge a much higher standard for Erbitux. Mr. Stupak. Sure. Irinotecan was a single agent? Ms. Keegan. That's correct. Mr. Stupak. And also demonstrated life expectancy, correct? Ms. Keegan. Not on the original approval. The original approval was based only on response rate information in patients who had failed the available standard therapy. So the setting was very similar in the question being addressed to us. Mr. Stupak. Okay. Well, is it fair to say then that you were mislead on the single agent idea that was put forth? Ms. Keegan. By ImClone? Mr. Stupak. Yes. Ms. Keegan. I felt that when they told me, or when they told the group at the meeting, that the information in the application would satisfy us, that we would find that compelling and convincing, I felt mislead personally. That may be a difference of interpretation. They certainly seemed to very much believe that even after we told them that we didn't concur with that assessment. Mr. Stupak. So you told them that you didn't concur with that, but they insisted that they could prove this to you on this single agent? You have to say yes or no. Ms. Keegan. I'm sorry, yes. They felt that they could. They felt very strongly that--and they represented to us, to the point of saying that they felt that it would be unethical to conduct a single agent study, and that is where we felt we could not agree with that statement, and why we told them they should do a study. Mr. Greenwood. The gentleman's time has expired. The Chair recognizes the gentleman from Kentucky, Dr. Fletcher. Mr. Fletcher. Thank you, Mr. Chairman, and certainly I thank you all for coming. It has been a long day for you, I'm sure. Let me just ask first, and I guess Dr. Keegan, this would be probably addressed to you. But was this the first clinical drug trial or request for approval of a particular agent from ImClone to the FDA? Ms. Keegan. They have a number of studies in development programs in other cancers, and we had been talking about other development programs. But this was their first approach with a completed study sent that they felt might be reasonable to consider for accelerated approval. Mr. Fletcher. Does the FDA, who works with a lot of companies, many like Bristol-Myers Squibb, who had extensive experience with the FDA, and given that, does the FDA have any protocol for new, relatively small, companies that come out to assist them to make sure that they comply with the protocols that they are adequately informed as we go through this process? Ms. Keegan. No. Mr. Fletcher. Do you think that would be helpful? Ms. Keegan. I am sure that it would be helpful to the companies. I am not sure how we would accomplish that given our current resources. Mr. Fletcher. Let me go back. I believe you were here and you heard Dr. Waksal talk about--and I guess you reported that the discipline of the clinical trial was poor. And yet we are dealing with the premier institutions in the United States, and probably the premier in the world, and how does that occur, and have you seen this before? Ms. Keegan. I would say that most protocols have a very low rate of protocol violations, but I have never seen a perfect study. The number of deviations in this protocol was out of the norm in my experience, and it exceeded what we expected certainly. Mr. Fletcher. Dr. Pazdur, do you have any comment on that? Mr. Pazdur. Yes, I do. I have been an investigator for almost 20 years before I joined the FDA at the Anderson Cancer Center, and I have done work in colorectal cancer. The issue here is the supervision that a pharmaceutical company has to give the sites, and there has to be a fairly frequent auditing of the data by qualified auditors either from the company, or from a CRO, a contract research organization. I don't know if this was in place since I was not involved with this study, but it is not just the institutions. There is obviously people that are there and variations in the investigators in any institution. But the overall supervision of a study is the responsibility of the company, and there has to be some type of careful auditing plan. Usually a periodic audit of the data on a monthly, or bi-monthly, quarterly basis, would have caught some of these errors. So they would not have been problematic and this data would not have been submitted in such poor quality shape here. Mr. Fletcher. My understanding is that clinicians do not deviate from requirements based on their best judgment, and that the patient is eligible for the study. Is that a legal requirement? Ms. Keegan. All the investigators who conduct studies under IND sign a statement, a government form, called a 1572, in which they agree to basically conduct the study according to good clinical practices. It is not enumerated in that, but it basically is a statement that they will adhere to their obligations as a clinical investigator. In that sense, it is a legal requirement. I am not certain that every physician who signs that form understands that, but it is a legal requirement, and a form that they are to sign. Mr. Fletcher. Dr. Pazdur, you obviously participated in this. I have been a participant somewhat as a clinician, and more of referring patients, and kind of following them along and training, but we were pretty strict on that, because it is your reputation at stake. And what happened here? Mr. Pazdur. I don't know. I don't know. You are entirely right. When you have a protocol, and it specifies the eligibility criteria, a competent investigator should follow those eligibility criteria. It is not a game of chance here. If it says that a BUN has to be such and such value, then it has to be that value, or less, or greater than a particular value. It is not left up for the judgment of the investigator. Mr. Fletcher. Well, there is one patient here, Patient Number 20635, that received the irinotecan for a certain period of time, and there was no CAT scan to evaluate the response during this period. It indicated that as a matter of fact that the CAT scan report on one cycle of the drug that we are talking about showed that the patient had no metastatic disease at all. And the question is was this a miraculous cure, or was there any metastatic disease at the very beginning, and that is just very troubling. There is something called a special protocol assessment, and---- Mr. Pazdur. But could I just--I think what you are pointing to and getting at is that it is sloppy work. Mr. Fletcher. Well, that's it, and I have the utmost respect for our institutions of health care in this country, even though a company has the inexperience, and that's why I wanted to ask you about this special protocol assessments. Is there a mechanism that when you have a company that may have an excellent product, and some very brilliant minds that have developed something, that as they bring it to the FDA that there is some assurance that there are some special protocol assessments that are done to ensure that they are following this protocol? Because that is in the interests of the patient, and I realize that there is staffing limitations, et cetera. Mr. Pazdur. The special protocol assessment isn't to follow a protocol or to audit it as you are suggesting. What special protocol assessments are, are basically we have a meeting with the company, an end of phase two meeting, where we discuss their pivotal registration trials. Those trials, the written protocol is then sent to the FDA. That protocol is then reviewed in detail. The statistical plan is looked at, and the eligibility plan is looked at. The treatment plan is looked at. They then get a written letter back from the FDA with what the FDA would like to see in the protocol, and what the company would like to see in the protocol. A meeting of minds is had there, and an agreement on a final protocol is established. The meaning of a special protocol assessment then is that the FDA cannot deviate from its agreement with the company on that unless there is an overwhelming new medical discovery that comes along, or new medical situation. So it locks the FDA and the sponsor into an agreement, and that has to be so that the FDA does not have the complaint that we are arbitrary and capricious in our decisions, and in our review, and we said this at one time, and we said something else at another time. It locks us into an agreement. Mr. Fletcher. Let me ask a couple of other questions. One is do you think--I mean, these are patients where we have to understand from a clinical standpoint that you are dealing with patients who have no other hope. So there is a strong desire to give them some hope, and if a clinician sees that this medication--I just came from a patient who had a response to this, and it is promising, certainly there would be a great deal of pressure to make sure that this individual was eligible. You are dealing with real people, and you are dealing with hope where there is no hope. So do you think that influenced the discipline, or the lack of discipline that we see in this study or not? Including the hype about the effectiveness of this drug. Mr. Pazdur. Possibly, but we see that in other areas, and that doesn't account for really sloppiness to be honest, and to really evaluate the situation. There are other mechanisms to avail the patient to therapies, rather than trying to get them in to the protocol in an artificial fashion, and those include a compassionate use program, expanded access program, et cetera. Mr. Fletcher. So that is not an excuse for not complying? Mr. Pazdur. It should not be. Mr. Fletcher. Because actually in the long run from what I understand, you would discredit the trial, which would hurt patients in the future, which is exactly what happened here. Dr. Keegan, let me ask you something. We have this disparity, in the sense that as a trial is being done, a company has the ability to issue press releases and with the result in this situation of producing a lot of enthusiasm about a drug that may be overstated and maybe not. But in this case, you all are setting--and I think the chairman mentioned this, you are there watching this happen, and yet one of the requirements or restrictions on the FDA of speaking up when you see this going on, especially--and, Dr. Jerian, you mentioned that you had some concerns about the clinical trial as it goes on. I mean, are you all restricted from coming out and saying anything? What kind of restrictions do the regulations have? I know that there is some proprietary information that you have that you can't disclose, but what are the restrictions on you all speaking up as you see this disparity of a lot of hype that went on in the ImClone situation? And do you have a protocol on that? I mean, how do you all deal with this? Ms. Keegan. I don't know that we have an absolute standing operating procedure that is written. If we were to see something very disturbing in the Center for Biologics, because we have a slightly different administrative structure, we would refer our concerns to the advertising and promotional labeling branch, and say we have some concerns about this. And to the extent that we have in our hands the facts and can document that the statements are untrue, and the statements are very egregious, it is possible that the advertising and promotional labeling branch could write some sort of letter to the sponsor indicating which statements we object to and which we think are false and misleading. I think we are often hampered in the pre-marketing setting by, one, not actually having the facts and the raw data, and not being able to tell how far off the mark they are, and the others might be ones of semantics. If someone says interesting, it is hard to say that is a misleading statement. Mr. Fletcher. In this situation, and I know that the August meeting of 2000 requested fast track, and you felt like the trial was adequate at that time given the fact of a 23 percent response. You didn't feel like a randomized trial was necessary at that time because you didn't want to deprive patients from the medication, and we can understand all of that. But as things started to unfold did you all become more skeptical of this, and if you did, how much communication was there where you picked up the phone and said, Sam, I think you all are overselling this thing, and you might want to back off? Ms. Keegan. I would say that I think that a reviewer, or an individual could feel that they could make those statements to a sponsor, but that would not carry the same weight as coming to--as a letter or some other action. However, I think again that the situation was in somewhat a state of flux at the time, particularly during the review as we were just becoming aware of some of these. And I think that we have spent our focus on assessing the application and not on monitoring the statements that were being made publicly. At least I would say for myself that I really don't on a regular basis review the press releases and the clippings, because I have other things that occupy my time. Mr. Fletcher. Mr. Chairman, I certainly appreciate the opportunity. Thank you very much, and thank you all. Mr. Greenwood. The Chair thanks the gentleman. Dr. Mills, when did you come to the realization that the deficiency in the ImClone application were too great and that a refusal to file letter would be necessary? Mr. Mills. At the standpoint that there were a number of points, where we were talking with ImClone and discussing elements that we found in the submission which were defective. By November 30, where we had a telecon with ImClone, and discussing some additional elements on that day. At that time, the number of defects that I had discovered with Dr. Lee Pai-Scherf, such that we both came to the conclusion in that telecon that we felt we needed to recommend to our group that it was time to consider a refusal to file. When we had just come out of that telecon, we briefed Dr. Keegan at that time, and we gave her the information. She certainly understood our concerns, and she certainly felt that we needed to provide the documentation to her because we were just coming out of the telecon. In the course of the following week, it was arrived that we were going to refuse to file, based upon that information that we had discovered in the course of the review, and the filing issues. Mr. Greenwood. Did you have a meeting on December 4 with Lilly Lee? Mr. Mills. That is correct. Mr. Greenwood. Okay. Now, you were here for her testimony? Mr. Mills. Yes. Mr. Greenwood. Would you characterize that meeting in terms of the likely, or how you presented to her the likelihood of various outcomes, because it seemed to me that she was saying that what she came out of that meeting with was that, well, we could get a green light, or we could get a red light, or we could get a yellow light. The odds are relatively equal that we could get any of those outcomes. How would you characterize that meeting? Mr. Mills. I characterized it with Dr. Lee very carefully, that there were indeed four options that could occur. I wanted to maintain a very even balance, while I knew that my recommendation and Dr. Pai-Scherf's recommendation to Dr. Keegan a couple of days before was that we should refuse to file it. I also knew that we had not arrived at that decision as a group, and so, I presented to her in the discussion as it came up, would there be a potential that there would be a refusal to file? I went over the four potential options. Mr. Greenwood. Did you tell her that you had recommended to Dr. Keegan that there be a refusal to file? Mr. Mills. No. Mr. Greenwood. Why not? Mr. Mills. From the standpoint that that was an internal communication. I did not feel that it was appropriate. If I told her my recommendation at that time, then that would be disclosing information that was informal at that moment with Dr. Keegan one is the supervisor. Dr. Keegan's decision is what is going to hold the weight. As any of your staff would make staff recommendations from time to time, but you in your situation have to come to that final conclusion. So I would not disclose to her my internal recommendation, which was still based upon developing information. When I am still in the midst of doing the filing review, I may find additional information which may sway me back. At this time, though, I knew that I had that concern, that recommendation, but I wanted to be sure to present to her all of her options, and not to overweigh any of the options because I did not represent the entire organization at that moment. Mr. Greenwood. Did she specifically raise the question or ask the question are we going to get an RTF? Mr. Mills. That is my recollection of that conversation. She did ask that question. Mr. Greenwood. But you did not assign any probability to that? Mr. Mills. No, I did not. I told her and I explained that I could not. That it was the matter of our internal group discussion, and we do have a BLA review committee that is operational here. We also have our own internal organizational structure, a matrix management, where we discuss this and arrive at that type of decision. I, again, reviewed the four options that could occur from this point, but I was careful to maintain an even weight to them because we had not yet arrived at a decision. Mr. Greenwood. When the RTF letter came out, it had four concerns I think raised about the--well, four reasons why the RTF letter was given. Were those reasons shared with her? Were those concerns that eventually found their way to the RTF letter? Mr. Mills. Often---- Mr. Greenwood. Were they shared with Dr. Lilly at that time? Mr. Mills. I want to be sure in terms of what we were sharing at that time, because it was an ongoing process. It is December 4, and we are going to go to December 28. So issues are coming in as we go. There was a stream of communications between Dr. Lee, Dr. Pai-Scherf, and myself over the course leading up to December 4. Most of those issues that I was raising with her related to the review of the CT scans and the independent review. I had carefully documented those and made sure that ImClone was aware of them, and that they were able to give me full input, and to make sure that I was correct in my assessments that these were defects and that they were going to need repair. In each one of those cases that I had raised, we had communications back from Dr. Lee in the documents that we presented to the committee that indeed that she had agreed, and that they were going to need to be repaired. Mr. Greenwood. By December 4 was it clear to you and was it conveyed to Dr. Lee that more studies would be necessary? Mr. Mills. I don't know whether I could determine that more studies would be necessary. But, indeed, it was quite clear that the independent review committee was going to have to be brought back together, and the CT scans were going to have to be reviewed, and that they were going to have to be reassessed---- Mr. Greenwood. I am referring specifically to a single agent study. Mr. Mills. The single agent study had come in and I believe that we actually had the result come in, and while I have heard December 4 throughout, I believe I knew about that result on December 3. But that she was aware of that result, and from the understanding that I had, that that was a remarkable piece of information, inasmuch as it had originally been purported to me that Erbitux alone was not going to show any responses. Mr. Greenwood. And finally in retrospect, and in looking prospectively to future applications, one of the things that is particularly troubling about this matter is that this drug had--that it may still hold great promise; great drug, bad study, as Dr. Pazdur said. Mr. Mills. Yes? Mr. Greenwood. It had such a hard landing, and when a drug has a hard landing like this, and the stock goes into a free fall, and investor confidence crumbles, and patient confidence and hope crumbles, and so forth, could that have been avoided, and should that have been avoided by the FDA at a date like December 4, saying, look, you might have had this conversation with Dr. Lilly. You might had said, look, I am going to tell you something, I have recommended an RTF You may want to--I think that is what is likely to happen. I can't be positive because it is subject to review. But you folks may want to pull back and withdraw your application now, and work on some of these things. And come back with this when you are ready so that your-- because you know when an RTF letter comes out, it is a relatively unusual thing, and you know that the impact that is likely to have on the product with such enormous expectations, and this sudden and hard, and devastating landing for the product. Would it not have been better had you done what I suggested, and that is offered them the opportunity to withdraw their application, and work on it, and come back later to avoid this relatively public embarrassment? Mr. Mills. From the standpoint of the four options that I discussed with her, the fourth option that I was clear to remind her of, that in view of the single agent study, Erbitux alone, the result had just come in, plus the findings to date, which showed a number of things that were going to need to be repaired, and which she agreed to already, that ImClone always has the option to withdraw, and to be able to come back and represent this data. So there were three options that were available to the FDA, in terms of the review, and the fourth option was there with ImClone. While I made sure that the balance was there, it was remarkable for me at that moment in time, half-way through the review cycle for filing purposes, to be able to tell a sponsor that that is a consideration, and you should consider it in view of everything that you know to date, and especially when you decided, as she had, to come down independently that day unannounced prior to an e-mail coming from her on the train that she would like to meet with us, and that she had had that much concern. Mr. Greenwood. Well, I might question whether in fact your presentation should have been so balanced, when in fact the likelihood in your own mind was that those were not equally likely outcomes. Mr. Mills. Well, from that standpoint here, I fully understand your question. Please bear with me, in terms of understanding that I was only halfway through the filing assessment, and I still had to present all of my data and to get confirmation from my organization. I don't think you want, necessarily, a medical reviewer independently deciding to tell any sponsor that their drug should be withdrawn halfway through the filing, necessarily, without full coordination with the rest of the agency. And while I might think that my opinion is the opinion, it is an organization that is a matrix, and there are a number of people who have input. Mr. Greenwood. Well, when the team made the decision the next day to go to the RTF, and then there was nearly 3 weeks, or about 3 weeks went by before they got their letter, you did have the opportunity to assertively contact the company and say I am now not compelled to give you such a balanced review, but to suggest to you strongly that your options have narrowed to two; withdrawal or an RTF. And I would ask the question, Dr. Pazdur, how would your side of the shop have handled it? Mr. Pazdur. I think that you really hit upon a very important point here, and that is that there is a high degree of inconsistency on how the agency communicates with sponsors. And I think that maybe this puts a spotlight on it. And a lot of it has to do with personal preference of the director of the division, for example, and I can't really speak for what goes on in CBER. For a refuse to file, for example, that we had recently, we took a look at the data, and within 1 week we realized that they forgot to collect an important element, the duration of responses. So I called up the sponsor and said no way this is going to make it. I am not going to waste our resources reviewing a document when you know that you have a fatal flaw here. Why don't you withdraw it, and you are going to need a new study. We have meetings before an application comes in and frequently if I realize that there is a fatal flaw in the application, why not address it up front with a sponsor and say don't even bother submitting this. I don't want to waste our review time, our resources. It takes one medical officer on a priority review 6 months basically full-time, and if you already know on a priority that there is a fatal flaw here, why bother going through the mechanics of a review. So I think in essence that there is a high degree of variability from one division to another. For example, even on non-approval letters, with some companies we may call them up once we have reached that decision and say you have the option. Do you want a non-approval letter or do you want to withdraw the application, and here again there is not a consistent approach within the agency dealing with this, and I think it is a very important element that needs to be addressed. Mr. Greenwood. Dr. Keegan, do you want to say something? Ms. Keegan. Yes. I would agree with Dr. Pazdur that if at the time that we met with the company on a particular product that we felt that there was no way that we were going to be able to approve--for example, if we knew that the major end point of the study, that the primary goal of the study had failed, and that they had not shown what they had intended to show, we would tell a company and that we considered this to be a negative study, that they should not file it and they should not even attempt to submit an application. I think the circumstances here are a little bit different, in that some of the flaws only became available to us as we reviewed the application. And there is a difference in approach here. We have not to my knowledge in the Center for Biologics in our office called up the sponsor and said we are going to refuse to file this application. Do you want to withdraw. I think we don't do that for several reasons and I can't speak to all of them because we haven't actually gone through a major discussion, but one consideration would be that such a phone call might to some extent be considered coercive; to call up a company and say do this, and if you don't withdraw, we are sending you this letter. It is a consideration that some people might---- Mr. Greenwood. I don't know. I think if someone said to me that you can step off the scaffold, or we can pull the trap door, I think I would like to exercise my options. The gentleman from Michigan. Mr. Stupak. Well, thank you. Along those lines then, if ImClone had the inclining that they might get an RTF, did they ever call and ask can we withdraw our drug until we submit further documentation? Ms. Keegan. I was never contacted with a request like that. Mr. Stupak. Was anyone? Ms. Keegan. And I don't know of anyone who was. Mr. Stupak. And like the FDA, and instead of them taking the positive approach, or however you want to look at it, the approach that maybe you should withdraw, the company also could have requested a withdrawal before that December 28 RTF came out, correct? Mr. Mills. I had advised them on December 4 that that was their option, and reminded them that is an option that they can exercise. Let met emphasize that on December 12 that we had a follow-up telecon with Bristol-Myers, also on the line at that time, where we went through each of the issues again that we had focused on all of the telecons up to that date to make sure and reconfirm each time. At that time, they were quite aware that these were significant issues, and there were numerous issues, and that they were going to require significant amounts of time to repair. Mr. Stupak. Now, the design of the 9923 protocol, that was ImClone's stage two study, correct? Mr. Mills. Yes. Mr. Stupak. And that was later submitted as a study for this fast track approval, correct? Mr. Mills. Yes. Ms. Keegan. What was requested was the portion of the study that met the criteria that we discussed in the August 11 meeting, the subset of the patients in that study, but not the protocol itself, but some modification of that. Mr. Stupak. Well, the experts, and I think that Dr. Weiss had talked about this, that the protocol for 9923 was really flawed. In fact, they cite another oncologist that stated, and let me quote, that overall this was a protocol that asked the wrong questions, and then is not tightly written and efficient. The protocol generates far more questions than it could ever answer. It is a blue print for the production of vague answers. So the protocol from the very beginning had fatal flaws in it. Ms. Keegan. I would disagree with that. I think that there were issues with the protocol that were problematic, but presented with the results of the study, we didn't consider it to be a fatal flaw, but a protocol that didn't answer every question necessary to review the drug for approval. And that reflects the approach that I recommended that we take. Mr. Stupak. If the protocol was not a fatal flaw, then did you, Dr. Keegan, tell them what they had to do to correct 9923? Ms. Keegan. They couldn't correct the protocol after the fact. What we could do is arrive on a group of patients on whom we could assess the effectiveness, the activity, of Erbitux, and that is how I viewed the August 11, 2000 meeting; to determine whether or not there was a significant population. And we were told approximately 120 patients of the 138 in that study in whom we could assess Erbitux, and we discussed the criteria to be applied for that study, and how we would look at that. Mr. Stupak. And actually when you applied the criteria the 138 went down to 89, which then made it statistically unacceptable, correct? Ms. Keegan. That was an issue with the conduct of the study. If in the conduct of the study data were not correct, that is different from the design, and I would just like to make that distinction. Mr. Stupak. Sure. And on August 11 when you met with ImClone, you not only met with your officials, but you met also with their consultants, right? Ms. Keegan. Yes. Mr. Stupak. And were these consultants of reputable stature within---- Ms. Keegan. Yes. Dr. Saltz was their consultant for their colorectal application. Mr. Stupak. And did that doctor present some of ImClone's positions to you at that time or were they just there? Ms. Keegan. As I recall, he made the presentation of the study results as an investigator on the study 9923. And then other portions of the presentation were made by various additional members. I don't know if Dr. Mills or Dr. Jerian recollect any differently. Ms. Jerian. What I recall of what Dr. Saltz discussed was with what Dr. Keegan mentioned, and in addition when we asked about the issue of single agent use of Erbitux, he expressed the opinion that he felt that it would be unethical to study it as a single agent. Mr. Stupak. And, Dr. Pazdur, you said it is a good drug, bad development plan. Is it a good drug or a good idea behind a drug, and a bad development plan? Mr. Pazdur. Well, you have to understand that when we see activity, tumor shrinkage, in heavily pre-treated patients, that gives us the initial signal that there is something there to further develop. I think that this drug has shown some activity. Mr. Stupak. For shrinkage? Mr. Pazdur. Tumor shrinkage, okay. It's life's story is just beginning basically. What needs to be done is obviously to show that this drug works, and as I stated before, I firmly believe that as it is being done now that you needed a randomized study to show this. Mr. Stupak. To show that it works in what way? Mr. Pazdur. To show that it works with CPT-11. The clue here, or the major crux of the situation is in that original study with CPT-11, plus Erbitux, do you need the CPT-11 or irinotecan. I have no idea. And what their subsequent study, the single agent study, was that in order for that to work, you had to have a zero percent almost in the single agent Erbitux study. So in essence they were betting against their own drug to get the combination approved, which is a very faulty design. And that's why I am saying for a similar study or for a similar drug under development in our center, we have demanded that the sponsor do a randomized study, and work with the sponsor to achieve that, and they did for the exact same indication, a 600 patient study, and answered the question. So can it be done? Yes, it can be done, but you have to make sure basically that the sponsor adheres to the plan, and for the one indication for this drug, we actually had to work with the sponsor very closely in developing the protocol. But I guess to answer your question, Mr. Stupak, what I am saying here is that its initial activity is seen, and once these drugs get approved in a refractory setting, they are used in less advanced disease studies. They are eventually sent into patients that are adjuvant therapy, after surgery and very early staged patients that are at a high risk for a relapse. And that may even save lives of people who are at high risk for having a relapse after surgery. So it is a glimmer of activity that needs to be further developed. Mr. Greenwood. The gentleman's time has expired. The Chair recognizes the gentleman from Kentucky, Mr. Fletcher, for 5 minutes. Mr. Fletcher. Thank you, Mr. Chairman. Let me certainly thank all of you for coming. Dr. Pai-Scherf, you are currently the medical review officer for Erbitux; is that right? Mr. Pai-Scherf. That's correct. Mr. Fletcher. And when did you take that position? Mr. Pai-Scherf. July 15, 2001, the file was transferred to me. Mr. Fletcher. Okay. So you have been through this process quite a bit. Now, as a medical review officer, what are your responsibilities on overseeing this study and the approval process? Mr. Pai-Scherf. My responsibility is to review the clinical portion of the BLA. Mr. Fletcher. Now, do you get ongoing reports back from these studies? In other words, as the data comes through, I guess you don't get all the data at once. Do you begin to get part of it? Mr. Pai-Scherf. The first portion of the clinical studies came in early October, and the final piece came on December 3. So I started my review in early October. Mr. Fletcher. And when did you really begin to see that, hey, there are some problems here, or did you see that there were problems? Mr. Pai-Scherf. In a very early stage of my review, I noticed some problems, and the first one is that we did not have documentation of the CT scan of the patients receiving irinotecan. Mr. Fletcher. So you could not document that they were non- responders? Mr. Pai-Scherf. Yes. Yes, and that was the first piece and a very important piece. Mr. Fletcher. And at what point--well, who did you communicate that to? Mr. Pai-Scherf. With Dr. Lilly Lee. Mr. Fletcher. Dr. Lee with ImClone? Mr. Pai-Scherf. Yes. Mr. Fletcher. And that was reported that, hey, you have got some real documentation. Did they report back to try to get the documentation? Because that certainly looked to have a significant impact on the refusal to file letter. Mr. Pai-Scherf. First she reported that there were 11 patients, and she sent me a table stating that there were 11 patients who were ordered to have a CAT scan, or the physician never ordered, and felt that the patient progressed because of clinical judgment. Mr. Fletcher. And that is not adequate for your study at all. I mean, just a clinician's feeling from clinical judgment that the tumor has progressed is not an adequate data collection; is that right? Mr. Pai-Scherf. Not for a clinical study supporting licensure, no. Mr. Fletcher. Okay. Thank you. In your communication were you at a meeting with Dr. Lee on December 4 when she asked whether the FDA was going to send an RTF letter? Mr. Pai-Scherf. Dr. Lee was clearly concerned about all the issues that we had raised at that point. Mr. Fletcher. Were you at that meeting? Mr. Pai-Scherf. Yes. Mr. Fletcher. And so you were at that meeting. Okay. Mr. Pai-Scherf. And she stated that--she asked us if there would be an RTF. Mr. Fletcher. And what did you say? Mr. Pai-Scherf. Dr. Mills answered the question, and I agreed with what he said. Mr. Fletcher. Well, you had mentioned that earlier, but go ahead. Mr. Mills. From the standpoint again that I offered the four options that were available, three of which were FDA, and one of which was that I offered to ImClone that certainly they could withdraw. Mr. Fletcher. Let me ask a question, and I guess it is--I guess this probably goes to Dr. Keegan, but if somebody else has a responsibility, don't hesitate to answer it. We got testimony earlier from Mr. Bryan Markison that on December 25, of all days, Christmas, that he received a call from someone, and I don't know that we got that individual's name. But he received a call on December 25 that you all were likely--well, not only likely, but that it was going to occur, that an RTF letter would be issued. And the letter that came out, or at least the one that I see, has got stamped on it December 28. Now, what is the protocol here? Who leaked the information, and is that normal to leak the information, or is that okay to leak the information? It had tremendous impact on the executives, and family, friends, and other folks who ended up selling off a whole lot of stock based on that information. Ms. Keegan. Well, as Dr. Pazdur says, we do have the option, and in his center, he will actually inform a sponsor, a commercial firm, that they would refuse to file the application ahead of issuing the letter. There is no prohibition against telling a company that you will refuse to file their application. We did not choose to tell them that definitely before we sent the letter, but there is no prohibition against it. Mr. Fletcher. Given the fact, and I know that your area of expertise is not that of the SEC, or some of the other things, but should there be something? As someone mentioned, there is no standardization of communications to the companies, and Dr. Pazdur, you may have made that statement. Mr. Pazdur. Correct. Mr. Fletcher. Should we have some standardization given the impact of markets, the venture capital that is required in the development of these, and obviously the number of investors involved that were affected tremendously by this December 28 letter, and some who used inside information to make a bundle? Ms. Keegan. Well, I think how someone chooses to use the information is not part of our procedure, and certainly any communication that we would provide, we would expect that the company would use it responsibly, or the individuals who received that. What I would say about standards is that I am not certain. I don't know if it is preferable to companies to be told and to have the opportunity to withdraw. It is certainly something that we could consider. As Dr. Pazdur says, every office within the Center for Drugs, as well as the three review offices within the Center for Biologics, may differ somewhat in terms of how they might approach that, and whether a standardization is preferable or beneficial, I don't know. Mr. Fletcher. Well, let me ask one final or just a few questions. Dr. Pazdur, you mentioned that this is probably a-- well, is this a promising drug? A promising drug class probably, but is it a promising drug? Mr. Pazdur. I think it is. I think it is, and what we have seen here as I have stated before is a good drug, bad development plan. Mr. Fletcher. What is the time line that you think that this randomized study will come out that this may come back and be issued? How soon do you think we can have this drug, if it is good as you feel it is, and obviously Bristol-Myers---- Mr. Pazdur. I am not saying that it is as good as it is. I am just saying that it has the potential. Mr. Fletcher. Well, if it is 13 percent effective, and people have no other hope, and if it is that in some very recalcitrant tumors, think what it is in some less recalcitrant tumors. Mr. Pazdur. You've got it. Mr. Fletcher. I mean, you are able to affect shrinkage in tumors that have been resistant to everything. So that is a tremendous potential. Mr. Pazdur. Yes. Mr. Fletcher. So what is the timeframe that you think---- Mr. Pazdur. I don't know what the current study is. Pat knows as far as the European study. Ms. Keegan. There is a study being conducted by another partner with ImClone, Merck KGA, and they are conducting a registration trial in Europe that is looking at a randomized trial of Erbitux alone, versus Erbitux plus irinotecan. That study has completed accrual, and I don't believe that the data are mature enough to analyze at this point. And I don't know the specific timeframes, but the study was conducted and has been completed, but is not yet ready for submission. Mr. Fletcher. Would that be submitted to the FDA, or would that be approved only in Europe? Ms. Keegan. No, at the time that we met with ImClone after the refusal to file letter in February 2002, we discussed the source of additional data, and they committed to providing the results of the Merck study to the USFDA and Merck committed to do that. Mr. Fletcher. Thank you. Mr. Chairman, I would just like to say in closing that there are several things which I think have been brought to our attention. One is the lack of discipline in this study, even by some of the finest experts in the country, and I think that is shocking. Second, I believe that the lack of standardization in communication is a real problem here, especially given the market impact that it has, and the financial impact that it has on a lot of investors that were caught unaware. And so I appreciate you holding this. I think it has uncovered some very important issues that need further work. Thank you. Mr. Greenwood. The Chair thanks the gentleman for his comments, and also for his attendance and participation in the hearing. I would add to that list of policy issues for us to address, and that I think we need to address the question of making sure that there is some process by which the claims of companies who have applications pending can be reviewed, and if necessary, curtailed, and reined in if in fact those are raising expectations that are significantly beyond the expectations that ought to be raised. Let me clear up just one final piece of information with Dr. Pai-Scherf and Dr. Mills. When Dr. Lilly arrived unannounced or had an unscheduled meeting on December 4, I believe it was her testimony earlier today that she did not initiate the question of are we going to get an RTF letter, and that she just wanted to check on things and see what the options were. I believe that it was both of your testimonies that she did raise that issue. So you are both nodding your heads? Mr. Mills. That is correct. Mr. Greenwood. For the record, since we don't record head nods. Mr. Mills. That's right. That is correct. Mr. Pai-Scherf. That is correct. Mr. Greenwood. Okay. Thank you. Thank you all for your presence and for waiting to testify, and I thank you for the work that you do on behalf of our country. The hearing is adjourned. [Whereupon, at 5:03 p.m., the subcommittee was adjourned.] AN INQUIRY INTO THE IMCLONE CANCER-DRUG STORY ---------- THURSDAY, OCTOBER 10, 2002 House of Representatives, Committee on Energy and Commerce, Subcommittee on Oversight and Investigations, Washington, DC. The subcommittee met, pursuant to notice, at 10:10 a.m., in room 2123, Rayburn House Office Building, Hon. James C. Greenwood (chairman) presiding. Members present: Representatives Greenwood, Stearns, Whitfield, Fletcher, Deutsch, Stupak, Strickland, and DeGette. Staff present: Alan Slobodin, majority counsel; Anthony M. Cooke, majority counsel; Will Carty, legislative clerk; and David Nelson, minority Counsel. Mr. Greenwood. The meeting will come to order. Today the subcommittee continues its inquiry into the ImClone cancer-drug story. The purpose of this hearing is to help this committee, as well as the public, understand the circumstances surrounding the Food and Drug Administration's refusal to file the application for Erbitux, a highly publicized cancer drug developed by ImClone Systems, and how the cancer-drug approval system can be improved. Erbitux initially attracted national attention because it offered new hope for seriously ill colon cancer patients; and because of the premarket publicity about the drug, ImClone's record-setting $2 billion alliance with Bristol-Myers Squibb to market Erbitux, the controversy over the accuracy of ImClone's public descriptions of FDA's concerns in a nonpublic letter and multimillion dollar stock trades by ImClone insiders in the weeks before FDA's negative decision. On June 12, Samuel Waksal, one of the founders of ImClone and its former CEO, was arrested on a Federal criminal complaint for insider tipping, attempted insider trading, and false statements. In its complaint, the Federal Government alleged that members of Samuel Waksal's family had sold about $10 million worth of stock on December 27, 2001, based on tips by Dr. Waksal the day before the FDA's decision. Dr. Samuel Waksal himself allegedly attempted to sell about $5 million worth of ImClone stock by initially gifting the stock to one of his daughters and having her immediately sell it. At the subcommittee's hearing on June 13, we heard testimony from one of the committee's investigators and the committee-retained oncology consultant who reviewed some of the data and documentation from the key study on Erbitux. In addition, Dr. Samuel Waksal appeared and exercised his constitutional right not to testify. We heard testimony from witnesses from ImClone Systems, Bristol-Myers Squibb and the FDA. Some of the key findings from this hearing were that the primary FDA medical reviewer handling the Erbitux matter did not believe that ImClone's key study met the criteria for accelerated approval and fast-track designation. However, at a meeting between FDA and ImClone in August 2000, the senior FDA medical official in effect overruled the primary medical reviewer and said the protocol design was probably acceptable. The senior FDA official testified that she believed she was misled by ImClone about its claim that a human clinical trial showed that Erbitux had no activity when used alone. FDA granted fast-track designation to ImClone's Erbitux based on the wrong version of the protocol for the key study and was made before the agency had the single-agent data on Erbitux. ImClone testified that its officials believed that FDA had accepted the protocol design, that FDA had the correct protocol version and that they were not led to believe that any of the documentation problems and flaws in the studies would actually result in FDA refusing to file the Erbitux application. On December 24, a law firm retained by Bristol-Myers obtained information from an FDA source that confirmed ImClone would receive a refusal-to-file letter. This information in turn was passed to Harlan Waksal, the then chief operating officer at ImClone, on December 25. On December 28, 2001, FDA sent ImClone the refusal-to-file letter on the Erbitux application. In subsequent days, Samuel and Harlan Waksal portrayed the reasons for FDA's refusal-to- file letter as based on a lack of proper documentation. However, excerpts of the refusal-to-file letter appeared in a trade publication that showed that FDA's concerns were more serious than just missing documentation and, in fact, raised serious questions about whether ImClone would have to obtain additional data from other preexisting studies or conduct new studies in order to get approval. The committee's oncology consultant testified that there were serious problems in the key study including high rates of patient ineligibility and waivers. In addition, Bristol-Myers' independent radiology review showed that strict scrutiny of the study data yielded only a response rate of 12.5 percent, less than ImClone's 15 percent goal and much less than the 22.5 percent response rate presented to the public. Testimony from the FDA officials showed inconsistent approaches on drug product applications and interactions with companies between FDA's Center for Biologics and FDA's Center for Drugs. Since the June 13 hearing, there have been a number of major developments reported. On June 19, ImClone Systems received a Wells Notice from the Securities and Exchange Commission that appears to indicate that the SEC staff is considering recommending the Commission bring an action against ImClone relating to the company's disclosure immediately following its receipt of the refusal-to-file letter on December 28. Besides Samuel Waksal and members of his immediate family, other individuals, notably Martha Stewart, have emerged as subjects of investigation for conduct related to trading ImClone stock immediately before the FDA letter was issued. With respect to Ms. Stewart, the committee on September 10 sent a bipartisan letter to the Attorney General requesting his consideration of concerns and information related to statements that Ms. Stewart caused to be made to the committee concerning her trade of ImClone stock. In August, a Federal grand jury in New York indicted Samuel Waksal on 13 felony counts, including obstruction of justice and bank fraud. Dr. Waksal has pleaded not guilty to these charges. A few days later, ImClone Systems sued Samuel Waksal for breach of contract and for breach of fiduciary duty based on the company's belief that Dr. Waksal falsely affirmed that he was cooperating with the Federal investigations. FDA granted accelerated approval to a colon cancer drug called Eloxatin. The approval was noteworthy for two reasons. The drug was finally available in the U.S. after being on the market for years in over 50 countries, and the company gained approval by conducting a three-arm randomized trial in less than 2 years with FDA approving the application in 46 days. An FDA advisory committee recommended approvability for Astra-Zeneca's Iressa based on a 10 percent response rate where the drug was used alone in seriously ill cancer patients who had few, if any, alternatives. These new developments and additional information obtained by the committee provide the subcommittee with reasons to continue this inquiry and discussion with today's witnesses. For example, the committee has learned that ImClone insiders sold $244 million of ImClone stock in the 2 months before the FDA rejection, and the volume of options trading of ImClone on December 27 and December 28 was unusually high. This subcommittee is encouraged by FDA's reorganization, but still has questions about how the FDA envisions improving the approval process for cancer drugs. We will also want to hear the FDA's views on the adequacy of its law and procedures on dealing with misleading premarket statements by industry officials to patients and the investing public about data or events contained in confidential FDA meetings and documents. The subcommittee remains interested in discussing drug approval issues with ImClone, but in addition, this subcommittee will also want to discuss issues bearing on corporate governance. For example, ImClone's legal department told the committee staff that it discovered that Samuel Waksal had forged the signature of ImClone's general counsel in a document certifying Samuel Waksal owned stock warrants that he no longer had. We have also learned that Samuel and Harlan Waksal purchased shredders in January shortly after Sam received a phone call from an SEC investigator. Many aspects of Samuel Waksal's financial problems and past professional record have come to light. We will want to learn what ImClone's board and management knew about these issues, and when and how these decisionmakers responded. As the committee continues its inquiry, the picture comes into sharper focus. The ImClone-Erbitux story is truly a tragedy, particularly for cancer patients and especially those making 400 telephone calls to ImClone daily for compassionate- use access. The evidence shows, in the months leading to the December 2001 rejection, ImClone management spent much of its time nailing down its billion-dollar tender offer with Bristol- Myers, publicizing Erbitux, making millions, but failing to provide the necessary quality control of the clinical package in its application. At the same time, there appears to have been confusion and miscommunication at FDA. Profits before patients and regulatory incoherence is a betrayal of cancer patients and is at odds with the Federal mission of promoting the public health. Through this accounting of what happened at this hearing, it is my sincere hope that this will enhance the public's confidence in the biotechnology industry and the FDA, and produce a more efficient and effective drug approval process. I look forward to hearing from the witnesses and working in a bipartisan fashion with my colleagues to produce a better cancer-drug approval system for patients. The Chair recognizes for purposes of an opening statement the ranking member, the gentleman from Florida, Mr. Deutsch. [The prepared statement of Hon. James C. Greenwood follows: Prepared Statement of Hon. James C. Greenwood, Chairman, Subcommittee on Oversight and Investigations Today the subcommittee continues its inquiry into the ImClone cancer-drug story. The purpose of this hearing is to help this committee as well as the public understand the circumstances surrounding the Food and Drug Administration's (FDA) refusal to file the application for Erbitux, a highly publicized cancer drug developed by ImClone systems, and how the cancer-drug approval system can be improved. Erbitux initially attracted national attention because it offered new hope for seriously ill colon-cancer patients and because of the pre-market publicity about the drug, ImClone's record-setting $2 billion alliance with Bristol-Myers Squibb to market Erbitux, the controversy over the accuracy of ImClone's public descriptions of FDA's concerns in a non-public letter, and multi-million dollar stock trades by ImClone insiders in the weeks before FDA's negative decision. On June 12th, Samuel Waksal, one of the founders of ImClone and its former CEO, was arrested on a federal criminal complaint for insider tipping, attempted insider trading, and false statements. In its complaint, the federal government alleged that members of Samuel Waksal's family had sold about $10 million worth of stock on December 27, 2001 based on tips by Dr. Waksal, the day before the FDA's decision. Dr. Samuel Waksal himself allegedly attempted to sell about $5 million worth of ImClone stock by initially gifting the stock to one of his daughters and having her immediately sell it. At the subcommittee's hearing on June 13th, we heard testimony from one of the committee's investigators and a committee-retained oncology consultant who reviewed some of the data and documentation from the key study on Erbitux. In addition, Dr. Samuel Waksal appeared and exercised his constitutional right not to testify. We heard testimony from witnesses from ImClone systems, Bristol-Myers Squibb, and the FDA. Some of the key findings from this hearing were: --The primary FDA medical reviewer handling the Erbitux matter did not believe that ImClone's key study met the criteria for accelerated approval and fast-track designation. However, at a meeting between FDA and ImClone in August 2000, the senior FDA medical official in effect overruled the primary medical reviewer and said the protocol design was probably acceptable. --The senior FDA official testified that she believed she was misled by ImClone about its claim that a human clinical trial showed that Erbitux had no activity when used alone. --FDA granted fast-track designation to ImClone's Erbitux based on the wrong version of the protocol for the key study and was made before the agency had the single-agent data on Erbitux. --ImClone testified that its officials believed that FDA had accepted the protocol design, that FDA had the correct protocol version, and that they were not led to believe that any of the documentation problems and flaws in the studies would actually result in FDA refusing to file the Erbitux application. --On December 24th, a law firm retained by Bristol-Myers obtained information from an FDA source that confirmed ImClone would receive a refusal-to-file letter. This information in turn was passed to Harlan Waksal, the then chief operating officer at ImClone, on December 25th. --On December 28, 2001, FDA sent ImClone the refusal-to-file letter on the Erbitux application. --In subsequent days, Samuel and Harlan Waksal portrayed the reasons for FDA's refusal-to-file letter as based on lack of proper documentation. However, excerpts of the refusal-to-file letter appeared in a trade publication that showed that FDA's concerns were more serious than just missing documentation and in fact raised serious questions about whether ImClone would have to obtain additional data from other pre-existing studies or conduct new studies in order to get approval. --The committee's oncology consultant testified that there were serious problems in the key study, including high rates of patient ineligibility and waivers. In addition, Bristol-Myers independent radiology review showed that strict scrutiny of the study data yielded only a response rate of 12.5%, less than ImClone's 15% goal and much less than the 22.5% response rate presented to the public. --Testimony from the FDA officials showed inconsistent approaches on drug product applications and interactions with companies between FDA's center for biologics and FDA's center for drugs. Since the June 13th hearing, there have been a number of major developments reported: --On June 19th, ImClone systems received a wells notice from the Securities and Exchange Commission (SEC) that appears to indicate that the SEC staff is considering recommending the commission bring an action against ImClone relating to the company's disclosure immediately following its receipt of the refusal-to-file letter on December 28th. --Besides Samuel Waksal and members of his immediate family, other individuals, notably Martha Stewart, have emerged as subjects of investigation for conduct related to trading of ImClone stock immediately before the FDA letter was issued. With respect to Ms. Stewart, the committee on September 10th sent a bipartisan letter to the attorney general requesting his consideration of concerns and information related to statements that Ms. Stewart caused to be made to the committee concerning her trade of ImClone stock. --In August, a federal grand jury in New York indicted Samuel Waksal on 13 felony counts, including obstruction of justice and bank fraud. Dr. Waksal has pleaded not guilty to these charges. --A few days later, ImClone systems sued Samuel Waksal for breach of contract and for breach of fiduciary duty based on the company's belief that Dr. Waksal falsely affirmed that he was cooperating with the federal investigations. --FDA granted accelerated approval to a colon cancer drug called Eloxatin. The approval was noteworthy for two reasons: the drug was finally available in the U.S. after being on the market for years in over 50 countries and the company gained approval by conducting a three-arm randomized trial in less than 2 years with FDA approving the application in 46 days. --An FDA advisory committee recommended approvability for Astra- Zeneca's Iressa based on a 10% response rate where the drug was used alone in seriously ill cancer patients who had few if any alternatives. These new developments and additional information obtained by the committee provide the subcommittee with reasons to continue this inquiry and discussion with today's witnesses. For example, the committee has learned ImClone insiders sold 244 million dollars in ImClone stock in the two months before the FDA rejection, and the volume of options trading of ImClone on December 27th and December 28th was unusually high. The subcommittee is encouraged by FDA's reorganization but still has questions about how the FDA envisions improving the approval process for cancer drugs. We will also want to hear the FDA's views on the adequacy of its law and procedures on dealing with misleading pre- market statements by industry officials to patients and the investing public about data or events contained in confidential FDA meetings and documents. The subcommittee remains interested in discussing drug- approval issues with ImClone, but in addition the subcommittee will also want to discuss issues bearing on corporate governance. For example, ImClone's legal department told the committee staff that it discovered that Samuel Waksal had forged the signature of ImClone's general counsel on a document certifying Samuel Waksal owned stock warrants that he no longer had. We have also learned that Samuel and Harlan Waksal purchased shredders in January shortly after Sam received a phone call from an SEC investigator. Many aspects of Samuel Waksal's financial problems and past professional record have come to light. We will want to learn what ImClone's board and management knew about these issues, when, and how these decisionmakers responded. As the committee continues its inquiry, the picture comes into sharper focus. The ImClone-Erbitux is truly a tragedy, particularly for cancer patients, and especially those making 400 telephone calls to ImClone daily for compassionate-use access. The evidence shows in the months leading to the December 2001 rejection, ImClone management spent much of its time nailing down its billion-dollar tender offer with Bristol-Myers, publicizing Erbitux, making millions, but failing to provide the necessary quality-control of the clinical package in its application. At the same time, there appears to have been confusion and miscommunication at FDA. Profits before patients and regulatory incoherence is a betrayal of cancer patients and is at odds with the federal mission of promoting the public health. Through this accounting of what happened at this hearing, it is my sincere hope that this will enhance the public's confidence in the biotechnology industry and the FDA, and produce a more efficient and effective drug approval system. I look forward to hearing from the witnesses and working in a bipartisan fashion with my colleagues to produce a better cancer-drug approval system for patients. Mr. Deutsch. Thank you, Mr. Chairman. We have two separate panels today, and I think they highlight the two separate trends in our hearings and our investigation. First, with the head, acting head of the FDA, I think we're here--we will hear an excellent story of really an agency and Congress working very well together, and our staffs, both of our staffs, really doing the work of this subcommittee, really its investigative arm that I think we are so well known and so talented about. And that is--in fact, my understanding is that the FDA has or is in the process of changing its review procedure for human organism drugs to basically--back to the Center for Drug Evaluation from the Center for Biologics. And from all of our understandings, one of the problems of the Erbitux was really a problem--a procedural problem in a sense in terms of the expertise within those two parts of the FDA. Clearly, there are challenges in that animal studies are different for biologics and chemicals in terms of preclinical trials, but I think our best assessment, as well as the agency's best assessment, is that this review potentially has some very dramatic, positive effects for all Americans and, in fact, all people throughout the world; and so I'm very proud of the work that we've done in a very bipartisan, workmanlike fashion, doing our job. The second part of the hearing is, I guess, more a step forward in a sense, in our continuing look at some of the corporate disasters that have occurred and looking both at specifics and then systematic issues. I hope that we will focus on systematic issues today, and I think there are some that are clearly there. In this case, I think the largest focus is really the role of board of directors, in a case where their judgment, in terms of independence, is very much open to question. I specifically--there will be many questions that will come up this morning, but with all that the board knew in terms of Sam Waksal's actions, including--my understanding is the general counsel whose signature was forged will be here--with all of that information available to the board, the fact that the board still did not seek to remove him even at others' suggestion--obviously issues about some of the consulting relationships with the board, really, and the independence. What I've said previously in other hearings is, even with downturns almost on a daily basis in equity markets, our economy is still by far the strongest economy in the world and the strongest economy in the history of the world, and a lot of that has to do with transparency. And what we've seen, step after step, seem to be problematic issues related to transparency. To some extent, it is unfortunate that we're doing this in the waning hours of this Congress, because we still have legislation which, hopefully, although it appears more and more unlikely to pass, is trying to protect investors, trying to protect 401(k) owners as well. Thank you, Mr. Chairman. Mr. Greenwood. The Chair thanks the gentleman. The gentleman from Kentucky, opening statement. Mr. Fletcher. First, Mr. Chairman, I want to thank you for holding this subsequent hearing to the hearing that we had previously. I think as we look--just very briefly, and I'll enter a statement, a little more, later, but it's about patience and investors, public trust. First, I'm glad to hear some of the changes that the FDA is making in their drug approval process, particularly that some of the problems were uncovered as we looked at the process, the fast-track approval; and also the relationship between the FDA, the SEC, when products are being marketed and statements are being made by companies related to those products that are under review by the FDA. Second, I think it's very important--and I want to thank the chairman for the second panel as well--corporate responsibility. There are some grave concerns about oversight on the board during all this problem with the approval of Erbitux and ImClone's management. So let me introduce my more lengthy statement, but conclude with that. And thank you, Mr. Chairman. Mr. Greenwood. The gentleman's statement will be made part of the record, as will any other opening statements that members wish to include in the record. [The prepared statement of Hon. Ernie Fletcher follows:] Prepared Statement of Hon. Ernie Fletcher, a Representative in Congress from the State of Oklahoma Chairman Greenwood; thank you for having this hearing today. We have all seen the devastation that Cancer can cause. We know the emotion and physical destruction that this disease brings to patients and their families. In the US where we have one of the best healthcare systems in the world, there will be more than 1.2 million new cancer cases diagnosed this year alone. This year about 555,500 people will die from cancer. It is no surprise that patients and physicians are excited when a promising new drug or therapy becomes available. The Energy and Commerce Committee has worked hard to see that groundbreaking research can provide physicians with the tools to provide treatment for cancer. While new drugs, Like Erbitux show great promise, we must also balance their development with the public's interest--including patients, their families, and investors. They must be proved safe and effective before they are available for general use. I have deep concerns that ImClone ignored important advice from Dr. Frederick Sparling that the scientific advisory board (SAB) could help the company's situation regarding clinical trials if they would just bring them together to ensure the company could recognize what sound science should look like. I am concerned that the decision to not bring the SAB together, was made because some on the Board were too close to the clinical trials and Erbitux itself to make unclouded judgements about what were best practices in order to achieve a study void of design and conduct flaws. At our last hearing, I wanted to make sure that FDA was doing the best job possible to balance these two issues. I still believe we must continue our conversations with the FDA, but I am pleased to see the FDA making some positive changes that will help balance safety and effectiveness. I hope that we can continue to work with FDA to develop policy that allows these new technologies to be available to patients as quickly and safely as possible. Equally as important, we must look at corporate governance issues such as CEO misconduct, the ImClone insider trading policy, conflicts of interest within the Board and management, and changes in corporate policies made in 2002 in response to this Committee's inquiries, the media attention, and enactment of the Oxley-Sarbanes Act. It is my hope that many new cancer treatments, including Erbitux can be approved for marketing as quickly and safely as possible. It is FDAs responsibility to maintain the Gold Standard of safety. ImClone needs to recognize that they must not only work to ensure that Erbitux is approved, but also that is safe and effective according to the FDAs standards. Again, I thank the Chairman for holding this hearing today. Mr. Greenwood. The gentlelady from Colorado is recognized for an opening statement. Ms. DeGette. Thank you, Mr. Chairman. Just to say briefly, I'd like to commend you on holding this hearing today. Like the other members, I've been quite concerned for some time about what the role of corporate boards has been in all of our investigations on corporate responsibility. And what we've seen over the last year during the hearings of this subcommittee, which have been incredibly productive, we've seen throughout the economy, every industry, from energy to telecommunications to pharmaceuticals; corporate officers, corporate employees almost running rampant with the resources of the company, and the boards just standing by and rubber- stamping whatever these employees wanted to do. I think that our continuing investigation into board activities and board accountability will be greatly helped by our hearing today, and I just want to thank you for really refocusing this committee's efforts with respect to ImClone on the board activities and also the FDA approval process. I think it will yield a lot of evidence as we move forward to decide what, if any, additional legislation Congress needs to examine to improve the system. And I yield back the balance of my time. Mr. Greenwood. The Chair thanks the gentlelady. The gentleman from Florida, Mr. Stearns. Mr. Stearns. Thank you, Mr. Chairman, and I commend you for this hearing. I think many of us have either been on television or heard from the news media. They always ask the question: Congress doesn't need to aggressively inquire into these cases of corporate governance; why don't we just turn these over to the Department of Justice? Why don't we turn them over to the Federal Trade Commission? And my response is that we do have a responsibility here in Congress. We make the laws, both on drug approval and securities trading, and therefore we need to be informed of examples where events do not proceed as the law intended, because we are making the laws here. One of my concerns was how ImClone was hyping Erbitux on 60 Minutes and the cover of Business Week. Meanwhile, the FDA's hands were tied in not correcting any exaggerated claims made by this company. So, rightly so, we have to explore these, and I think this hearing is important to do that. We'll hear today from the FDA on Federal trade secrecy laws and how they might be permitted to communicate with the subcommittee in such cases where the stock prices have these exaggerated claims. Furthermore, I'm glad that this committee will again examine these corporate governance issues, because the oversight committee on commerce has the responsibility--and that is what we're elected to do--how directors of companies abuse their positions, get interest-free loans, the CEOs and the like. For this whole system of capitalism to work and the general public to have transparency, we need to have a better understanding of how companies in the biotech industry, like ImClone, work and how we as legislators can make it so it is more transparent to the investors. Integrity is the elixir that will attract capital and lead to this life-saving innovation which ImClone is trying to do. And to see this poison that is eroding investors' confidence today--so I think this hearing is timely and important, and I commend you, Mr. Chairman. [The prepared statement of Hon. Cliff Stearns follows:] Prepared Statement of Hon. Cliff Stearns, a Representative in Congress from the State of Florida Mr. Chairman, thank you for holding this follow-up hearing today. On August 25, I was interviewed on MSNBC News, and the reporter asked me didn't I feel that Congress doesn't need to aggressively inquire into cases of corporate governance, that we should just turn these over to the DOJ's antitrust lawyers and the FTC. My response was, and is, that we in Congress make the laws on both drug approval and securities trading, and therefore we need to be informed of examples where events do not proceed as the law intended. And so here we are again. One of my grievances at the last hearing was how while ImClone was hyping Erbitux on ``60 Minutes,'' and the cover of Business Week, the FDA's hands were tied in not correcting any exaggerated claims made in these features. And rightly so: their role is not as watchdog of the media. I am especially pleased, therefore, that today we will hear from the FDA on Federal Trade Secrecy laws, and how they might be permitted to communicate with the SEC in such cases where stock price may be affected. Further, I am glad this Committee will again examine corporate governance issues: how directors of companies abuse company debt, get interest-free loans, and the like. For the system of capitalism to work, where the general public invests in private ventures for the betterment of themselves, of the economy, and in the case of a biotech company, the betterment of patients, there needs to exist complete transparency and integrity in a company's operations. Shady executive practices lead to damaging effects rippling through the economy: Integrity is the elixir that will attract capital and lead to lifesaving innovation, while deceit is the poison that is eroding investor confidence. Thank you. Mr. Greenwood. The Chair thanks the gentleman. The gentleman from Ohio, Mr. Strickland, for an opening statement. Mr. Strickland. Mr. Chairman, I would like to enter my statement into the record, and I would like to yield my time to Mr. Stupak who has an opening statement. Mr. Greenwood. The gentleman from Michigan is recognized to make an opening statement. Mr. Stupak. Thanks, Mr. Chairman. We just called a vote. We're less than 10 minutes, so I won't give my full statement. First of all, we talked about another hearing. I'm pleased to see that we're having one on Erbitux and ImClone, and the two aspects are how the FDA approves their drugs in the biologics approval and also how ImClone, as a company, failed its investor. You know, Mr. Stearns brought up the exaggerated claims we heard at the last hearing. Dr. Frank Papineau, who said that-- well, the claims may have been exaggerated, and the officials were aware, FDA officials were aware they could do nothing about it because of the secrecy, the trade secrets and stuff of drug applications, he said. I find that sort of just plain wrong. I fail to see how trade secrets are exposed by a simple rebuttal of claims; or at the very least, a statement of caution to the public by the FDA should have been taken. It should have been put out. After all, the FDA's responsibility here is to protect the health, safety and welfare of the American people. And when exaggerated claims are being made on so-called ``miracle drugs,'' as this was, there should be something there to be able to rebut it; and I hope that is one of the policy decisions this committee will handle. I also have great reservations about how the FDA handled drug and biologic approvals, and I'm not sure that just switching over to biologics approval to the Center for Drug Evaluation will work. I'll withhold my judgment on that until we hear more about it. Finally, we've seen in the long series of cases Oversight and Investigation has done, once again a corporate board has allowed its officers basically to take a publicly owned company and use it as their own privately owned piggy bank; and again, I'd be remiss if I did not once again say, I think all this started back in 1995 when we passed a Private Securities Litigation Reform Act that should be repealed. The Private Securities Litigation Reform Act of 1995 created a permissible legal environment for the threat of lawsuits that were removed and the loser pay--and that law should just be repealed, and I would once again ask the committee to consider repealing the Private Securities Litigation Reform Act. With that, I'd yield back and submit my full statement for the record. [The prepared statement of Hon. Bart Stupak follows:] Prepared Statement of Hon. Bart Stupak, a Representative in Congress from the State of Michigan Mr. Chairman, we are here today to continue our investigation of the ImClone/Erbitux disaster. I am pleased we are taking up two very important aspects of this fiasco: how the FDA conducts its drug and biologic approvals, and how ImClone as a company failed its investors. On June 13, 2002 we had a hearing on ImClone, and I questioned Dr. Frank Papineau, an investigator for this committee and a witness at the hearing, about how FDA could have let ImClone make such exaggerated claims about its drug, Erbitux. I asked him how it was that the FDA did not take steps to publicly correct these misstatements. He replied that FDA officials were aware of these misstatements but could not do anything because of ``the secrecy--the trade secrets and stuff of drug applications.'' He went on to say that the FDA officials saw the ``60 Minutes'' story, the USA Today story, and the Business Week cover story, and still could not say anything. When I brought up this point to Pat Keegan, the officer who overruled her own staff and allowed the Erbitux application to go forward, she found it amusing and laughed. I do not think this is any laughing matter.Well, this is just wrong. I fail to see how trade secrets are exposed by a simple rebuttal of claims, or at the very least a statement of caution to the public from the FDA. I have great reservations about how the FDA handles drug and biologic approvals, and I am not sure that switching over the biologics approval to the Centers for Drug Evaluation will work. I will withhold judgment on that. Today, we are also looking at how the senior officers and board members of ImClone may have worked the system in their favor at the expense of their shareholders. It appears we have a classic case of corporate malfeasance, although further investigation is ongoing. What I--and the shareholders who got the short end of the stick-- want to know is, ``What happened?'' What we do know at this point is that top officers sold large amounts of stock after privately receiving bad news. Stock prices plunged. It seems as though certain people may have treated this publicly- owned company as a privately-owned piggybank. I hope this is not what happened. Perhaps shareholders would have had more recourse if those in Congress didn't strip away their rights in 1995 as part of the Contract on America. The Private Securities Litigation Reform Act, or PSLRA, stripped away shareholders rights and virtually eliminated deterrence. It created a permissive legal environment where the threat of lawsuits were removed and the loser pays. PSLRA should be repealed, and I request the support of my colleagues for my bill that would do just that, H.R. 3829. Mr. Chairman, I yield back the balance of my time. Mr. Deutsch. Mr. Chairman, I have a statement from the ranking member of the full committee, Mr. Dingell. Mr. Greenwood. Without objection, Mr. Dingell's statement will be made a part of the record. [The prepared statement of Hon. John D. Dingell follows:] Prepared Statement of Hon. John D. Dingell, a Representative in Congress from the State of Michigan Mr. Chairman, thank you for holding this hearing. As our first ImClone hearing and reports in the press have revealed, this company belongs in the infamous pantheon of firms whose executives have been allowed to treat publicly traded businesses as their own personal cookie jar. Apparently the ImClone Board of Directors, like many others, has been content to take their fees while at best turning a blind eye to abuses that were occurring under their very noses. This investigation, however, has also addressed another issue of at least equal importance to corporate misdeeds--the efficiency and fairness in the expedited approval process at the Food and Drug Administration (FDA) for drugs to treat illnesses, often life threatening, for which no alternative treatment regime exists. Congress enacted a process that expedites new experimental treatments to the market in record time, based on very little evidence of effectiveness. Even under these very lax procedures, ImClone was unable or unwilling to undertake the research necessary to make the necessary showing of possible efficacy. This hurt colorectal cancer patients for whom this drug was the last hope. No drug currently on the market as a treatment for colorectal cancer is much better from a placebo. Even ImClone only claimed its drug, in combination with a chemotherapy agent, shrunk tumors, not actually extended life but shrunk tumors, in less than a quarter of the 120 patients in the study. Analysis of the data by Bristol Meyers put that number at less than 13 percent. The Waksals raised false hopes, and stole the hope that did exist, from those suffering, or whose loved ones are suffering, from this terrible disease. It appears that the FDA has taken a positive step in the direction of a more rational, consistent approach to expedite these applications. When the reorganization that transfers all drug reviews to the Center for Drugs is complete, all applicants should realize that if they hope to get small Phase II studies considered for early approval, that the science behind those limited studies will have to exhibit the kind of rigor that Dr. Pazdur advocated at our last ImClone hearing. While this proposed transfer of authority holds the promise of consistency and good science as the heart of expedited consideration, the devil remains as always in the details. Congress, and particularly this Subcommittee, will need to watch carefully. Will needed expertise be transferred? Will bureaucratic delay and uncertainty cause FDA to lose important scientific expertise? Will employee rights be respected? This transfer must be done right, or FDA may make matters worse. Mr. Greenwood. We have just over 7 minutes left in this vote, so the committee will recess and return immediately after the vote. [Additional statement submitted for the record follows:] Prepared Statement of Hon. W.J. ``Billy'' Tauzin, Chairman, Committee on Energy and Commerce Mr. Chairman, thank you and let me commend you and the staff on both sides of the aisle once again for the path-breaking work in this ImClone investigation. There is so much more to this than people just following the news stories over the summer may realize. Ultimately, this investigation comes down to doing what's right for cancer patients. By exposing the problems that occurred with ImClone's Erbitux and the FDA, you are helping to point the way for us to improve the drug-approval system--to make it work better for these and other patients desperately hoping for breakthrough treatments. So with all the attention on insider trading and corporate governance--subjects we will take on today as they relate to the problems here--the public should not forget that potential flaws in FDA's drug approval process have been at the center of this investigation all along. These flaws allowed a study of questionable quality to become the basis for fast-track application. They allowed irresponsible hyping of a promising drug as FDA silently stood by--thus raising and dashing hopes of thousands of cancer patients. I am encouraged that since the June ImClone hearing, the FDA has reorganized pharmaceutical product reviews to enhance consistency and performance. This is a good first step and we are very interested to learn how FDA envisions this reorganization will improve the drug- approval system, especially for cancer drugs. I welcome Dr. Lester Crawford, FDA's Deputy Commissioner, who can discuss this for us. There's clearly room for improvement. We know this from FDA's own work. Consider Eloxatin. This colon-cancer drug was approved on an accelerated basis by FDA's Center for Drugs on August 12, 2002, within 46 days of submission--a new FDA record. And it was approved based on an interim analysis of a Phase III randomized trial--a trial that measures actual patient survival--instead of less reliable Phase II study-data on surrogate endpoints, which had been the basis for past accelerated-approvals and were the basis for ImClone's application. Eloxatin shows a company can get accelerated approval just as fast as ImClone had hoped its drug would be approved, and with better data. Perhaps the Eloxatin case can be a useful model for the future. It clearly suggests that ImClone's experience might have been different, if there had been better communication between FDA and ImClone. I understand that FDA is working on a communications policy that is aimed at improving interactions between the agency and the companies it regulates. This is encouraging and I am hopeful that FDA is moving in a constructive direction. I look forward to hearing about FDA's views on pre-market promotion or pre-market statements--a topic that also gets to ImClone's actions and governance. This aspect of the ImClone story is essential to our inquiry. We now understand that ImClone directors and officers reaped millions from the sale of ImClone stock before FDA's refusal-to-file letter. Cancer patients, of course, got their hopes dashed. And what did many ImClone shareholders get from the rejection of Erbitux? An 88% reduction in share price, delay in the development of Erbitux, a CEO-- Sam Waksal--who resigned and then was arrested and indicted. ImClone Systems has now sued Sam Waksal because it believes he did not cooperate with the federal investigations while he affirmed to the company that he was cooperating. Yet we have now learned that for years ImClone did not trust Sam Waksal with the company's corporate credit card. It actually installed special procedures to ensure he did not charge the company for his personal expenses. Why would ImClone management have trusted Dr. Waksal? The media have already reported his financial problems, and his past firings for allegedly misleading and even falsified scientific work. Fortune reports that, over the past 20 years, dozens of lawsuits and tax liens have been filed against Waksal by the IRS, New York State, American Express, banks and brokers, art galleries, contractors, and individuals. Are we to believe that ImClone management was totally unaware of these issues? Did the Board and management act properly in light of these red flags? We will be interested to hear from the ImClone witnesses on these questions and others surrounding the rejection of Erbitux. Mr. Chairman, it is my hope that, from this investigation, we will see an improved drug-approval system--where the public has confidence in the companies, the FDA and the companies are clearly communicating with each other, and drug-studies are conducted properly to provide information that will optimize the chances for approval, so patients can be helped. Thank you, Mr. Chairman. [Brief recess.] Mr. Greenwood. The committee will come to order. The Chair apologizes for the delay. And we welcome Dr. Crawford. Thank you for being with us. And I think you're aware that this committee is holding an investigative hearing, and when we hold investigative hearings, we take testimony under oath. Do you have any objections to giving your testimony under oath? Mr. Crawford. None whatsoever. Mr. Greenwood. I also should advise you that pursuant to the rues of this committee and the House, you are entitled to be represented by counsel. Do you choose to be represented by counsel this morning? Mr. Crawford. Not at this time. Mr. Greenwood. Okay. If it gets dicey and you need a lawyer, just let us know. Mr. Crawford. We have some waiting in the wings, Mr. Chairman. Mr. Greenwood. All right. In that case, if you would stand and raise your right hand. [Witness sworn.] Mr. Greenwood. You are under oath, and recognized to make your statement. TESTIMONY OF HON. LESTER M. CRAWFORD, DEPUTY COMMISSIONER, FOOD AND DRUG ADMINISTRATION Mr. Crawford. Mr. Chairman and members of the subcommittee, I am Les Crawford, Deputy Commissioner of the Food and Drug Administration. I appreciate the opportunity to address the committee's questions about the agency's communications policy. The recent announcement of a plan to transfer responsibility for the premarket review of certain therapeutic biological products from our Center for Biologics Evaluation and Research (CBER) to our Center for Drug Evaluation and Research (CDER) and the agency's authority to police the marketplace for false or misleading statements made by companies about their products that are being reviewed by FDA prior to marketing. In conjunction with the June 2002 reauthorization of the Prescription Drug User Fee Act of 1992, FDA agreed to meet specific performance goals. Under the PDUFA goals, as they are called, CBER and CDER agreed to draft a joint guidance for the agency and industry on how we define good review management principles for the first review cycle of a new drug application or a biologics license application, otherwise known as a BLA. At this committee's hearing in June on the subject of the review of the BLA submitted by ImClone for Erbitux, questions were raised about whether CBER and CDER had consistent policies for communicating with sponsors of premarket approval applications. Thus, the importance of this guidance document was highlighted further. This guidance, when finalized, will be based on the agency's best practices for efficient management of review processes and will emphasize the need for effective communications between the agency and sponsors during premarket review. We recognize the need for guidelines to ensure the consistency of communications. While our overriding responsibility is to help assure the safety and effectiveness of drugs and medical devices, we're also aware that information concerning the status of premarket review and the likelihood of FDA approval can substantially affect the financial markets for publicly held companies. We anticipate publishing the draft guidance in the next few months and will welcome comments from the public. As you may know, in September, I announced a plan to transfer responsibility for premarket review of certain therapeutic biologics from CBER to CDER. As part of continuing efforts to improve agency efficiency and consistency, in the fall of 2001, the Office of the Commissioner hired consultants to evaluate the drug review process to identify best practices and make recommendations for improving those processes. The consultants conducted reviews with CBER and CDER staff and reported their findings to me. Also, during the renegotiation of PDUFA, industry representatives expressed their views to Secretary Thompson and me about the importance of achieving consistency across all review divisions. Members of my scientific management team gathered data on specific issues of concern and developed a list of options for improving efficiency and consistency at FDA. After reviewing these options, I concluded that CBER performs a variety of functions, such as vaccine and blood regulation, that are distinguishable from the review of most therapeutic biologic products. Furthermore, I concluded that consolidation of certain review functions within CDER would promote efficiency and consistency within the agency. To manage the transfer of these functions, we have established a team of staff from both centers. The transfer will be accomplished with the greatest attention given to minimizing disruption to current product reviews. Last, I would like to address questions that have arisen concerning the extent of FDA's authority to take action with respect to false or misleading statements, made by sponsors to the public, regarding products undergoing FDA review. FDA's paramount statutory mandate is to help assure that patients have access to safe and effective medical products. That is our focus during the preapproval stage. While FDA has authority to correct false or misleading sponsor statements, in appropriate circumstances, primary responsibility for assuring the truthfulness of company statements aimed at investors resides not with FDA, but with the Securities and Exchange Commission. The SEC has broad authority under Federal securities laws to take action against any sponsor that makes false or misleading statements in connection with a securities transaction. SEC enforcement action based on false or misleading statements to the markets regarding the progress of FDA premarket review is commonplace. FDA has a very effective relationship with the SEC. To further strengthen interagency ties, FDA has taken a systematic review of our interactions with the talented and dedicated people at SEC, and we intend to systematize our interactions further, based on discussions with those individuals. Thank you very much for the opportunity to be here. I look forward to the further proceedings of this committee. [The prepared statement of Lester M. Crawford follows:] Prepared Statement of Lester M. Crawford, Deputy Commissioner, FDA Under the PDUFA goals, CDER and CBER agreed to create a joint guidance for the Agency and industry on how we define Good Review Management Principles for the first review cycle of a new drug or biologics licensing application. This guidance will be based on the Agency's best practices for efficient management of review processes and will emphasize the need for effective communications during interactions between the Agency and industry. In September Dr. Crawford announced a plan to transfer review of certain therapeutic biological functions from CBER to CDER. FDA has established a team of staff from CBER and CDER to manage this transition. FDA's primary responsibility during the preapproval stage is to conduct thorough and prompt premarket review of products under investigation. Primary responsibility for assuring the truthfulness of company statements aimed at investors resides with the SEC. FDA has undertaken a systematic review of its interactions with the SEC, and we intend to systemize our interactions further based on discussions with those officials. Mr. Greenwood. Thank you. The Chair recognizes himself for 10 minutes for questions. Mr. Crawford, on June 27, 2002--in light of the ImClone hearing, the committee sent you a bipartisan letter--I believe it is being handed to you now--asking the FDA to harmonize best practices for designing clinical trial protocols and communications with companies about drug approval issues. The question is, what action has the FDA taken to encourage more agreements between companies and the FDA about clinical protocol design? Mr. Crawford. Well, under the recently negotiated PDUFA goals and standards, we agreed that we would engage in a certain number of increased meetings with the industry, meetings that--for which minutes are kept, in which we review what their intentions are, what their progress is, and also offer the best interpretation that we can along scientific lines and medical lines of what we expect the company to do. These minutes have been referred to in the open press as ``contracts'' between FDA and the sponsoring firms. In point of fact, they're not, technically speaking, that, but they are an understanding of what the company has to do and also what we expect they will need to do in order to gain approval. These will be increased, as I mentioned, as a result of PDUFA; and also we are now going to be publishing, as I mentioned, these good review practices for public comment, and that will be part of a larger document where the intention will be not only to systematize, but to bring some consistency between what the different centers say to the industries that are sponsoring these products, but also from reviewer to reviewer, what is said. And that is a result of this committee's interest and actions and also this letter. So that will be proceeding apace, we expect, in a very short time, perhaps by the end of the year, that we will have this package out for comment. We will give a reasonable amount of time for comment, and it also will be submitted to this committee for any action you would like to take, including further meetings with the subcommittees of FDA personnel, including myself and the new commissioner; and we would like to work with the committee on making sure that we refine these practices. I think it's worth noting that there have always been commonly understood mechanisms and techniques that FDA will use to communicate with the industry. I think it is axiomatic that we have to communicate throughout the review process, because we have to ask them for more information, and they have to---- Mr. Greenwood. Let's get right to the ImClone case here, because a number of lay people have said to me, isn't this awful that the FDA leaked this information out that caused the panic at ImClone and the insider trading and so forth? And my response is actually a little different than they expect, because I've been pushing since the mid-90's for more and more transparency at the FDA. It seems to me that if I look at this particular case, when Ms. Lee was in the FDA's office in--I think it was December 4-- at that time, the FDA reviewers with whom she was meeting knew that they had or were about to make a recommendation to their superiors to issue a refusal-to-file letter, and yet that information was not shared with her. And, in fact, there was a lack of transparency from that point forward, except for the fact that the Bristol-Myers lobbyist was able to worm his way in and get some information. And so it seems to me that cases like that in FDA would be better off--the patients would be better off, the companies would be better off with maximum transparency, so that if companies--so that conversation might have happened where the FDA said, look, we've got some serious--we have some serious problems with your study here. These are what those problems are, and we're inclined to recommend a refusal to file. You should know this. You may want to withdraw your application and do some more work and come back to us, and that might have prevented this very precipitous issue. How would you respond to that? Mr. Crawford. Well, I think a couple things, based on that case. One is, we believe--and it's memorialized in these draft guidances that we're trying to get together as quickly as possible--that the result of the FDA review should be committed to writing. There should be a letter that can change hands, because there were many different interpretations of what was said and who said what, et cetera, et cetera. So we are moving toward vesting in the division director the requirement that when the decision has been made, to hand out this written statement and I believe that will make for a lot of progress. Mr. Greenwood. Well, but again, that's when a decision has been made. What I'm talking about is ongoing dialog; and I understand the need to memorialize that dialog in written form so there isn't confusion or there aren't legal concerns. But it seems to me that companies ought to be able to make written inquiries with regard to the status of their applications and receive written responses along--all along the process. Mr. Crawford. They can and do do that. And I think ``written'' is a key thing. The other thing is that although there are certainly early warning signs all along, the final decision on whether or not we're going to file rests with the division director. So theoretically a division director can overturn the decisions early. So we have to have a focal point for transmitting the information. Mr. Greenwood. Let me get to the question of preapproval promotion, because it's a big issue here. Without making any judgments about this particular product and how it was promoted and how that compared with the facts, as the company knew them, when a product is approved, it has a very tightly worded label, and it's quite clear as to what claims cannot be made for the product. Prior to approval, there is very little that goes on in terms of the FDA's regulation of what a company can say. Now, in your opening statement in your testimony, you talked about the SEC being responsible for this, and the status of communications between the SEC and the FDA. Clearly, the SEC is unlikely to have reason to second-guess a company's claims, unless they get some information from the FDA first. SEC has a lot to do and certainly has limited personnel and isn't going to be able to monitor every press release, every printed statement about a potential product. And there is a lot of opportunity there, putting Erbitux aside for a moment, there's a lot of opportunity to exaggerate claims in order to attract investment. Do you think that there should be consideration by the Congress of having some review process at the FDA or disclosure process so either the company says, we'd like to make this claim or we'd like you to review it, or we've made this claim and you should see it, so the FDA can monitor and, if need be, refer a case to the SEC? Mr. Crawford. We'd like to work with the committee on that. Two quick points: One is that we are--I have asked our office chief counsel the volume of interchange between FDA and SEC, and I'm assured that it is on a daily basis going both ways. So I think this is a case where two executive branch agencies do communicate well. The second thing is that in the preapproval process, if a company makes some egregious claims that have come to our attention, there are some things that we can do now under the statutory authority that we have. One is that we can send letters, which are commonly called ``untitled letters,'' to the company asking them, in effect, to cease and desist. If that doesn't work, we can--what we would do historically is send a second untitled letter, and then finally a warning letter. And it is possible for us legally, if the egregious claims continue, to actually suspend review of the drug. So we do have that authority. Mr. Greenwood. Let me squeeze one more question in before my time runs out. What can you tell us about the current status of Erbitux and its review by the FDA, and who is doing--which center is doing the reviewing? Mr. Crawford. That reviewing is taking place in the Office of Oncology, where it was before. And the second thing is that there are some clinical trials that have begun. And there's one fairly large clinical trial, involving about 300 patients, that is presently under way; and there are a couple more of about 1,000 patients that are being contemplated. And the firm is interacting with FDA in order to be sure that these set up correctly. Mr. Greenwood. Any sense as to when you think the FDA will be--these trials will be completed and the FDA will be in a position to approve or disapprove this drug? Mr. Crawford. You know, I can't predict. I just can't. Every time I do, I---- Mr. Greenwood. Months away or years away? Mr. Crawford. Let me confer just 1 second. Yeah. The first review, the first trial, the data should be in by the end of the year. Typically we take about 6 months to review, and we don't know whether the--at the completion of the review, you know, we'll file, it will be approvable, but that would be sort of the earliest, like midyear next year. Mr. Greenwood. Very well. My time has expired. The gentleman from Florida for 10 minutes. Mr. Deutsch. Thank you, Mr. Chairman. Dr. Crawford, it's widely alleged that the decision to transfer the review of most biological drugs from the Center for Biologics to the Center for Drugs was not originated from either center, but rather was imposed by the department at the behest of the biotech drug industry. Without judging that decision, because it's not yet been implemented, I would like to explore how it came about and what preliminary steps your office is taking to see that no requisite expertise is lost from the agency. First, when and from whom did you first hear this proposal expressed within the government? Mr. Crawford. When I joined FDA--or rejoined FDA on February 25 of this year, very shortly after that--I believe it was probably in early March--I was briefed about a review of CBER, or a review of their therapeutic biologics, that was going on and that the group that was reviewing it was shortly coming to some conclusions and we might be putting in place a system to develop recommendations based out of that. There was an internal review committee and also outside consultants that were doing that, and so the--that's the first I would have heard of it. Mr. Deutsch. Excuse me for a second. Who briefed you? Do you recall? Mr. Crawford. Yes. It was a woman who was in a--a senior associate commissioner named Linda Suydam. Mr. Deutsch. And the outside consultants? Mr. Crawford. The names of them? Mr. Deutsch. Correct. Mr. Crawford. I'll have to get that for you. I can submit that for the record. [The following was received for the record:] The team included: Dr. Linda Suydam, Mr. William Hubbard; Dr. Theresa Mullin; Mr. Jeff Weber; Mr. Daniel Troy; and Dr. Murray Lumpkin. The outside consultants were Mr. Paul Coppinger and Dr. Elizabeth Jacobsen, who were hired for this task by Dr. Suydam. Mr. Deutsch. Okay. When did Dr. Woodcock and Dr. Zoon first propose or were informed that they would have to accept this idea? Mr. Crawford. Dr. Zoon was told that we were considering this around August 1, and she asked for the privilege of responding in writing to the proposal and the idea, which she did. Dr. Woodcock would not have been informed until after that was done. So it would have been, like, the first of September, somewhere around in there. Mr. Deutsch. And who in FDA and HHS were asked to basically offer opinions on the impact of this prior to the announcement of the shift? Who else did you seek counsel? Mr. Crawford. Well, the--there is a--I put together a review committee to make recommendations. They were in the Associate Commissioner for Policies' office and also the Acting Deputy Commissioner's office. And the Office of Budget of FDA. There were about 10 or 11. I can provide those names for you if you like. Mr. Deutsch. I appreciate that. What outside groups have been consulted or were consulted? Mr. Crawford. Groups outside the FDA? Mr. Deutsch. And HHS, outside the government. Mr. Crawford. When the decision was being made? Mr. Deutsch. Prior to that decision being made, that's correct. Mr. Crawford. None. At HHS, I conferred with the secretary about what was contemplated. Mr. Deutsch. Okay. So your testimony is that you did not get any outside--I mean, the outside consultants who you used and you would not consider them outside or other---- Mr. Crawford. Well, they were not, no longer employed by the FDA. Both of them had been previously employed. Mr. Deutsch. So we're talking about really two people, two individuals. Mr. Crawford. Two people and then there was a--the team that was developing recommendations when I got there had conferred with some outside organizations prior to my getting there. And we can get you a list of those if you like. Mr. Deutsch. Okay. But from the time you arrived you didn't interact with anyone. Mr. Crawford. I did not personally interact with anyone on the outside no. Mr. Deutsch. And just these two consultants. Mr. Crawford. I did meet with the two consultants once within a few days of my arrival. Mr. Deutsch. And again, you don't recall their names. Mr. Crawford. I can get those for you. Mr. Deutsch. All right. That's fine. Okay. Throughout the PDUFA reorganization process, FDA repeatedly reminded the Congress that the failure to act well in advance of the September 30 sunset would result in FDA losing a very large investment in human capital as reviewers with expertise leave in the face of uncertainty. What steps has the agency taken to assure that the reviewers will have continuing employment under comparable conditions after this reorganization? Mr. Crawford. Well, actually, several things both--some before and some after the decision. One is that PDUFA itself in the early passage gave assurance to people who would be involved in this review process that there would be funds enough to keep them on board. As you may recall from the PDUFA hearing, we were concerned that we would have to begin laying off people if we couldn't get the decision before August, or that is late in this legislative year. Since that time we have identified key personnel that may be leaving, and we have the authority now to offer them incentives to stay, that is monetary incentives to adjust their salaries, and then I get a weekly report on movement of personnel and I attempt to be very careful about unusual changes. So far we have not--once PDUFA was signed and presented, we have had very few losses. Mr. Deutsch. Okay. I understand what you just said. I am told that Dr. Zoon has said that she is already losing top people. Would you say that is not accurate, inaccurate or maybe not to your knowledge at this point? Mr. Crawford. There haven't been any unusual losses. FDA has an annual turnover rate of about 8 percent, and the record shows that's continuing. Mr. Deutsch. Okay. Thank you. Thank you, Mr. Chairman. Mr. Greenwood. The gentleman from Florida is recognized for 10 minutes. Mr. Stearns. I thank the chairman. Dr. Crawford, when ImClone was hyping their--the drug Erbitux, Erbitux, were you familiar with their hyping? Did you know of their hyping? Mr. Crawford. Unfortunately, Mr. Stearns, I was not there at the time. Mr. Stearns. Okay. Did your predecessor know of it? Did he ever say to you boy, these folks are really hyping this drug. Mr. Crawford. I didn't come until late February, so I would not have had any interaction. I did talk to my predecessor about the major items that were developing and had developed during the year that he had been acting commissioner and that subject did not come out. Mr. Stearns. So nobody in the FDA ever talked about ImClone hyping the drug Erbitux? Mr. Crawford. They did not talk to me about it no. Mr. Stearns. They did not talk to you. And you had no--to your knowledge, you had no awareness that there was hyping going on at ImClone? Mr. Crawford. Well, had I been there, I may have known about it. But I wasn't there. Mr. Stearns. No, I mean after you were appointed and once you were there, no one ever talked to you about it? It was never a subject and no one said, you know, as a result of this, we should do some new procedures. Mr. Crawford. Actually, I believe that the procedures that I discussed earlier may have emanated from that, and I have reason to believe that they did. I'm just--you know, there was no specific conversation where someone said to me, because of that incident we need to push these forward. However, I do believe that the procedures that are now in draft form will help and I think they are part of that. I don't dispute that at all. Mr. Stearns. Yeah. What I'm trying to establish with this line of questioning is that the new procedure established because of ImClone's hyping the drug, one of the reasons these procedures have been established. Do you think that's fair to say? Mr. Crawford. It would be surprising to me if that was not the case, yes. Mr. Stearns. Okay. Once the FDA is doing their pre-new drug application, they meet with a drug company and get an opportunity to sell the agency, you know, the company meets with you folks and has an opportunity to sell you on it in the pre-new drug application. But after the application is submitted, explain to me the opportunities that they have for face-to-face meetings with the company. Okay. Mr. Crawford. Well, they--we hope they sell through science, I mean it's a form of selling, but we do, from the very beginning, have an understanding with them of what will be expected in order to get the claims that they're seeking. It has to be first a decision about what the drug will be used for and what the claims will be. Their opportunity to meet with FDA is unfettered. Prior to the Prescription Drug User Fee Act, I am told that that was a problem in terms of resources. But the passage of PDUFA and the utilization of some of those funds for this activity has improved that remarkably. So I don't believe anyone is being denied a meeting. There are a great number of meetings, and we can provide that for the record if you like. Mr. Stearns. I guess what we're trying to also establish on this committee is sort of the vision for improving the whole approval process for cancer drugs. I mean, ImClone is one example, but we're trying to put in place procedures so that these things are expedited. You know, and lots of us feel that the FDA sometimes moves slowly on this process. Do you think that there's a way to expedite this anyway if we have more face-to-face meetings between the company and the FDA? I mean, all--and a little bit in ImClone's defense, they want to know what's going on. They don't know what's going on. They want to, you know, they're sitting there waiting and waiting and waiting. Obviously, they shouldn't have been hyping it. But on the other hand, at the same time more FDA face-to-face meetings would have been helpful. Mr. Crawford. They had access to face-to-face meetings and these were regularly held. As I mentioned, under the Prescription Drug User Fee Act, we have resources that are expended for these meetings which are resource-intensive, to be sure. And they take a great deal of preparation and a great deal of follow up. But that is happening. And we are also emphasizing that cancer drugs are important. I believe that they get as good a treatment as any compound can. They also can get special consideration for fast track approval and also for accelerated approval. The company has to ask for that. In terms of fast track, we determine if their request is present, they make the request and if we can find some plausibility of approval and usefulness for an unmet medical need, they get top-of-the-line coverage, and also top-of-the-queue coverage. Mr. Stearns. So they simply have to just ask for fast track. Mr. Crawford. They have to ask and then we have to evaluate whether or not it truly is for an unmet medical need. And if there is plausibility of its usefulness and approval. But if it--and if they don't ask, you know, we sometimes can suggest that they might ask. Mr. Stearns. I guess there's a question whether the FDA spelled out the consequences of a single agent study results to ImClone. If the agency asks the company to conduct a study in support of an application, how can the agency communicate clearly to the company what will happen in the event of certain results? Mr. Crawford. Well, that's the creative tension that we have with the manufacturer. We tell them what they have to do, sometimes they disagree. They can--you know, it's a free country. They can go ahead and do whatever they want to do. And they're not obligated to follow FDA's advice. In most cases, companies do. But there is a give and take. I don't want to, you know, confuse anyone on that notion. We could be wrong. The company could say, well, why don't we do it this way. Why don't we do this trial, why don't we do this study in animals or whatever. And FDA can be convinced that that is the proper way to go. Mr. Stearns. Yeah. So in conclusion, you basically agree that the idea that the FDA should have periodic face-to-face meetings with the companies during the review process. Mr. Crawford. I do. Mr. Stearns. And do you think they should be spelled out in a little bit more detail. Or do you think---- Mr. Crawford. This new package that we're putting together called good review practices---- Mr. Stearns. Because every reviewer is different, you know. This reviewer could have this idea, this reviewer could have this idea and so I mean, do we need a consistent policy where we say this is what should be done so that the companies know. Mr. Crawford. We do and we're doing that. We're going to put it out for public comment by the end of this year. Consistency among reviews, as you have pointed out, is one of the great management challenges at FDA. Mr. Stearns. Okay. I thank the chairman. Mr. Greenwood. The Chair thanks the gentleman from Florida. The gentlelady from Colorado is recognized for 10 minutes. Ms. DeGette. Thank you, Mr. Chairman. Dr. Crawford, in our last hearing on this whole issue, we talked a lot about the fast track drug approval process that the FDA's been using for certain drugs for a while, and then which Congress codified and expanded on in 1997 and what the standards are for approval of drugs under that process and how it differs from the regular approval process. And I guess I would like for you to talk for a minute about how the FDA is viewing the fast track approval process and how it's working and how--how it's working differently from the regular drug approval process. Mr. Crawford. The regular drug approval process is best described as a first-come/first-served process. What fast track does is it enables compounds of special promise to get to the top of the queue. And I think everyone would agree that it is a necessary and useful procedure and policy, and the codification of that was welcomed. Ms. DeGette. And in general, we all--and I supported it too. Our thinking was with fast track, is that it would be particularly useful for drugs used for diseases, like in this case, the Erbitux, which was to be used for colorectal cancer, where there are not very many options for the patients who have this type of cancer; is that accurate? Mr. Crawford. That is accurate, yes. Ms. DeGette. But is it your sense that because it's used for these types of drugs, that the clinical trial standards should be different from those used in the regular FDA approval process? Mr. Crawford. No. Ms. DeGette. Okay. So your sense is then--and is this a view shared throughout the FDA? Mr. Crawford. Yes. It's FDA policy. Ms. DeGette. Okay. Because we kind of got the sense in our last hearing that because Erbitux was part of a fast track drug approval process, that the clinical trial standards would be, you know, fudged around the edges a little bit because it was an experimental drug being used for a serious disease that doesn't have very many options. Mr. Crawford. Well, the time saving is in expeditious review, not in shortening of the studies. Ms. DeGette. Right. I mean, what we learned in our last hearing was that for Erbitux, for example, the FDA approved a clinical trial process that actually had a much smaller sample size than under the normal process. Were you aware of that? Mr. Crawford. The sample size is, in effect, negotiated. The company proposes what the studies will look like and FDA interacts with them and has--is not directly related to fast track. Ms. DeGette. Were you aware that the clinical trials had already been completed by the time Erbitux was put on the fast track approval process? Mr. Crawford. I wasn't involved in the review. I can check that out for you. And I wasn't even in the agency. Ms. DeGette. I'm pretty sure, from our last hearing, that that was the case. So what you're saying is at least from your perspective, during this negotiation process between the FDA and the developers of the drugs, they shouldn't be allowing for smaller sample sizes just because the drug is going to be subject to a fast track process? Mr. Crawford. Well, the standard is whatever they do has to be statistically significant. In other words, you have to be able to induce from the trial that there is an improvement. And that--that's not necessarily referable to the numbers of patients that are in the trial. It's referable to what the data needs are. Ms. DeGette. I understand what you're saying. But what we heard in the last hearing was when they went back, I mean--and this is sort of what happened in this case. When the FDA reviewers went back and looked at the original studies, they realized not only was the sample size smaller than in a normal study, but also that the individuals involved in those clinical trials a lot of times, didn't fully meet the requirements of the study. Were you aware of that? Mr. Crawford. I wasn't here then and I was not a reviewer. I can look that up for you. Ms. DeGette. Okay. You have not become aware of that since then? Mr. Crawford. No. Ms. DeGette. But it would be your testimony that fudging like that, allowing a smaller-than-normal sample size, allowing within that sample size folks who maybe weren't completely qualified to be in the clinical trial, that would not be contemplated by the FDA fast track approval process. Mr. Crawford. My testimony is that fudging is not allowed. Ms. DeGette. Good. And I think that's really important because one thing we are trying to investigate in this committee is how all of this happened. And one thing that some have said is that part of the problem was communication between both CBER, CDER and who should be responsible for, you know, for undertaking these studies. And so I guess my question would be--I know the FDA announced in early September it would transfer the review of certain therapeutic biologies from CBER to CDER which has more experience. And my question is, how do you think that this will improve the communication process and maybe even the approval process. Mr. Crawford. Well, we haven't worked out the implementation details of that. These should be ready very soon, however, and I can submit that for the record. The idea is that if you consolidate similar review functions within one unit, then you should get more efficiency. And so it's a move toward efficiency. Ms. DeGette. Would it also improve the scientific accuracy? Mr. Crawford. Well, the Center for Biologic Evaluation and Research is a highly respected organization, and there is no supposition on my part or anyone else's part that they didn't do a first-rate job. But if you're doing essentially the same thing at two different centers, you ought to be able to get it done more efficiently, not more scientifically but more efficiently if you consolidate it in one other center. To some extent, although the decision to consolidate has been made, exactly what will be consolidated is still being considered. Ms. DeGette. And how long will that take to decide? Mr. Crawford. It'll be done by the end of this year, and should be done the first--the things we can share with you about our conclusions of this implementation group will be within a matter of a very few weeks. Ms. DeGette. Mr. Chairman, I'd ask that we submit--we supplement the record with that answer. Mr. Greenwood. Without objection, we will. [The following was received for the record:] The CBER/CDER Product Consolidation Working Group (the Group) discussed Phase 1 of the implementation plan relating to the scope of products to be consolidated. The Group's October 28, 2002, memorandum is set forth in Enclosure A. [Enclosure A appears at the end of the hearing.] Ms. DeGette. Thanks. Okay. I have one last question which I intend to talk to the board about as well. We're concerned on this committee a lot about conflicts of interest in medical research. There are institutional conflicts of interests, principal investigator conflicts, and the question we have is is this affecting the integrity of medical research? And in this instance, it's particularly troubling because Dr. Mendelsohn, who's the inventor of Erbitux, not only also sits on the ImClone boards of directors, but also heads the M.D. Anderson Cancer Center in Houston, which is the same cancer center that serves as a clinical trial site for Erbitux. And the problem that we have, and that I have, is that M.D. Anderson failed to inform patients that were participating in clinical trials that Dr. Mendelsohn stood to make $6 million from the drugs' success. So my question is, in 2001, the GAO called on HHS, including the FDA, to promulgate new regulations to issue guidance to address institutional conflicts of interest. By the way, this is something I'm working on in general in a clinical trial bill that I'm working on. What the GAO said was that institutional financial interests may color an institution's review, approval or monitoring of research conducted under its auspices or its allocation of equipment facilities and staff for research. And then just a few weeks ago, the American Association of Medical Colleges issued its report on institutional conflicts of interest and recommended full disclosure in situations like that that faced M.D. Anderson. So my question is, what is HHS, and most specifically, FDA, doing to address institutional conflicts of interest? Mr. Crawford. The Department of Health and Human Services has, at the departmental level, an organization called the Office of Human Research Protection, and they're dealing with this and some other items. Let me--if I could confer for just a moment. Ms. DeGette. Thank you. Mr. Crawford. Yeah. They're looking at conflict of interest in a very broad way, and I think--I have met with that group several times since I've been at FDA. And the specific issue that you're mentioning, that is someone being connected either on the board or an officer with a clinical center that's doing the investigation, will be encompassed in what they're considering. But what I need to do is to get the minutes of our meetings and submit that as part of the record. I also would--with your permission, I also will get a report from that office. They don't report to FDA. They rather--we'd rather report to them. So if that's okay, I'll make sure that their deliberations are made part of the record. [The following was received for the record:] The Department has been considering the issue of the effect of financial interests on human subject protection for several years. In August 2000, the Department sponsored a conference on this subject. FDA had an integral role in the planning and conduct of that meeting, which led the Department to issue for public comment a draft interim guidance entitled, ``Financial Relationships in Clinical Research: Issues for Institutions, Clinical Investigators, and IRBs to Consider when Dealing with Issues of Financial Interests and Human Subject Protection.'' This document was available to the public on January 10, 2001. Following the issuance of the draft interim guidance, a number of other public and private organizations began to examine these issues, leading in some cases to the publication of reports or policies. The public bodies that have addressed financial interests in research include the National Bioethics Advisory Commission, the HHS Office of Inspector General, and the General Accounting Office. Private organizations that are examining these issues include the Association of American Universities, the Association of American Medical Colleges; the American Medical Association; and the American Society of Gene Therapy. Also, on September 30, 2002, the National Institutes of Health sponsored a workshop at which issues Related to institutions were discussed. FDA and the Department continue to work together to address conflicts of interest in research and the protection of human subjects. Ms. DeGette. Yeah. Again, what kind of timeframe are they looking at as they look at promulgation of ethical standards? Mr. Crawford. They--I don't set their timeframes. But my sense is that there's great urgency about it. Ms. DeGette. That would be my sense, too. Are you concerned about this issue? Mr. Crawford. I am. Ms. DeGette. And can you tell me why you're concerned about it? Mr. Crawford. Well, I think there are several--there a couple of ways to look at these kind of things. One is actual conflicts of interest and perceived conflicts of interest. And full disclosure is what I've always been in favor of. I was editor of a journal before I took this job. And we required the listing of on every publication and everything of whether or not a person did have conflicts of interest. They could self- declare, and we also could challenge. And in the center I directed at Georgetown University, we did the same kind of thing. So I am--you know, I'm on record as favoring full disclosure of conflicts of interest and possible conflicts of interest. And I think there has to be oversight of that. I think you can't depend on the investigator themselves. Ms. DeGette. And that would help the FDA in reviewing applications as well if the clinical trials were being undertaken at some place where there was a board member or someone who had a financial interest? Mr. Crawford. Absolutely. I fully agree. Ms. DeGette. Thank you, Mr. Chairman. I yield back. Mr. Greenwood. The Chair thanks the gentlelady. Mr. Crawford in your response to a question I asked earlier about Erbitux particularly and its status, I believe you said that it was still at the Center for Biologics which is doing the review; is that correct? Mr. Crawford. I'll have to check where it is. That is correct, yes. Mr. Greenwood. The question then, is it--is this application going to be transitioned over to the new combined center or to the pharmaceutical center? Mr. Crawford. My decision on that has not been fully reached. We have--those that are under review at the present time, I would have--I would want to make sure that they did not leave the unit that is being--doing the review. I think it is important to note that the entire unit would transfer under one scenario to the Center for Drug Evaluation and Research, so there'd be no disruption. Mr. Greenwood. Well, who has signatory authority on oncology products at CDER now? Mr. Crawford. The director of the division of oncology. Mr. Greenwood. Is that Richard Pazdur? Mr. Crawford. It is. Mr. Greenwood. And who is going to have signatory authority on oncology products after the transfer. Mr. Crawford. It would be him. Mr. Greenwood. So, what issues does FDA have to resolve first before implementing this reorganization? What do you have to do? Mr. Crawford. What we did was to put together a task force of personnel from both centers to hear about what categories of compounds should be transferred and what special considerations so that we don't delay the process, would come to the fore. Basically, it's to be sure that we don't lose efficiency by trying to get more efficiency. Mr. Greenwood. So why don't you just briefly outline what you think the advantages will be of this reorganization. Mr. Crawford. The advantage will be that in the Center for Drug Evaluation and Research, there is expertise and also a unit that reviews drugs that are very similar to these therapeutic biologics. And so since they already have the unit set up and since it's functioning, if you put these in there, you would--you should get more efficiency because you have a critical mass. When you have review units you have to have statisticians. You have to have pathologists, biochemists and so forth. And so what we're trying to do in FDA and have been for some time is not have to recreate this critical mass of expertise in order to get the job of review done. And when that has been done correctly, we have experienced efficiencies. Mr. Greenwood. Back to this question of communication with the sponsors, communications back and forth between FDA and the sponsors, the question I have really is do you think it should be the policy that the sponsor--if the sponsors wants a face- to-face meeting, that that ought to be the sponsors' right? In other words, that it's not simply at the subjective decision of a particular reviewer as to when and how frequently those meetings should occur. But it seems to me that we still don't have the policy and I haven't heard you describe yet this morning a policy in which that would be the rule. Mr. Crawford. The policy is being developed and we, as I mentioned, we are going to submit that to the committee as well as ask for public comment. It is my feeling and it is FDA policy that the sponsors do have the right to have these meetings. Of course, they have to be scheduled correctly. You have to make sure that you have the right people at the meeting, both from the company's side. They can't just--there was a time actually when I was first at FDA in the 1970's, when sponsors of the center I directed at that time could just, as we put it, fall in off the street and come by and see you and those meetings were better described as lobbying meetings than scientific interchange meetings. So we've come a long way since then. There has to be some order in the process. But meeting with the reviewers is the right that the companies have and should expect to exercise. Mr. Greenwood. Okay. And that sounds like the right policy to me. The Chair recognizes the gentleman from Michigan, Mr. Stupak for 10 minutes. And let me announce so that everyone knows what's going on. I know you have scheduling issues. At the conclusion of Mr. Stupak's time, oh and Mr. Whitfield is here. And if he has questions at the conclusion we will break until at least 1 for lunch and then we'll take panel two. Mr. Stupak. Mr. Stupak. Thank you, Mr. Chairman. I apologize. I missed most of this hearing. I've been over in the Senate and I appreciate the chairman's indulgence, and hopefully none of my questions are redundant. Dr. Crawford, you said in your statement that it is not the FDA's responsibility to correct false and misleading statements to the public by a drug sponsor. Rather, you state it's the SEC's responsibility to do this. Do you, or have you communicated your concerns with the SEC? Mr. Crawford. Yes. In preparation for this hearing, I asked of our Office of Chief Counsel to give me an understanding of how frequent and how productive our communication was with the Securities and Exchange Commission and on the productivity scale, it's reported to me that it is very productive, that these are actually two executive branch agencies that interact well with each other. Their frequency of contact is daily on both sides. They initiate contact with FDA on subject matter areas, and we initiate them also. So it's working. Mr. Stupak. But what about specifically on false, misleading statements where the SEC should step in? And has those communications been since the last hearing, which was, I believe, in June? Mr. Crawford. Yes. We've had those kinds of communications with them. I can give you some statement of how many, if you would like for the record. Mr. Stupak. Well, at these communications have you come up with any kind of solution on how you're going to resolve this situation? Mr. Crawford. We have. We have--we're developing a document called the Good Review Practices Document, which does address this issue and we're--we're going to put it out for--we're going to supply it to the committee and also going to put it out for public comment. It's in--fairly far along in development, and we'll have that done by the end of the year. And it will address this so as to routinize these kinds of interchanges. It will also routinize other things, like how reviewers interact with the sponsoring drug and biologics firms likewise. Mr. Stupak. Okay. You also stated, I believe, in your statement that the FDA currently does have authority to correct misstatements. What kind of situation would lead to the FDA to step in or take an active role in correcting misstatements? In other words, what would it take for the FDA to step in? I mean, here we had a drug that was called the miracle drug in Business Week, I believe, 60 Minutes. In fact, I think in the June testimony, some of the FDA people said they were appalled at some of the statements being made, but yet they said and did nothing. So what does it take? Mr. Crawford. You mean, in the pre-approval timeframe before it's on the market? Mr. Stupak. Sure. Mr. Crawford. What we can do, obviously SEC reference is one thing. But FDA also has authority to do the following things, and we have done these in instances in the past and up to the present. And that is, we are--we send to a company that's making egregious claims in the pre-approval era period what's called an untitled letter. And in those letters, we indicate what we find unacceptable about the issuances that they're putting out, and we also call upon them to cease and desist doing that. If the untitled letter does not bring relief, then we go, at some stage, to what's called a warning letter. And the warning letter informs them that their behavior is unacceptable and could result in the suspension of the review process for the product that's under consideration. Mr. Stupak. In the matter before us, Erbitux, did anyone send an untitled letter? Mr. Crawford. I was not at the agency at that time. But let me check. I'm--we're not aware of one. Mr. Stupak. So in this case, basically, despite the claims and people were appalled from the FDA, nothing was really done on this one then, right? Mr. Crawford. We're not aware of that being done, no. Mr. Stupak. Okay. When you do these untitled letters, with a cease and desist order or statement, whatever you want to call it in the untitled letter, do you inform the public of it? Mr. Crawford. Those are available under the Freedom of Information Act. We don't normally do that. Mr. Stupak. But the people would have no way of knowing. Mr. Crawford. We do not suppress that information. Mr. Stupak. Sure, if someone asked for it. Mr. Crawford. Asked for it. Mr. Stupak. But the public probably didn't know to ask for it until today. Mr. Crawford. I'm informed that our new policy that has been developed is that we post them on the Web site. Now, we don't tell people though that they're on the Web site. You have to look on the Web site. Mr. Stupak. So when you post it on the Web site, you don't put out a press release or anything like that? Mr. Crawford. No. Mr. Stupak. Okay. And again, posting on the Web site is that post June 2002, after our last hearing? Mr. Crawford. Actually, we're trying to go electronic and I think that--that's been done since about 1996. Mr. Stupak. Okay. You indicate that after the untitled letter, and it wasn't done in this case, but in other cases that's been done, and then there's a warning letter. And then if necessary, you can spend time to review the application; is that correct? Mr. Crawford. That is correct. Mr. Stupak. Have you ever done that? Not you, but FDA? Mr. Crawford. No. That's never been done. I assume that's because they have gotten the correction they sought. Mr. Stupak. Well, it's--I'm just concerned, it's a little bit like studies, you know, the FDA asks for studies and if they don't get the studies, they can always pull the drug from the market. And one of the hearings we had here earlier this year, when I asked Ms. Woodcock if that's ever been done, she said no. I'm concerned that the enforcement of the FDA in cases like this is always after the fact, and then it's not very vigorous, even when it is. I'm trying to find what parameters or what criteria would you use where you'd actually step in. I still am bemused by the fact that the FDA is probably the only regulatory agency we have in the Federal Government that doesn't have subpoena power to get the studies that manufacturers do, but never submit to you, or if you ask for further raw data in support of the study submitted, you don't get it, in Serzone and a couple of other drugs that I know of. So I'm a little suspicious, or I shouldn't say suspicious, but really don't believe the FDA does much in light of enforcement in these areas. So I'm trying to find out what criteria would you use before you begin some type of enforcement, other than they didn't follow through on the cease and desist order. Mr. Crawford. Yes. What I described is a chain of events where we would be seeking correction of a firm's course and if we didn't get that, then we would go as far as we needed to go in order to try to get the correction. Firms generally will-- you know, acquiesce to what FDA's requests are at some point. Sometimes it takes quite a bit of coercion. Mr. Stupak. Sure. I realize you're fairly new to the FDA, and I think you're saying last night you've been there three or four times, and then out of the FDA, right? Mr. Crawford. Right. Yes, sir. Mr. Stupak. Do you believe the FDA should have subpoena power to be able to obtain studies and raw data from these drug manufacturers if there's a question as to the validity of a study? Mr. Crawford. Let me check if we've asked for that. We apparently have not sought that, at least recently. And one of the reasons is that we do have authority to require this information. And if they do not submit the information, then we can suspend the review of the product. And if it is a product that's already on the market, we can suspend the marketing of that product. Mr. Stupak. Sure. But the FDA has never done it. That's my point. Counsel's wrinkling their nose back there. If you know of some drug, you have actually pulled it because of that, I'd really like to know because they didn't submit it. Take Serzone, take Accutane. I can go down a couple of more if you want. Mr. Crawford. What we'll do is do a review of that and submit for the record if we ever have and then if we have, which ones we have. Mr. Stupak. Sure. I'd like to see that. I think the answer is no, but if you have any. Mr. Chairman with that I'd yield back. Thank you. [The following was received for the record:] CBER has revoked approved license applications when it subsequently discovered that the original applications contained false or misleading information. For example, the establishment and product licenses issued to Sclavo, S.p.A. (U.S. license 0238), were revoked after an inspection identified significant differences between the manufacturing methods used to manufacture product and those described in the license application. The product licenses revoked included Diphtheria and Tetanus Toxoids and Pertussis Vaccine Adsorbed, Tuberculin Purified Protein Derivative and Cholera Vaccine. See 58 Fed. Reg. 66,380 (December 20, 1993). CBER has also accepted the withdrawal of pending applications once substantive review has been deferred due to the presence of untrue statements in the application. For example, CBER accepted the withdrawal of pending license applications for two monoclonal antibody products. FDA has repeatedly taken action to withdraw approval of new drug applications (NDAs), abbreviated applications (ANDAs), abbreviated antibiotic drug applications (AADAs), and new animal drug applications (NADAs) where sponsors failed to provide complete and truthful information to the Agency before or after marketing approval. In 1976, FDA initiated an action to withdraw approval of NDA 17-581 for Naprosyn (naproxen) Tablets on the ground that the sponsor had misstated or omitted material facts from the application. Specifically, FDA found that, because of such misstatements and omissions, a study report submitted as part of the NDA was ``uninterpretable in documenting the lack of chronic toxic effects or carcinogenic potential of the drug.'' FDA found that the untrue statements ``vitiate[d] the earlier conclusions reached by the Agency regarding long term safety of Naprosyn. See FDA, Naprosyn Tablets: Opportunity for Hearing on Proposal To Withdraw Approval of New Drug Application, 41 Fed. Reg. 45,605 (October 15, 1976). Between 1989 and 1995, FDA initiated proceedings to withdraw approval of certain and AADAs after it discovered untrue statements in batch and stability test records and bioequivalence studies (see Enclosure B). FDA has also initiated proceedings to withdraw approval of many NDAs, AADAs, ANDAs, and NADAs on the ground that the sponsor had failed to submit required annual reports or periodic reports as required by FDA regulations. See 58 Fed. Reg. 25,653 (April 27, 1993) (3 NADAs); 58 Fed. Reg. 33,445 (June 17, 1993) (one NADA); 58 Fed. Reg. 34,814 (June 29, 1993) (24 NADAs); 61 Fed. Reg. 9,999 (March 12, 1996) (41 NDAs); 61 Fed. Reg. 10,768 (March 15, 1996) (3 AADAs, 14 ANDAs); 61 Fed. Reg. 59,100 (November 20, 1996) (1 NADA); 62 Fed. Reg. 37,063 (July 10, 1997) (4 NDAs); 63 Fed. Reg. 29,233 (May 28, 1998) (2 NADAs); and 65 Fed. Reg. 16,397 (March 28, 2000) (158 ANDAs). enclosure b ANDA 71-737; Triamterene/HCTZ Capsules; AADA 61-471; Tetracycline Hydrochloride 500 mg Capsules; AADA 62-159; Cephalexin 250 mg and 500 mg Capsules; AADA 62-227; Doxycycline Hyclate 100 mg Capsules; AADA 62- 779; Cephalexin for Oral Suspension, 125 mg/5 mL; AADA 62-780; Doxycycline Hyclate 50 mg Capsules; AADA 62-781; Cephalexin for Oral Suspension, 250 mg/5 mL; AADA 62-813; Cephradine 250 mg and 500 mg Capsules; AADA 62-863; Cephalexin 250 mg, 500 mg, and 1,000 mg Tablets; AADA 62-910; Clindamycin HCI 75 mg and 150 mg Capsules; ANDA 71-360; Triamterene 75 mg/Hydrochlorothiazide 50 mg Tablets; ANDA 71-531; Indomethacin ER 75 mg Capsules; ANDA 71-564; Orphenadrine Compound Tablets, Single Strength; ANDA 71-565; Orphenadrine Compound Tablets, Double Strength; ANDA 71-684; Meclofenamate 100 mg Capsules; ANDA 71- 710; Meclofenamate 50 mg Capsules; ANDA 71-711; Indomethacin 25 mg Capsules; ANDA 71-712; Indomethacin 50 mg Capsules; ANDA 71-832; Trimipramine 25 mg Capsules; ANDA 71-833; Trimipramine 50 mg Capsules; ANDA 71-834; Trimiprarnine 100 mg Capsules; ANDA 71-901; Baclofen 10 mg Tablets; ANDA 71-902; Baclofen 20 mg Tablets; ANDA 72-167; Desipramine Hydrochloride 10 mg Tablets; ANDA 72-179; Mefenamic Acid 250 mg Capsules; ANDA 72-254; Desipramine Hydrochloride 150 mg Tablets; ANDA 71-642; Orphengesic Tables (25 mg orphenadrine citrate, 770 mg aspirin, 60 mg caffeine); ANDA 71-643; Orphengesic Forte Tables (50 mg orphenadrine citrate, 770 mg aspirin, 60 mg caffeine); ANDA 72-337; Triarnterene 75 mg and HCTZ 50 mg Tablets; ANDA 71-845; Triamterene 50 mg and HCTZ 25 mg Capsules; AADA 62-779; Cephalexin for Oral Suspension 125 mg/5 mL; AADA 62-781; Cephalexin for Oral Suspension 250 mg/5 mL; AADA 62-813; Cephradine 250 mg and 500 mg Capsules; AADA 62-863; Cephalexin 250 mg, 500 mg, and 1,000 mg Tablets; ANDA 71-684; Meclofenamate 100 mg Capsules; ANDA 71-710; Meclofenamate 50 mg Capsules; ANDA 70-642; Diazepam 2 mg; ANDA 70-643; Diazepam 5 mg; ANDA 70-644; Diazepam 10 mg; ANDA 70-421; Verapamil Hydrochloride Tablets, 80 mg; ANDA 70-422; Verapamil Hydrochloride Tablets, 120 mg; ANDA 71- 020; Disopyramide Phosphate Capsules, 100 mg; ANDA 71-021; Disopyramide Phosphate Capsules, 150 mg; ANDA 71-558; Perphenazine and Amitriptyline HCI Tablets, 4 mg/50 mg; ANDA 71-661; Oxazepam Capsules, 10 mg; ANDA 71-662; Oxazepam Capsules, 15 mg; ANDA 71-663; Oxazepam Capsules, 30 mg; ANDA 89-700; Perphenazine Tablets, 8 mg; ANDA 70-400; Meclofenamate sodium 50 mg capsules; ANDA 70-401; Meclofenamate sodium 100 mg capsules; ANDA 88-711; Phenytoin sodium extended release capsules 100 mg; ANDA 62-392; Doxycycline hyclate tablets 100 mg; ANDA 88-207; Ergoloid mesylates tablets 1.0 mg; ANDA 70-727; Lorazepam Tablets, 0.5 milligram (mg); ANDA 70-728; Lorazepam Tablets, 1 mg; ANDA 70-729; Lorazepam Tablets, 2 mg; ANDA 70-881; Clonidine Hydrochloride Tablets, 0.1 mg; ANDA 70-882; Clonidine Hydrochloride Tablets, 0.2 mg; ANDA 70- 883; Clonidine Hydrochloride Tablets, 0.3 mg; ANDA 89-387; Prednisone Tablets, 5 mg; ANDA 89-388; Prednisone Tablets, 10 mg; ANDA 89-389; Prednisone Tablets, 20 mg; ANDA 62-047; Erythromycin ethylsuccinate oral suspension, 200 and 400 mg; ANDA 71-929; Disopyramide phosphate extended release capsules, 100 mg; AADA 86-538; Nitroglycerin extended release capsules, 2.5 mg. See 54 Fed. Reg. 35,535 (August 29, 1989); 54 Fed. Reg. 40,740 (October 3, 1989); 54 Fed. Reg. 42,367 (October 16, 1989); 54 Fed. Reg. 48,026 (November 20, 1989); 55 Fed. Reg. 8,995; 55 Fed. Reg. 9,360 (March 13, 1990); 55 Fed. Reg. 21,103 (May 22, 1990); 55 Fed. Reg. 25,712 (June 22, 1990); 55 Fed. Reg. 46,245 (November 2, 1990); 55 Fed. Reg. 47,542 (November 14, 1990); 55 Fed. Reg. 47,919 (November 16, 1990); 56 Fed. Reg. 2,528 (January 23, 1991); 60 Fed. Reg. 32,982 (June 26, 1995). Mr. Greenwood. The Chair thanks the gentleman. One final question and then we're going to break. Mr. Whitfield did you have questions? Mr. Whitfield. Mr. Chairman, I just have one brief question. I was just curious. Of the applications that are submitted for accelerated approval or fast track designation, what percent of those meet the criteria would you say for fast track? Mr. Crawford. We will check that and provide it for the record. We believe it to be 60 to 80 percent of requests. [The following was received for the record:] Fast track programs are designed to facilitate the development and expedite the review of new drugs that intended to treat serious or life-threatening conditions and demonstrate the potential to address unmet medical needs. Fast track emphasizes the critical nature of close early communication between FDA and sponsors. Procedures such as pre- Investigational New Drug (IND) and end of Phase 1 meetings are methods used to improve the efficiency of pre-clinical and clinical development. The fast-track process focuses on efforts by FDA and sponsors to reach early agreement on the design of the major clinical efficacy studies that will be needed to support approval. Fast track policies are primarily designed to expedite drug development during the IND stage. Approval under subpart H (accelerated approval) (Title 21, Code of Federal Regulations Part 314, Subpart H) allows for marketing approval of an NDA based on an effect on a surrogate endpoint along with well-controlled post-marketing studies. A drug developed under fast track may also qualify for accelerated approval. CDER has received 172 requests for fast track designation since it was implemented in 1998. One hundred seventeen fast- track designations were granted. Forty-three fast-track designations were denied. Twelve fast-track designations are still pending, Based on these statistics, 73 percent met the criteria for fast-track designation. Since 1978, CBER has granted 51 requests for fast-track designation and has denied 38 requests. Two applications are still pending. Based on these statistics, 56 percent met the criteria for fast-track designation. Mr. Whitfield. Okay. Mr. Chairman that's all that I wanted to ask. Thank you for being with us today, Dr. Crawford. Mr. Crawford. Thank you very much. Mr. Greenwood. The Chair thanks the gentleman. And finally, thinking about the Erbitux case and this line of questioning that we've been engaged in with the pre-approval marketing and so forth, in general, I think what we're trying to resolve here is if you have a promising drug, of course you want to create interest in investors and want to attract capital so that you can develop the drug. And of course that can be utilized the way it should work and it can be misused so that you actually attract investment for a product that--whose potential you're exaggerating. And so the--obviously we think that the FDA has a role here. But we also realize that if you look at the Erbitux case, a lot of the--what some have called hyping, a lot of the promotion of the drug and its potential benefits occurred even before the application was submitted to the FDA. So we have this whole other period of time in which I suppose there's nothing at all we can do except caveat emptor. The investors will have to make their own decisions based on the personnel of the company and so forth as to whether they're going to believe these claims. That's basically a statement. I don't know if you choose to respond. Mr. Crawford. I don't believe we have any authority with that. Mr. Greenwood. Yeah. And we probably shouldn't. All right. Well we thank you for testifying. This committee will recess now until 1. [Brief recess.] Mr. Greenwood. The committee will come the order, and as we do so, I welcome our next panel. And I will introduce them. We have Dr.--or rather Robert Goldhammer, chairman of the board of ImClone Systems. Welcome. Good afternoon. I say to all of you I apologize for delay, and there will be more because we have votes before us yet. Mr. Goldhammer is chairman of the board of ImClone Systems. Paul Kopperl is a member of the board of directors of ImClone Systems. Welcome, sir. John Mendelsohn is the member of the board of directors also. Good to have you with us, Dr. Mendelsohn. Harlan Waksal, Dr. Waksal, good to have you back. Thank you for coming again. John Landes is the senior vice president for legal at ImClone Systems. Welcome, sir. And Katherine Vaczy, am I pronouncing that correct? Vaczy, vice president of the legal department at ImClone Systems. We thank all of you for being here. You probably have been informed by our staff that this is an investigative hearing, and when we hold investigative hearings, it is our practice to take testimony under oath. And I would ask if any of you have any objections to providing your testimony under oath? Seeing no such objections, I then advise you that pursuant to the rules of this committee and the rules of the House of Representatives, that you are each entitled to be represented by counsel, and let me start with Mr. Goldhammer, are you represented by counsel today, sir? Mr. Goldhammer. Yes. Mr. Greenwood. Would you pull your microphone right up close to your mouth and make sure the button is on. It is flexible so you can--you can bend it up toward you so you don't have to bend down. Now push the button again. Try it again. It still isn't on. All right. We'll get somebody to help you there. Mr. Goldhammer. Oh, wrong button. Mr. Greenwood. Do whatever Dr. Waksal does. He has been here before. If you would identify your counsel. Mr. Goldhammer. Yes. Charles Cobb. Mr. Greenwood. Very well. Mr. Cobb, good to have you with us. Mr. Kopperl, are you advised by counsel as well? Mr. Kopperl. Yes, sir. It's Mr. Cobb. Mr. Greenwood. Oh, same person. And Dr. Mendelsohn. Mr. Mendelsohn. Same person. Mr. Greenwood. Dr. Waksal. Dr. Waksal. Chip Lowenson. Mr. Greenwood. Chip, would you identify yourself. Okay. Very good. Mr. Landes. Mr. Landes. Yes. David Meister. Mr. Greenwood. Who is there. Okay. And Ms. Vaczy. Ms. Vaczy. Eric Heikel. Mr. Greenwood. Who is there. Very well. In that case, if you would stand and raise your right hand, I'll administer the oath. [Witnesses sworn.] Mr. Greenwood. You are under oath, and we will--Okay. Mr. Goldhammer, do you have an opening statement that you'd like to make? Mr. Goldhammer. I do, sir. Mr. Greenwood. Okay. Then please do. You're recognized for 5 minutes, and, again, if you would--if you can adjust that microphone so it is right where you want it. TESTIMONY OF ROBERT F. GOLDHAMMER, CHAIRMAN OF THE BOARD, IMCLONE SYSTEMS, INC.; PAUL B. KOPPERL, MEMBER OF THE BOARD OF DIRECTORS, IMCLONE SYSTEMS, INC., JOHN MENDELSOHN, MEMBER OF THE BOARD OF DIRECTORS, IMCLONE SYSTEMS, INC.; AND HARLAN WAKSAL, CHIEF EXECUTIVE OFFICER, IMCLONE SYSTEMS, INC., ACCOMPANIED BY JOHN LANDES, SENIOR VICE PRESIDENT, LEGAL, IMCLONE SYSTEMS, INC., AND CATHERINE VACZY, VICE PRESIDENT, LEGAL, IMCLONE SYSTEMS, INC. Mr. Goldhammer. Thank you. Mr. Chairman and members of the subcommittee, good afternoon. My name is Robert Goldhammer. I joined ImClone Systems board of directors in October 1984, and I've been chairman since February 1991. Over the past 18 years, I've been privileged to witness the dramatic growth of a small startup company to the viable company ImClone represents today. The company was founded by Dr. Samuel Waksal and his brother Dr. Harlan Waksal in the early 1980's. For the first 5 years the company sought to find its niche in establishing an appropriate scientific and business model for the company. To build ImClone, the Waksals assembled a distinguished scientific advisory board, and with the help of that board, the company began to focus on the treatment of cancers. In 1991, the company went to the public market on the basis of its potential as a young innovative biotechnology company with some promise. A little more than a year ago, the company stood on the verge of a breakthrough. It had negotiated a strategic alliance with the Bristol-Myers Squibb Company that would facilitate its ability to bring hope in the form of Erbitux to hundreds of thousands of cancer patients. And it was in the process of seeking approval of Erbitux from the FDA. While the subcommittee's primary interest is in that approval process, no doubt some of your questions today will center around ImClone's former president and CEO, Sam Waksal. Let me say two things about this subject, if I might. First, despite the misconduct that has come to light, Sam Waksal was indispensable to this company, and an integral part of its success over those years. Sam Waksal was the one who recognized the potential of Erbitux early on, and it was he who was instrumental in building ImClone and in creating significant value for its shareholders and patients over a long period of time. Second, as soon as allegations of wrongdoing by Sam Waksal began to surface in early 2002, the company's board acted quickly to address most of these issues. We put in process a place to have outside legal counsel investigate the allegations of misconduct and report back to it. We debated the issues surrounding Sam Waksal vigorously, decided to about after, not before, a thorough investigation had taken place. Today, despite the challenges of these recent months, ImClone remains a vibrant company that is working with its partners to give people hope and save lives. We continue to believe that Erbitux will become an important treatment for cancer patients, and the company has an exciting pipeline of other products showing significant promise. This board has met literally dozens of times this year in an effort to make sure that we in the company's management team are doing all we can and should be doing to get through these difficult times. Paul Kopperl on my left, the chairman of ImClone's audit committee, will discuss some of the significant governance changes the board initiated over the past 9 months. Importantly, shortly after receiving the refusal to file letter from the FDA at the end of 2001, we quickly formed a committee of outside directors and retained legal counsel to address the serious issues facing the company. Above all, we have not led all of this controversy surrounding Sam Waksal to deflect any focus from our mission to get Erbitux back on track. Dr. John Mendelsohn, a fellow board member and coinventor of Erbitux, will speak to it in more detail talking about this important drug. Thank you for the opportunity to be here today. I'd be pleased to answer questions you may have. Thank you. [The prepared statement of Robert F. Goldhammer follows:] Prepared Statement of Robert F. Goldhammer, Chairman of the Board, ImClone Systems, Inc. Mr. Chairman and members of the Subcommittee, good afternoon. My name is Robert Goldhammer. I joined the ImClone Systems Board of Directors in October 1984 and have been Chairman since February 1991. Over the past eighteen years, I have been privileged to witness the dramatic growth of a small start-up to the viable company ImClone represents today. The Company was founded by Dr. Samuel Waksal and his brother, Dr. Harlan Waksal, in the early 1980s. For the first five years, the Company sought to find its niche in establishing an appropriate scientific and business model. To build the Company, the Waksals assembled a distinguished Scientific Advisory Board, and with the help of that board, the Company began to focus on the treatment of cancer. In 1991, the Company went to the public market on the basis of its potential as a young, innovative scientific biotechnology company with great promise. A little more than a year ago, the Company stood on the verge of a breakthrough. It had negotiated a strategic alliance with Bristol-Myers Squibb Company that would facilitate its ability to bring hope in the form of Erbitux to hundreds of thousands of cancer patients. And it was in the process of seeking approval of Erbitux from the FDA. While the Subcommittee's primary interest is in that approval process, no doubt some of your questions today will center around ImClone's former President and CEO, Sam Waksal. Let me say two things about this subject. First, despite the misconduct that has come to light, Sam Waksal was indispensable to this Company and an integral part of its success over the years. Sam Waksal was the one who recognized the potential of Erbitux, and it was he who was instrumental in building ImClone and in creating significant value for its shareholders and patients over the long term. Second, as soon as allegations of wrongdoing by Sam Waksal began to surface in early 2002, the Company's Board acted quickly to address these issues. We put a process in place to have its outside legal counsel investigate the allegations of misconduct and report back to it. We debated the issues surrounding Sam Waksal vigorously, and decided to act after, not before, a thorough investigation had taken place. Today, despite the challenges of these recent months, ImClone remains a vibrant company that is working with its partners to give people hope and save lives. We continue to believe that Erbitux will become an important treatment for cancer patients, and the Company has an exciting pipeline of other products showing significant promise. This Board has met literally dozens of times this year in an effort to make sure that we and the Company's management team are doing all we can and should be doing to get through these difficult times. Paul Kopperl, Chairman of ImClone's Audit Committee, will discuss some of the significant corporate governance changes the Board initiated over the past nine months. Importantly, shortly after receiving the refusal-to-file letter from the FDA at the end of 2001, we quickly formed a committee of outside directors and retained separate legal counsel to address the serious issues facing the Company. Above all, we have not allowed all of the controversy surrounding Sam Waksal to deflect focus from our mission to get Erbitux back on track. Dr. John Mendelsohn, a fellow Board member and a co-inventor of Erbitux, will speak to you in more detail concerning this important drug. Thank you for the opportunity to be here today. I will be pleased to answer any questions you may have for me. Mr. Greenwood. We thank you, Mr. Goldhammer. Mr. Kopperl, do you have an opening statement? Mr. Kopperl. I do, sir. Mr. Greenwood. Please proceed. TESTIMONY OF PAUL B. KOPPERL Mr. Kopperl. Good afternoon. My name is Paul Kopperl. I chair the audit committee of ImClone Systems board of directors. On a personal note, Mr. Chairman, I'd like you and the committee to be aware that I have had my own personal battle with cancer, which is why I regard the success of Erbitux and the company as a critically important mission. Since joining ImClone's board in December 1993, I have sought to ensure that the company has had sound corporate governance, policies in place and functioning. Over the years, we have reevaluated these policies and improved them when and if appropriate. The goal was and is to have them be current best practices. Let me mention some recent examples. In the fall of 2001, the audit committee reviewed the composition of the board's executive committee and recommended that it be comprised of a majority of outside directors. Accordingly, in November 2001, the board added two additional--two outside directors to our executive committee. In addition, during this year, the board has rigorously reviewed many of its previous corporate governance policies and implemented new ones where we thought improvements could be made. Although I do not have sufficient time to describe them in detail this afternoon, I would like to present you with a brief overview, if I may, of the significant steps that the board has taken to improve corporate governance at ImClone. In April of this year, the board adopted new enhancements to its securities law compliance and insider trading policies. As a result, the company now has 16 officers who must file reports of their transaction under section 16 of the Securities and Exchange Act. The board has also put in place a strict process to be followed before the company may enter into any related party transactions, and in an abundance of caution and even to avoid any appearance of impropriety, we terminated the consulting agreements between the company and two of the scientific members of the board. And these were the only directors with such consulting contracts. But we didn't stop there. The company recently hired a highly qualified full-time vice president to perform an internal audit function reporting directly to the audit committee. Finally, the full board at our next meeting in November will be acting on a recommendation by one of our board committees to adopt a code of conduct for the entire board, a code of conduct for officers and employees and specific charters for those board committees, such as the compensation committee that do not now have it. As Mr. Goldhammer explained, when the board learned of allegations of wrongdoing by the company's then-chief executive officer Sam Waksal, the board took these allegations very seriously and took appropriate action. After a deliberate and thorough process, including investigations by outside counsel and a careful weighing of the relevant facts as we knew them, the board concluded in May 2002 that it was in the best interest of the company for Sam Waksal to step down. On May 22, 2002, he did resign. In August, the company filed a lawsuit against Sam Waksal to recover the money paid him in his separation agreement, because we believe he failed to cooperate with Federal investigations into his conduct. In this regard, it should be emphasized that as you know, no company policy, however strong, can prevent an officer or other employee from engaging in personal wrongdoing if that person chooses to evade company rules and engage in wrongful and perhaps illegal behavior. In closing, let me say that this board has faith in Erbitux and faith in ImClone. That faith, Mr. Chairman, is why each of us continues to serve and why we continue to maintain substantial holdings of its common stock. The goal of this board has been, and remains to guide ImClone into the future and ensure that we continue to fulfill our duties to the company's shareholders, to the patients afflicted by this dread disease and to the public. And I thank you for this opportunity. [The prepared statement of Paul B. Kopperl follows:] Prepared Statement of Paul B. Kopperl, Chair, Audit Committee, ImClone Systems, Inc. Good afternoon. My name is Paul Kopperl. I chair the Audit Committee of ImClone Systems' Board of Directors. I also wish to mention, Mr. Chairman, that I have had my own personal battle with cancer--which is why I regard the success of Erbitux and the Company as a personal mission. Since joining ImClone's Board in December 1993, I have sought to ensure that the Company had sound corporate governance policies in place and functioning. Over the years, we have reevaluated these policies so that they remained current best practices. Let me mention some recent examples: In the Fall of 2001, the Audit Committee reviewed the composition of the Board's Executive Committee and recommended that it be comprised of a majority of outside directors. Accordingly, in November 2001, the Board added two additional outside directors to the Executive Committee. In addition, during this year, the Board has rigorously reviewed many of its previous corporate governance policies and implemented new ones where we thought improvements could be made. Although I do not have sufficient time to describe them all in detail to you now, I would like to present with you a brief overview of the significant steps the Board has taken to improve corporate governance at ImClone. In April of this year, the Board adopted new enhancements to its securities laws compliance and insider trading policies. As a result, the Company now has 16 officers who must file reports of their transactions under section 16 of the Securities and Exchange Act. The Board has also put in place a strict process to be followed before the Company may enter into any related-party transaction. And in an abundance of caution, and to avoid even any appearance of impropriety, we terminated the consulting agreements between the Company and the three scientific members of the Board of Directors. But we didn't stop there. The Company recently hired a highly qualified full-time Vice-President to perform an internal audit function reporting to the Audit Committee. Finally, the full Board will soon be acting on a recommendation by one of the Board committees to adopt a code of conduct for the Board, a code of conduct for officers and employees, and specific charters for those Board committees that do not currently have them. As Mr. Goldhammer explained, when the Board learned of allegations of wrongdoing by the Company's then-CEO, Sam Waksal, the Board took them seriously and took appropriate action. After a deliberate and thorough process, including investigations by outside counsel, and a careful weighing of the relevant facts, as we knew them, the Board concluded in May 2002 that it was in the best interest of the Company for Sam Waksal to step down. On May 22, 2002, he resigned. In August, the Company filed a lawsuit against him to recover the money paid him in his separation agreement because we believe he breached that agreement by failing to cooperate with federal investigations into his conduct. In this regard, it bears mention that no Company policy-- however strong--can prevent an officer or other employee from engaging in personal wrongdoing if that person chooses to evade company rules and engage in wrongful, and perhaps illegal behavior. In closing, let me say that this Board has faith in Erbitux and faith in ImClone. We are bullish on the company, which is why each of us continues to serve and maintain substantial holdings in its stock. The goal of this Board has been and remains to guide ImClone into the future and ensure that we continue to fulfill our duties to the Company's shareholders, to the patients afflicted by this dread disease, and to the public. Thank you. Mr. Greenwood. We thank you, Mr. Kopperl. And let me add, if I may, that it is because this committee is so intent on seeing that Erbitux, if it does have the potential that many believe it does, is approved and that we have an expeditious means of getting all innovative cancer products approved so that they can get to the patients, that is our objective. That is our goal, and that's what this is all about. Thank you, sir. Dr. Mendelsohn, you're recognized for your opening statement. TESTIMONY OF JOHN MENDELSOHN Mr. Mendelsohn. Thank you. Good afternoon, Mr. Chairman, and members of the subcommittee. My name is John Mendelsohn, and I'm here today as a member of the board of directors of ImClone Systems, Incorporated. I am currently the President of and a professor at the M.D. Anderson Cancer Center at the University of Texas. I have also had leadership roles in the Department of Medicine at Memorial Sloan-Kettering Cancer Center, and the University of California, San Diego. For more than 30 years, I have worked at these institutions to create and expand cancer programs that have made important contributions to the Nation's efforts to understand and conquer cancer, and for 30 years, I served as principal investigator in laboratory research at these institutions studying the regulation of cell growth. Cells have a molecular engine that doesn't run until you turn it on by putting a key, a growth factor molecule, into the ignition, a growth factor receptor on the cell surface. In the early 1980's, I working with collaborators, produced monoclonal antibody 225, now known as Erbitux. Our research was built on the then-novel concept that by targeting especially terminal growth factor receptors, we could inhibit a tumor's growth by blocking a molecular signalling pathway. Today, this concept is well accepted and is the basis for Herceptin and Iressa, in addition to Erbitux. In 1992, I was asked to join ImClone's scientific advisory board to consult with the company on a regular basis about the scientific basis behind monoclonal antibody C225 and worked with ImClone to help move the drug through the clinical trial process. In 1998, I joined ImClone's board of directors. As someone who has devoted his life to cancer research, I can't stress enough just how critical ImClone has been to the development of this revolutionary cancer drug. Until ImClone licensed C225 in 1993, no other company had taken a serious interest in developing this treatment. Sam Waksal was one of the few scientists who not only understood the molecular basis of treatment with C225, but developed and executed a plan to transform it from a molecule in the lab into a powerful and innovative cancer treatment. Under Sam Waksal's leadership, ImClone raised money for the drug's research and development, guided the drug through completion of phase II studies of its efficacy and made it the centerpiece of a major collaboration with one of the word's leading pharmaceutical companies. Sam Waksal's personal failures should not detract from what is really important, that Erbitux shows great promise. Although questions rightfully abound about why the FDA did not accept the Erbitux BLA for filing, each study that has been conducted strongly suggests that Erbitux is an active anticancer agent in end-stage colon cancer. As the subcommittee may know, the vast majority of patients diagnosed with colorectal cancer are resistant to chemotherapy. Our laboratory research shows that Erbitux, when used in combination with other agents, represents a promising treatment to help overcome this resistance in order to shrink tumors and perhaps extend life. The 9923 study was specifically designed to test this important hypothesis. The accelerated approval process which Congress enacted was designed to make certain that drugs which address an unmet medical need in a devastating disease can become available to patients more rapidly based on the results of a phase II study. The question posed in a phase II trial is whether of new drug is worthy of further development. The Erbitux phase II trials had positive results. I am disappointed that Erbitux will not be available for patients who need it as soon as we had originally hoped. I joined and continue to work with ImClone, because I believe its scientists have the vision, the desire and the capability to get this new treatment to patients. My personal goal remains to do everything in my power to bring Erbitux through the approval process and to patients with cancer. Thank you very much. [The prepared statement of John Mendelsohn follows:] Prepared Statement of John Mendelsohn, Board of Directors, ImClone Systems, Inc. My name is John Mendelsohn and I am here today as a member of the Board of Directors of ImClone Systems Incorporated. I am currently the president of, and a professor at, the MD Anderson Cancer Center at the University of Texas. I have also had leadership roles in the Department of Medicine at Memorial Sloan- Kettering Cancer Center and the University of California, San Diego. For more than 30 years, I have worked at these institutions to create and expand cancer programs that have made important contributions to the nation's efforts to understand and conquer cancer. And for 30 years I served as principal investigator in laboratory research at these institutions studying the regulation of cell growth. Cells have a molecular engine that doesn't run until you turn it on by putting a key (a Growth Factor molecule) into the ignition (a Growth Factor receptor on the cell surface). In the early 1980s, I, working with collaborators, produced monoclonal antibody 225, now known as Erbitux. Our research was built on the then novel concept that by targeting Epidermal Growth Factor receptors, we could inhibit a tumor's growth by blocking a molecular signaling pathway. Today, this concept is well accepted and is the basis for Herceptin and Iressa, in addition to Erbitux. In 1992, I was asked to join ImClone's Scientific Advisory Board to consult with the company on a regular basis about the scientific basis behind monoclonal antibody C225, and worked with ImClone to help move the drug through the clinical trial process. In 1998, I joined ImClone's Board of Directors. As someone who has devoted his life to cancer research, I can't stress enough just how critical ImClone has been to the development of this revolutionary cancer drug. Until ImClone licensed C225 in 1993, no other company had taken a serious interest in developing this treatment. Sam Waksal was one of the few scientists who not only understood the molecular basis of treatment with C225, but developed and executed a plan to transform it from a molecule in the lab into a powerful and innovative cancer treatment. Under Sam Waksal's leadership, ImClone raised money for the drug's research and development, guided the drug through completion of Phase II studies of its efficacy, and made it the centerpiece of a major collaboration with one of world's leading pharmaceutical companies. Sam Waksal's personal failings should not detract from what is really important--that Erbitux shows great promise. Although questions rightfully abound about why the FDA did not accept the Erbitux BLA for filing, each study that has been conducted strongly suggests that Erbitux is an active anti-cancer agent in end stage colon cancer. As the Subcommittee may know, the vast majority of patients diagnosed with colorectal cancer are resistant to chemotherapy. Our laboratory research shows that Erbitux, when used in combination with other agents, represents a promising treatment to help overcome this resistance in order to shrink tumors, and perhaps extend life. The 9923 study was specifically designed to test this important hypothesis. The accelerated approval process, which Congress enacted, was designed to make certain that drugs which address an unmet medical need in a devastating disease can become available to patients more rapidly based on the results of a Phase II study. The question posed in a Phase II trial is whether a new drug is worthy of further development. The Erbitux Phase II trials had positive results. I am disappointed that Erbitux will not be available for patients who need it as soon as we had originally hoped. I joined and continue to work with ImClone because I believe its scientists have the vision, the desire and the capability to get this new treatment to patients. My personal goal remains to do everything in my power to bring Erbitux through the approval process and to patients with cancer. Thank you. Mr. Greenwood. Thank you. And, again, we wish you success with them. Dr. Waksal. TESTIMONY OF HARLAN WAKSAL Mr. Waksal. Mr. Chairman, and members of the subcommittee, I am Harlan Waksal. I am the chief executive officer and president of ImClone Systems. I became the CEO of ImClone just over a hundred days ago. This has been a challenging time for the company, and I've worked hard, everyone, everyone at the company has worked hard to keep focused on the most important objective, bringing to market a promising new anticancer drug, Erbitux. Independent clinical studies performed at the Nation's finest medical institutions demonstrated that Erbitux holds promise for treating patients with advanced cancer. Shortly after I became CEO, ImClone's cofounder, my brother Sam, was arrested and charged with a number of offenses. Our company is fully cooperating with investigations being conducted by a variety of investigative bodies and agencies. Yet even as we deal with these challenges, we've turned a new page. I am here to report today that we have made progress on a number of fronts. So let me review briefly our efforts on three vital areas: Corporate governance, management reform and clinical testing. First corporate governance. ImClone has put in place procedures that comply with the recently enacted Sarbanes-Oxley law. We put in place new measures that will strengthen further our existing internal controls. We have, No. 1, enacted a new rigorous insider trading policy. No. 2, greatly increased the number of officers who are required to file reports about their securities trading. And No. 3, ended all consulting arrangements with directors. In short, we are moving forward in a way that should rebuild the confidence of investors, regulators, the oncology community and the public. Second, management reform. While I take pride in our company's achievements in its early years, we have made some changes in the past hundred days to reflect our company's new direction. Although the legal staff has served us well in the past, even before I became CEO, we set in motion the strengthening of the Office of the General Counsel. I am working closely with our new chief legal counsel as we adapt our controls as the company grows. We have also created a new position, vice president for internal audit. We recently hired a highly qualified individual to serve in this important role. In addition, we've added experienced and depth to the regulatory and clinical affairs departments. We are working closer than ever with our experienced partners at Bristol-Myers Squibb and with America KGAA from Germany to gain the benefit of their expertise and resources. Third, clinical testing. Erbitux is currently being tested in several clinical trials around the country and around the world. Based on the regulatory approach we have developed with our partners and continue to discuss with the FDA, we are moving forward with our clinical development plans. In connection with these plans--with this program that we've put in place, we plan to treat several thousand patients in various clinical trials of Erbitux in a number of different cancer types. And finally, as part of our colorectal clinical development program, we will be reinitiating a compassionate use program for colorectal cancer patients who do not qualify for those other clinical trials that are being put in place. The broad scope of our clinical development plans confirms our success in manufacturing Erbitux for use in clinical trials, our commitment to cancer patients and our belief and our partner's belief in this drug. And beyond Erbitux, we have a number of other drugs in our development pipeline. ImClone's immediate mission is clear, to gain regulatory approval for and bring to market a promising new anticancer drug, Erbitux. Our company is working hard to put the controversies of the past behind us and to focus our time, our energy and resources on the task at hand, helping patients who otherwise have little hope. I look forward to answering any questions you have today, sir. [The prepared statement of Harlan Waksal follows:] Prepared Statement of Harlan Waksal, CEO, ImClone Systems Incorporated Mr. Chairman and Members of the Subcommittee, I am Harlan Waksal. I am the Chief Executive Officer and President of ImClone Systems Incorporated. I became CEO of ImClone just over 100 days ago. This has been a challenging time for ImClone. I have worked hard--everyone at the company has worked hard--to keep focused on our most important objective: bringing to market a promising new anti-cancer drug, Erbitux. Independent clinical studies performed at the nation's finest medical institutions demonstrate that Erbitux holds promise for treating patients with advanced cancer. Shortly after I became CEO, ImClone's co-founder--my brother Sam-- was arrested and charged with a number of offenses. Our company is fully cooperating with the investigations being conducted by a variety of investigative bodies and agencies. Yet even as we deal with these challenges, we have turned a new page. I am here to report today that we have made progress on a number of fronts. So let me review today, quickly, our efforts in three vital areas: corporate governance, management reform, and clinical testing. First, corporate governance. ImClone has put in place procedures to comply with the recently enacted Sarbanes-Oxley law. We have put in place new measures that will strengthen further our existing internal controls. We have: (1) enacted a new, rigorous insider trading policy; (2) greatly increased the number of officers who are required to file reports about their securities trading; and (3) ended all consulting arrangements with directors. In short, we are moving forward in a way that should rebuild the confidence of investors, regulators, the oncology community, and the public. Second, management reform. While I take pride in our company's achievements in its early years, we have made some changes in the past 100 days to reflect our company's new direction. Although the legal staff has served us well in the past, even before I became CEO we set in motion the strengthening of the Office of the General Counsel. I am working closely with our new chief legal counsel as we adapt our controls as the company grows. We have also created a new position--Vice President for Internal Audit. We recently hired a highly qualified individual to serve in this important role. In addition, we have added experience and depth to our regulatory and clinical affairs departments. We are also working closer than ever with our experienced partners at Bristol-Myers Squibb and Merck KGAA to gain the benefit of their expertise and resources. Third, clinical testing. Erbitux is currently being tested in several clinical trials around the country and around the world. Based on the regulatory approach that we developed with our partners and continue to discuss with the FDA, we are moving forward with our clinical development program for Erbitux. In connection with this program, we plan to treat several thousand patients in various clinical trials of Erbitux in a number of different cancer types. And finally, as part of our colorectal clinical development program, we will be re-initiating a compassionate use program for colorectal cancer patients who do not qualify for the clinical trials. The broad scope of our clinical development plans confirms our success in manufacturing Erbitux for use in clinical trials, our commitment to cancer patients, and our belief--and our partners' belief--in this drug. And beyond Erbitux, we have a number of other drugs in our development pipeline. ImClone's immediate mission is clear: to gain regulatory approval for, and bring to market, a promising cancer drug, Erbitux. Our company is working hard to put the controversies of the past behind us, and to focus our time, energy, and resources on the task at hand: helping patients who otherwise have little hope. Mr. Greenwood. Thank you, Dr. Waksal. Mr. Landes. TESTIMONY OF JOHN B. LANDES Mr. Landes. Thank you, Chairman Greenwood, and members of the subcommittee. My name is John Landes. I have worked for ImClone Systems for more than 18 years. For most of that time, I was general counsel and corporate secretary. As general counsel, I was head of the company's legal department. I also worked several years in the area of business development. I joined ImClone in its beginning in 1984. During my time at ImClone, I have watched it grow from a three-person research organization into a cutting-edge biotechnology company. For its first 7 years, ImClone was a privately owned business. It became a publicly traded company in 1991. It has grown from 3 employees to approximately 400. Most of whom are scientists. The role of my department is to handle legal matters for all operating units of the company. While ImClone grew, its need for legal advice constantly evolved. As a result, my department has had to keep abreast of a variety of legal issues facing the company, from real estate to technology transfer, to employment, for example. At each step along the way, under my supervision, our small department has worked very hard to provide management with accurate and well-grounded legal advice and service as the company has pursued its goal of producing a pipeline of therapeutic products for patients with cancer. Because we have always been a small health department, our lawyers have worked closely with and relied upon several respected outside law firms to assist us with matters requiring particular expertise, such as security law matters, drawing upon specialists at outside law firms is a common practice, among in-house counsel, and it has been very useful to those of us at ImClone. Although the people in my department are not scientists, our overriding goal is to help ImClone develop treatments for cancer. As one of its original employees, I am very proud of what ImClone has accomplished. I remain committed to helping the company reach its goal. With that, I welcome the opportunity to answer any questions that you may have. [The prepared statement of John B. Landes follows:] Prepared Statement of John Landes, Senior Vice President, Legal, ImClone Systems, Inc. Thank you Chairman Greenwood and members of the subcommittee. My name is John Landes. I have worked for ImClone systems for more than 18 years. For most of that time, I was general counsel and corporate secretary. As general counsel, I was head of the company's legal department. I also worked several years in the area of business development. I joined ImClone at its beginning, in 1984. During my time at ImClone, I have watched it grow from a three- person research organization into a cutting-edge biotechnology company. For its first seven years, ImClone was a privately owned business. It became a publicly traded company in 1991. It has grown from three employees to approximately 400, most of whom are scientists. The role of my department is to handle legal matters for all operating units at the company. While ImClone grew, its need for legal advice constantly evolved. As a result, my department has had to keep abreast of a variety of legal issues facing the company, from real estate to technology transfer to employment. At each step along the way--under my supervision--our small department has worked very hard to provide management with accurate and well-grounded legal advice and service, as the company has pursued its goal of producing a pipeline of therapeutic products for patients with cancer. Because we have always been a small legal department, our lawyers have worked closely with--and relied upon--several respected outside law firms to assist us with matters requiring particular expertise, such as securities law matters. Drawing upon specialists at outside law firms is a common practice among in-house counsel, and it has been very useful to those of us at ImClone. Although the people in my department are not scientists, our overriding goal is to help ImClone develop a treatment for cancer. As one of its original employees, I am very proud of what ImClone has accomplished. I remain committed to helping the company reach its goal. With that, I welcome the opportunity to answer any questions you may have. Mr. Greenwood. Thank you, Mr. Landes. Ms. Vaczy. TESTIMONY OF CATHERINE VACZY Ms. Vaczy. Good afternoon, Mr. Chairman, members of the subcommittee. My name is Catherine Vaczy. I'm the vice president legal and associate general counsel of ImClone Systems, Incorporated. Much has been said about our small company over the last several months, and I am pleased to be here today to tell you about ImClone Systems from my perspective. I came to ImClone in 1997 as the second attorney in the ImClone legal department which today employs six lawyers. I hope that working in a biotechnology company would offer me a more intimate and satisfying experience than being on the outside looking in as I had done for several years as an associate in the corporate law department of a law firm. ImClone did not disappoint me. I was quickly won over by the warmth of this small company, the important work it is pursuing and the stories of how it had persevered through hard times. In 1999, we were encouraged in our work when the company's development staged anticancer therapeutic Erbitux showed promise in early stage clinical trials. Continuing the development process to hopefully make Erbitux available to cancer patients became the priority of our small company, but to do this, we had to grow and grow dramatically. The number of employees at ImClone nearly doubled on an annual basis in each of the next 3 years. This tremendous growth offered a whole host of difficult challenges that were as basic as where to put all of these people and as complex as how to adapt our policies, procedures and controls to this ever-changing landscape. In addressing these challenges, I was heartened by the importance of our task and the competence, dedication and determination of my peers. I think that on a whole, we have succeeded very well. We constantly review all of our policies to try to ensure that they are as effective and efficient as possible. We consult with outside counsel and other advisers, and we belong to trade associations and attend conferences to stay abreast of changing laws and trends. We do this not because we have failed in the past, but because we want to be even better in everything we do. Regarding trading company securities by officers and employees, we believe we have always had in place an appropriate insider trading policy. Throughout my time with the company, we repeatedly reviewed our insider trading policy with outside counsel at preeminent law firms advising us, and were always assured that the policy was appropriate. We also repeatedly considered whether the number of our officers who filed in courts of their ImClone stock transactions with the FCC was appropriate, and we repeatedly reviewed that question explicitly with our outside counsel, again preeminent in this field. And we were always assured, in no uncertain terms, that the determination was appropriate. To conclude, I think it is important that everyone remember that ImClone is a real company with real people working hard to achieve real results. I am proud to be a part of this effort. Thank you. [The prepared statement of Catherine Vaczy follows:] Prepared Statement of Catherine Vaczy, Vice President, Legal and Associate General Counsel, ImClone Systems, Inc. Good afternoon, Mr. Chairman, members of the Subcommittee. My name is Catherine Vaczy. I am the Vice President, Legal and Associate General Counsel of ImClone Systems Incorporated. Much has been said about our small company over the last several months and I am pleased to be here today to tell you about ImClone Systems from my perspective. I came to ImClone in 1997 as the second attorney in the ImClone Legal Department, which today employs six lawyers. I hoped that working in a biotechnology company would offer me a more intimate and satisfying experience than being on the outside looking in as I had done for several years as an associate in the corporate law department of a law firm. ImClone did not disappoint me. I was quickly won over by the warmth of this small company, the important work it was pursuing and the stories of how it had persevered through hard times. In 1999, we were encouraged in our work when the Company's development stage anti-cancer therapeutic, ERBITUX, showed promise in early stage clinical trials. Continuing the development process to hopefully make Erbitux available to cancer patients became the priority of our small company. But to do this, we had to grow, and grow dramatically. The number of employees at ImClone nearly doubled on an annual basis in each of the next three years. This tremendous growth offered a whole host of difficult challenges that were as basic as where to put all of these people and as complex as how to adapt our policies, procedures and controls to this ever changing landscape. In addressing these challenges, I was heartened by the importance of our task and the competence, dedication and determination of my peers. I think that, on a whole, we have succeeded very well. We constantly review all of our policies to try to ensure they are as effective and efficient as possible. We consult with outside counsel and other advisors and we belong to trade associations and attend conferences to stay abreast of changing rules and trends. We do this not because we have failed in the past but because we want to be even better in everything we do. Regarding trading in company securities by officers and employees, we believe we have always had in place an appropriate insider trading policy. Throughout my time with the company, we repeatedly reviewed our insider trading policy with outside counsel at preeminent law firms advising us, and we were always assured that the policy was appropriate. We also repeatedly considered whether the number of our officers who filed reports of their ImClone stock transactions with the SEC was appropriate, and we repeatedly reviewed that question explicitly with our outside counsel--again, preeminent in this field, and we were always assured in no uncertain terms that the determination was appropriate. To conclude, I think it is important that everyone remember that ImClone is a real company, with real people working to achieve real results. I am proud to be a part of this effort. Thank you. Mr. Greenwood. Thank you, Ms. Vaczy. And the Chair recognizes himself for 10 minutes for questioning, and I'll start with you, Ms. Vaczy. You might want to bend that microphone and pull it over a little closer. Before I do that, I would ask unanimous consent to place the document binder into the record. And without objection, it shall be done. Ms. Vaczy, I'd like to ask you about an issuers letter requested by the Bank of America in January 2002 for warrants owned by Sam Waksal. First, so I'm clear, an issuer's letter is a request to a company to, in effect, certify that a person owns certain financial instruments in the company such as in this case warrants. Is that correct? Is that your understanding? Ms. Vaczy. Yes. It is a representation of the company, yes. Mr. Greenwood. Okay. In January of this year, can you tell me why Bank of America came to you for an issuers letter related to Sam Waksal? Ms. Vaczy. You're referring to one that they requested from me as opposed to one that I--a copy of one that I received from them? Could I perhaps see the one that we're discussing? Mr. Greenwood. It's Tab 26 in your binder there. Ms. Vaczy. Well, this doesn't appear to be an issuer's letter in Tab 26. It is a letter to Dr. Waksal, Sam Waksal and Dr. Harlan Waksal. I'm familiar with an issuers letter. This does not appear-- -- Mr. Greenwood. All right. We'll try to correct that. But the question is--well, let me ask you this. Did Bank of America this January ask you for an issuers letter, or did you have discussion with a bank about an issuer's letter to certify that it had something to do with Mr. Waksal? Ms. Vaczy. Yes. I did. Mr. Greenwood. Why don't you tell us what that was. Ms. Vaczy. I had discussions with counsel to Bank of America on Dr. Sam Waksal's behalf around the middle of January 2002. Those discussions revolved around Dr. Sam Waksal moving a loan to Bank of America, that he had at another financial institution, and in connection with that, he was pledging securities of ImClone as collateral. And the bank was requesting an issuer's letter from the company to certify as to certain matters regarding a securities---- Mr. Greenwood. Okay. And did the Bank of America then give you or provide you the letter in Tab 26? Oh, wait a minute. I'm told the problem is that it's Tab 10. Ms. Vaczy. Yes, they did. Mr. Greenwood. Okay. And what is the significance of this type of document? Ms. Vaczy. Of this particular document or in general? Mr. Greenwood. Yes. Ms. Vaczy. In my conversations with Bank of America in January 2002 with the counsel to Bank of America, the counsel advised me of a warrant that had been pledged to them and sent to me this letter to demonstrate that they, in fact, had that pledge. Mr. Greenwood. Mr. Landes, if you would take a look at that letter as well, and at the bottom of the document is a signature that reads John Landes. Is that your signature? Mr. Landes. No, it's not. Mr. Greenwood. Okay. When did you first see the document with your forged signature on it? Mr. Landes. I saw this document on January 14, 2002. Mr. Greenwood. Okay. You met with Sam Waksal about the document. Right? Mr. Landes. Yes, I did. Mr. Greenwood. And did Sam Waksal deny that he signed your signature to that document? Mr. Landes. No, he did not. Mr. Greenwood. Did you report this to the Federal authorities? Mr. Landes. No, I did not. Mr. Greenwood. Was the board notified about the forgery to Bank of America? Mr. Landes. Yes, it was. Mr. Greenwood. Okay. Let me then address some questions to the members of the board, Mr. Goldhammer, Mendelsohn and Kopperl. Were you aware of this letter? Mr. Kopperl. Yes. Mr. Greenwood. And Mr. Goldhammer, when did you become aware of this allegation of forgery? Mr. Goldhammer. Early---- Mr. Greenwood. Take the microphone, please. Mr. Goldhammer. I'm sorry. The first part of February, I think. Mr. Greenwood. Okay. And Mr. Kopperl. Mr. Kopperl. It was early February. Mr. Greenwood. Dr. Mendelsohn. Mr. Mendelsohn. As I remember, it was in February. Mr. Greenwood. Okay. Why wasn't Sam Waksal fired immediately? Mr. Goldhammer. All of the loans--the forgery issue--as soon as we found out about it, we immediately formed a special committee of the board and hire outside counsel to investigate this allegation and do it as quickly as possible. Mr. Greenwood. What did you learn from that investigation? Mr. Goldhammer. I'm sorry? Mr. Greenwood. What did you learn from that investigation? Mr. Goldhammer. We never really learned in that--the investigation was not complete by the time Sam was asked to resign. Mr. Greenwood. Okay. But you knew before you had initiated your investigation---- Mr. Goldhammer. Yes. Mr. Greenwood. [continuing] that Mr. Landes said this is not my signature, it's forged, and Mr. Waksal didn't deny that; is that correct? Mr. Goldhammer. Yes, sir. Mr. Greenwood. Mr. Landes, let me go back to you. This wasn't the first time that Sam Waksal had forged your signature. Isn't that correct? Mr. Landes. There was a previous occasion that I was familiar with in which he had signed my name to a document. Mr. Greenwood. Can you tell us about that? Is that the 1991 case where he signed for you and Harlan Waksal on a stock certificate? Listen. Mr. Landes. Yes. I learned in 1991 that in 1986 that Sam had attempted to convey some of his own shares through an ImClone stock certificate, shares that he owned, and this I learned in 1991 and did obtain a copy of the stock certificate. Mr. Greenwood. The records show that Dr. Sam Waksal issued an ImClone stock certificate with those--these forged signatures and received payment for this of $90,000. Do you know what Sam Waksal did with the $90,000? Mr. Landes. No, I don't, Mr. Chairman. Mr. Greenwood. When did you learn of this forgery? Mr. Landes. I learned of this in 1991. Mr. Greenwood. Okay. And if you look at Tab 2, I think that will demonstrate your knowledge in 1991. To whom did you report these acts of forgery by Sam Waksal, and when? Mr. Landes. Well, I immediately had a conversation with Sam, a number of conversations with him, to learn what the circumstances were, and what I learned was that Sam did not understand how one conveyed one's own shares. I told him that this was clearly not how one did this. So my discussions were-- -- Mr. Greenwood. So he thought that the appropriate way to do it was through forgery? Mr. Landes. No, Mr. Chairman. I think he did not--he did not recognize how shares were to be conveyed if you owned them, but I believed that he--this was a good-faith misunderstanding or lack of knowledge on his part which I just---- Mr. Greenwood. I'm trying to understand how one could have a lack of knowledge about a technical financial matter that would result in one's forging another person's name on a document. Mr. Landes. Mr. Chairman, we were a very small company at the time. We, in fact, were probably less than a year old, 1986, I think we were just beginning. Mr. Greenwood. So when did you report that incident to the board of directors? Mr. Landes. At that time I did not report it to the board of directors, because as I say, my understanding was that this was really a misunderstanding on Sam's part which we discussed at length. Mr. Greenwood. My children know better than that, Mr. Landes. Did Sam ask you not to report it to anyone? Mr. Landes. No, he did not. Mr. Greenwood. Okay. So you made that decision on your own? Mr. Landes. I did. Mr. Greenwood. Okay. Let me return to the members of the board of directors. When did the board also learn that Sam Waksal had forged signatures on an ImClone stock certificate? Dr. Goldhammer--Mr. Goldhammer. Mr. Goldhammer. Just recently, a couple of weeks. Mr. Greenwood. Just a couple weeks ago. Do you think that was a result of our investigation? Mr. Goldhammer. I don't know. I don't know. Mr. Greenwood. How did you learn 2 weeks ago? Mr. Goldhammer. It came up in--March 21. March 21 is when we learned--when I learned. Mr. Greenwood. Okay. Apart from these two forgeries, the board learned of certain other improprieties or questionable business practices by Sam Waksal, but similarly chose to look the other way. Please tell me if I'm incorrect in any respect. On February 22, 2002, the press reported that Sam Waksal had made illegal short-swing profits on ImClone stock and disgorged $486,000 to ImClone. Did you see this article, and were you ever aware of these allegations before this article was published? Do you want to see the article? It's Tab 31. Mr. Goldhammer. Would you repeat the question, please? I think I should remember. Mr. Greenwood. On February 22 of this year, the press reported that Sam Waksal had made illegal short-swing profits on ImClone stock and had disgorged $486,000 to ImClone. So the question is, were you aware of that in February of this year? Any of the members of the board recall learning about that when this was reported to the press in February? Mr. Kopperl. We did learn about it at approximately this time, Mr. Chairman, and we took appropriate action, which was to have, in the first instance, counsel investigate the relevant facts, and then the company demanded that Dr.--that Sam Waksal repay the short-term profits. Mr. Greenwood. Okay. My time is rapidly expiring, but Dr. Waksal, when did you know about this--first learn about this 10-year-old forgery? Mr. Waksal. You're talking about the stock certificate? I learned about 2 weeks ago. Mr. Greenwood. Okay. Well, my time is expired. The Chair recognizes the gentleman from Florida to inquire for 10 minutes. Mr. Deutsch. Thank you, Mr. Chairman. Mr. Kopperl, your testimony really begs the question, why have you been a member of the board since 1993, as in your words, sought to ensure that the company has sound corporate governance policies in place and functioning, over the entire time were no such sound policies put in place until the scandal broke? Mr. Kopperl. I beg your pardon. I didn't catch the last part of that. Mr. Deutsch. The policies that you articulated in your testimony, why were they just put into place only since the scandal broke? Why were those policies not in place previously? Mr. Kopperl. As the chairman of the audit committee, part of my responsibility was, as your question indicates, to make sure that ImClone had appropriate procedures in place. When I joined the board of directors, there were procedures in place, and in the main those procedures worked okay. We continually review them, and to the extent that we deemed that improvements could be made, we made improvements as the company continued to grow and evolve. So there were governance policies in place about short- swing profits, about insider trading and so on. Mr. Deutsch. Specifically you had a policy or you had an executive committee composed of Sam Waksal, Harlan Waksal and Bob Goldhammer. Was it a good policy to have only those individuals required to report stock transactions? Mr. Kopperl. To report stock transactions? Mr. Deutsch. That's correct. That was your policy that only those three individuals had to report stock transactions. Mr. Kopperl. Plus the--plus all the directors, sir. Mr. Deutsch. That's correct. But you've changed that policy now. Mr. Kopperl. We have changed the policy. Mr. Deutsch. So was the original policy appropriate, or was it inappropriate? Mr. Kopperl. As I think you heard Ms. Vaczy say that this policy was frequently reviewed--I think ``frequently'' is her word. Frequently reviewed with outside counsel, and it was determined by them that it was adequate. Mr. Deutsch. What about the policy permitting Sam to borrow hundreds of thousands of dollars at a whim from the company? Was that a policy that was an appropriate policy? Mr. Kopperl. Sir, those were--we have always had a procedure in place about loans, and we--loans were fully disclosed. The loans were repaid in full, and the loans at least for the past--ever since 1994 or 5 have borne interest at an attractive rate to the company, in fact. So all the money that Sam Waksal may have borrowed was repaid in full, every last penny of it. Mr. Deutsch. So it was an appropriate policy at the time? Mr. Kopperl. The policy worked. I felt it was appropriate. I think my colleagues felt it was appropriate. Mr. Deutsch. What about the policy in terms of payments to Sam and Harlan Waksal over $1 million plus stock when the company had not made a penny at that point in time? Was that appropriate reimbursement schedule? Mr. Kopperl. Well, those--you're talking about their bonuses? Mr. Deutsch. Well, not just the bonuses but the salaries as well. Mr. Kopperl. Salaries and bonuses. Well, the salaries were reviewed by the compensation committee, as were bonuses, and the achievements that Sam and Harlan had made in growing the company, which became increasingly complex as time went on, these bonuses--salaries and bonuses were reviewed in detail and were considered to be acceptable. Mr. Deutsch. Did you approve the deal to move up the vesting of shares by Sam Waksal? Mr. Kopperl. Yes. The board of directors approved it, as did the stockholders. Mr. Deutsch. And that occurred--when that occurred, so they could purchase those stock options and tender them to Bristol? Was that correct? Was that the purpose of it? Right. I mean, the loans of over $100 million. All right. What were the loans that were available, the loans that were approved at that point, the corporate loans? Mr. Kopperl. I'm sorry, Mr. Deutsch. Forgive me. Are we talking about stock options or about loans? Mr. Deutsch. Well, no. Let's talk about the loans. Mr. Kopperl. Okay. Thank you. In July, I think it was, of 2001. Isn't that the---- Mr. Deutsch. That's correct. Mr. Kopperl. The board considered the possibility of making loans to all the directors and decided--determined that this would not--that this would be an appropriate thing to do. We also considered the possibility of extending loans to employees and determined that that would not be--because of the confidentiality of negotiations that were going on at the time, that that would not be an appropriate thing to do. Mr. Deutsch. Besides Harlan and Sam Waksal, was anyone else allowed to borrow money from the company to acquire shares? Mr. Kopperl. The directors were, yes, sir. Mr. Deutsch. I'm sorry? Mr. Kopperl. The directors were. Mr. Goldhammer. Board of directors. Mr. Kopperl. The board of directors were given that opportunity. Mr. Deutsch. Now, the board supported Sam Waksal in the support with Bristol last winter--and again, I guess I've gotten sort of bits and pieces from the chairman's questioning. At that point you did not know that he had forged loan documents? When Bristol basically had a--wanted to get rid of Sam last winter, were you aware at that point in time that he had forged documents? Mr. Kopperl. I believe that the board was advised by our-- I'm sorry. Let me start again. I believe that the special committee of the board, which excluded Sam Waksal and Harlan Waksal, that the board was apprised of a possible--I repeat, possible signature forgery issue in early February, and I think that within a few days, they--we took--we took this seriously. We asked our counsel, our outside counsel, to investigate thoroughly and to do so as quickly as would be practicable and report back to the board. A few days and--I can't tell you exactly, but I would think within a matter of a week or so, the--we received a letter from Peter Dolan, the CEO of Bristol-Myers Squibb, making demands on ImClone and proposing to renegotiate the agreements that--the agreements that existed between Bristol-Myers and ImClone. Mr. Deutsch. Were you aware that Sam Waksal was under investigation by the SEC for insider trading and was also under investigation by this committee at that time? Mr. Kopperl. I believe so. Mr. Deutsch. So you--obviously you supported his position in terms of Bristol's request. Why then and not now? I mean, now you've changed that position. What happened? I mean, is he still entitled--you know, he hasn't been proven guilty. Shouldn't--I mean, should he still be leading the company today? Mr. Goldhammer. Mr. Goldhammer. The counsel, the counsel sadly was taking a long period of time to come up with this forgery question. At that time, Sam was delivered a Wells Notice and that became---- Mr. Deutsch. I'm sorry. He delivered---- Mr. Goldhammer. I believe at that time, right at that time---- Mr. Deutsch. The Wells letter? Mr. Goldhammer. Yes. Mr. Deutsch. Yeah. Mr. Kopperl. May I add something to that, Mr. Deutsch? Mr. Deutsch. Yes. Mr. Kopperl. The company adopted a thorough process to investigate the allegations against Sam Waksal as they arose. And this was a continuing review in late January, February, March, April and into May. And the Wells Notice that Sam Waksal received from the SEC was the--all along during that time, we decided on balance for the good of the company and particularly the personnel, that we would, if possible, like to retain Sam's services. But the Wells Notice was the final straw and in, I think it was May 22 or 21, we requested Sam's resignation, and he resigned, I think, on May 22. Ms. DeGette. Will the gentleman yield? Mr. Deutsch. My time has expired. Ms. DeGette. I'd ask unanimous consent that the gentleman be given an additional minute so I can follow up on his question. Mr. Greenwood. Without objection. Ms. DeGette. All right. Will the gentleman yield? Mr. Deutsch. I would be happy to. Ms. DeGette. I guess I don't understand, Mr. Kopperl, why it would take all those months for an outside counsel to investigate what would seem to me to be a very simple issue of a forged issuer's letter. Do you have any insight into that? Mr. Kopperl. Well, as I mentioned, ma'am, it was within a few days after the special committee of the board received the information about the alleged forgery that we were hit by the demand--not just a proposal, but a demand by Bristol-Myers Squibb to renegotiate the arrangements between the two companies. And that took approximately 6 weeks to---- Ms. DeGette. Okay. But you got a demand from Bristol-Myers Squibb. But in the meantime, you have this forged signature right in front of you. Why would that take so long to investigate and take action? It seems to me pretty clear-cut. Mr. Deutsch. And if I can reclaim my time for a second. I mean, did you ask Sam Waksal if he forged the signature? Mr. Kopperl. We turned it over to our special counsel, sir. Mr. Deutsch. And I assume--did they ask him that question? Mr. Kopperl. I don't know what their process was. Mr. Deutsch. I mean, wouldn't that have been an appropriate question to ask? Mr. Kopperl. Very possibly. Mr. Deutsch. I mean, very possibly it would be appropriate? You can't say, yes or no? That's the most ridiculous answer I've heard in a very long time here, and we've had everyone. We've had Enron--I mean, we've had WorldCom and that's up there. I mean, ``very possibly.'' Your CEO, the head of the company, forged a document. This is wacky. I mean, this is wacky. A guy's forging documents and you keep him in charge of the company, and you're outside directors. I mean, that's the whole issue that we're dealing with here, and the best you can come up with, maybe they might have asked him? Did you look the guy in the eye and say, ``Did you forge it?'' Mr. Kopperl. I respect your opinion, sir, you know, clearly, but I would like to say that we turned the matter over to a very prominent law firm in New York City and said investigate and come back to us with the results and conclusions of your investigation. And that's what we did. Mr. Deutsch. And how long was that investigation for? How long was the investigation? I mean, what was the timeframe? Mr. Kopperl. Well, the investigation, as I recall, had not been completed by the time we asked Sam Waksal to step down, at which point it became moot. Mr. Greenwood. The time of the gentleman has expired. The gentleman from Florida is recognized for 10 minutes. Mr. Stearns. Thank you, Mr. Chairman. And I'd like to turn to part of the insider trading that's concerning the blackout period. At Tab 19, your policy reads, ``There will be periods of time when it is clear that material, nonpublic information is known by several employees, officers and directors of the company. An example would be the making of a seminal discovery in the company's science, or significant results in one of its clinical trials, or the pending announcement of an important strategic alliance for the company.'' I'd also like to refer you to December 18, 2001, Tab 20, e- mail from Mr. Gallagher, a member of your legal department in which he writes, quote, ``On Tuesday, December 18, 2001, Cathy Vaczy reminded me in a conversation that I'm subject to the insider trader policy of the company. She further informed me that select members of senior management have been aware that the FDA may not accept our BLA, biological licensing application, filing.'' Ms. Vaczy, when did ImClone initiate its blackout period prior to the FDA announcement on December 28? Ms. Vaczy. We put a company-wide blackout---- Mr. Stearns. Can you put that microphone right on. Ms. Vaczy. We put a company-wide blackout in effect on December 21. Mr. Stearns. Okay. Is it true that the FDA contacted ImClone on December 12? Ms. Vaczy. I understand there was a conversation on December 12 with Dr. Lily Lee, our Vice President of Regulatory Affairs, and perhaps some other individuals. Mr. Stearns. Okay. When they made the contact with him, were you aware what they said to him about Erbitux? Ms. Vaczy. What I learned from this conversation on the 12th, through discussions with other select members of---- Mr. Stearns. Did you talk to him directly yourself? Ms. Vaczy. It's a woman, Dr. Lily Lee. Mr. Stearns. Okay. Did you talk to her? Ms. Vaczy. I don't recall that I spoke to her directly myself. Mr. Stearns. But that would be a big deal. If the FDA called her and talked to her about Erbitux, wouldn't that be a big deal? Ms. Vaczy. I don't think so. My understanding is, Lily was in contact with them virtually daily. But I think---- Mr. Stearns. So you think this was a routine call---- Ms. Vaczy. Well, I think many calls were routine. However, this call on the 12th, we did, based on Lily's report to senior management, she stated that this was the first time she had spoken to the FDA where she felt their tone had changed, and she became concerned. Mr. Stearns. Well, based upon this call on December 12, when do you think, in your mind, senior management were told about the FDA's decision, impending decision? When, in your best estimate were they aware? Ms. Vaczy. Oh, well, we--we certainly were not told until December 28 of the FDA's final determination. During the month of December there was really an evolution of certain communications. Mr. Stearns. No. But I mean, when were they aware that they might, the FDA might not accept the findings of ImClone? When were they aware of that date? Ms. Vaczy. Well, we formally knew on the 28th. Mr. Stearns. No. No. We all know the formal. But what we're trying to do is trying to understand if there's insider trading. Ms. Vaczy. Right. Well, I would like to say that on the 12th. And I believe that executives from our company have testified to this before in front of this committee that the 12th was important to us, because that was the---- Mr. Stearns. Tip off? Ms. Vaczy. No. Mr. Stearns. No. Ms. Vaczy. It was a time at which the--Dr. Lee reported to management, it's the first time she had any thought that perhaps there was a problem. She referred to it as a ``change of tone.''. Mr. Waksal. Congressman, if I could help out in this, if possible. Mr. Stearns. Okay. Mr. Waksal. I testified at the last hearing, and Dr. Lee was here as well, that around December 12, December 13, we had had a number of conversations internally and with the FDA, and the tone had changed in the discussions we had with them. In prior conversations, they were continuing to give us guidance as to how we could go ahead and remedy what we considered the documentation issues surrounding the filed BLA. December 12 we no longer got that guidance. They said wait, and we'll get back to you. There was no tipping of any type to us. But we became concerned, and it was a very small group of individuals who were involved with this. This was not disseminated to management as a whole as the letter in that file indicates. It was a very small, select group of senior executives that were aware of what was taking place with the FDA. Mr. Stearns. Would Charles Dunn be one of those senior executives that knew? Mr. Waksal. He would not be. Mr. Stearns. Okay. Would Lisa Cammy. Mr. Waksal. Lisa Cammy, she would not be the head of human resources, no. Mr. Stearns. Would Tom Gallagher? Mr. Waksal. No. As the memo points out, Tom was not part of that group that knew. Mr. Stearns. Would Daniel Hicklin. Mr. Waksal. He would not. Mr. Stearns. Okay. And would Nikhil Mehta. Mr. Waksal. He would not. Mr. Stearns. Well, it says here he was a member of the regulatory affairs committee. Mr. Waksal. He was involved with the manufacturing component of the submission. Lily Lee was the person who was working and interacted with the FDA; and to my knowledge, he had no information regarding the interaction with the FDA. Mr. Stearns. I respect what you're saying, but I'm reading from a list of people who suddenly, on December 14 started unloading a lot of shares, the people I mentioned. December 14, December 13, December 14, December 14, December 17, December 11, all these people suddenly ImClone officer stocks sales start to be out the door--4,500 shares, 3,500 shares, 5,000 shares, 32,212 shares, 20,000 shares for Thomas Gallagher on December 14, 5,000,--no, excuse me, 5,000 on December 17. You just--I'm just telling you, looking at this and hearing what Ms. Vaczy says, that not knowing, I would have a hard time--why did all these senior people, these aren't general managers, these aren't drafting managers; these are VP of manufacturing, VP of system facilities, VP of intellectual property, regulatory affairs. I mean, these were senior people, looking at their titles. And these are not small. They're not selling 100 shares. Some of them are as high as, you know, 32,212. Why would all these senior people suddenly, after December 12, start moving out and selling all this? Is this all coincidental, in your opinion? Mr. Waksal. Yes, it is. And I if could comment for a moment, if you look back over the sales that take place from employees in a company and our company, over the course of the many months, on average, there were around 20, 21 employees, per month that would exercise and/or sell stock. Mr. Stearns. In senior management? Mr. Waksal. Across the board, sir. Some in senior management and otherwise. There were certainly many people in senior management as well, but these individuals that you're speaking about--and I just want to go back to the memo from Tom Gallagher; it is very clear in his memo that it was a select group, and I have to emphasize that, a small and select group of individuals. Mr. Stearns. So these people that I mention are all a select group? Mr. Waksal. They are a group of individuals who, in fact, were not part of the individuals that had any knowledge regarding the interactions with the FDA, to my knowledge. Mr. Stearns. Well, it's just, you know, we have on December 12 contact from the FDA to senior management; and then we have--on December 18 we have some more communication. And then we have on December 21 your e-mail, which is asking for a blackout. And this--let me just read your e-mail. ``As many of you know, the FDA is required to tell us by the end of next week whether the filing of the BLA for Erbitux has been accepted and whether the file will be granted expedited review. Given the importance of this news, we believe employees should not trade ImClone stock until we receive definitized information from the FDA and a press release is issued.'' ``Accordingly, we have put into effect a company-wide blackout on trading in ImClone stock, as described in Section IV (D) of ImClone's insider trading policy.'' So, I see before this blackout a lot of senior people selling thousands of shares of stock, and the FDA contact on December 12; and your argument is that the contact on December 12 was routine and that these individuals, these senior people, were not inside the close group that you considered the higher management, but these were--from their titles, seem to be higher management. And yet they were all selling a large amount of stock prior to the blackout that was instructed on December 21. And so I'm just finding that a little bit difficult. So I think---- Mr. Waksal. If I could just comment, sir? Mr. Fletcher. Briefly. Mr. Waksal. I believe that whenever a company's stock goes up as high as ours was going up and it took place several times during the course of that year, on all of those occasions individuals took the opportunity to sell some of their shares or to exercise stock. And I have to say, we went through an investigation, looked into whether or not there was any sense of insider trading; and the conclusion that we reached, based on the inquiries, was that these trades were not based on inside information. They were not based on nonpublic, material information, and they were done for personal, individual reasons. And I have to say today that that memo that you point to speaks very clearly about the gentleman, Tom Gallagher, and others not knowing about what was taking place in this BLA process. Mr. Fletcher [presiding]. The gentleman's time has expired. Recognize Ms. DeGette for 10 minutes. Ms. DeGette. Thank you, Mr. Chairman. Mr. Goldhammer, you've been the chairman of the ImClone board since 1991. Would that be correct? Mr. Goldhammer. Yes. Ms. DeGette. I think you're going to need a microphone, and now you'll need to turn it on. Mr. Goldhammer. Hello. Ms. DeGette. That's great. Mr. Goldhammer. Yes, ma'am. Ms. DeGette. Okay. And in the period that we're talking about here, up until last spring, you and Dr. Sam Waksal and Dr. Harlan Waksal were the three members of the executive committee of the board of ImClone, right? Mr. Goldhammer. Yes. Ms. DeGette. How long were the three of you the members of the executive committee? Mr. Goldhammer. Since the company was founded. Ms. DeGette. And that was when? Mr. Goldhammer. 1984. Ms. DeGette. Okay. So for that whole period of time it was just you three who were the executive committee, right? Mr. Goldhammer. Yes. Ms. DeGette. And so you were all charged with making all of the decisions between board meetings, as executive committees do, right? Mr. Goldhammer. Yes. Ms. DeGette. Now, throughout the period--really, throughout the 1990's, Dr. Sam Waksal had a number of loans from the company. I think we already talked about that a little bit, right? Mr. Goldhammer. Yes. Ms. DeGette. If you'll look at Tab 63 in your binder, it kind of summarizes the loans, and it says on October 1, 1992, there was a promissory note from Sam Waksal for $257,000 plus 10 percent interest; April 1, 1993, $367,000 bearing 10 percent interest--that consolidated the other loan--then on March 22, 1995, $157,000, roughly, bearing 8 percent interest. And it goes on like that, January 1998, another loan, $130,000; and then December 21, 2000, $282,000, roughly; and then in July 2001, right before the Bristol-Myers deal, Sam Waksal took $18,178,750 in payment for the exercise price associated with the exercise of stock options and warrants, right? Are you following that? Is this a pretty accurate summary of the loans that Dr. Waksal received from the company? Mr. Goldhammer. I think so. Ms. DeGette. Now, all throughout this period of the 1990's I think you and also Mr. Landes and others said this company was a small biotech company, but trying to grow, right? Mr. Goldhammer. Yes. Ms. DeGette. And I assume that capital was always tight in the company, as it always is with small, growing companies, right? Mr. Goldhammer. Yes. Ms. DeGette. But if you make these loans, even though they're paid back eventually, while the loans are outstanding, that's capital the company doesn't have at that time, isn't it? Mr. Goldhammer. Yes. Ms. DeGette. Okay. Now, let's talk for a minute about this $18 million loan at the same time Dr. Waksal, Dr. Harlan Waksal, took a loan for $17 million, the promissory note for $17 million, also for the exercise price for the stock options, correct? Mr. Goldhammer. Right. Ms. DeGette. And---- Mr. Goldhammer. That's the last one. Ms. DeGette. I'm sorry? Mr. Goldhammer. I had to go to another page. The answer to that is yes. Ms. DeGette. All right. Now, there were three people who exercised stock options from that transaction. The two Dr. Waksals and you, right? Mr. Goldhammer. Right. Ms. DeGette. And there were only three people that exercised stock options, right? Mr. Goldhammer. I think there were four. Ms. DeGette. Four? Who was the fourth? Mr. Goldhammer. Oh, exercised options. Mr. Waksal. There were many people who were exercising options. Ms. DeGette. I'm sorry. Who borrowed money? Mr. Waksal. There was a fourth person who borrowed money, as well, I believe. Ms. DeGette. And who was that? Mr. Waksal. Dr. Arnie Levine. Ms. DeGette. Okay. But three of the four people who borrowed money to exercise the options were the three members of the executive committee of the board of directors, weren't they, Mr. Goldhammer? Mr. Goldhammer. Yes, they were. Ms. DeGette. Okay. Now, there was a great concern about some of Dr. Sam Waksal's spending habits throughout the period of--well, throughout the 1990's. Would that be fair to say? Mr. Goldhammer. I would say that's fair. Ms. DeGette. And why would you say that Mr. Goldhammer? Mr. Goldhammer. Well, because in the beginning, as you say, it's a small company---- Ms. DeGette. Uh-huh. Mr. Goldhammer. [continuing] started off with about 20 people. Even through the middle of the 1980's, late 1980's, we only had 50 or 60 people; so it was a small company. Ms. DeGette. Right. And you're worried about people--the board is worried about people--about keeping costs under control, right? Mr. Goldhammer. Yes. Ms. DeGette. If you could take a look--and, Mr. Kopperl, it'll probably be good for you to take a look--at Tab Number 5, which is the minutes of the audit committee meeting held on February 12, 1998, which was several years ago. Take a look at that second page. I was particularly interested in Number 6 because, over the years, I've dealt with a lot of corporations; and I've got to be honest, I've never seen a document like this where the audit committee of the board of directors has got to tell the CEO that, for example, they can only charge $50 to $100 of wine per bottle, or that they can't buy sporting tickets except exceptional circumstances, or that under ``Lodging''--clearly Motel 6 is neither necessary or appropriate; however, five-star European hotels, such as the Crillon, and occupying a suite are inappropriate unless a significant discount can be obtained. Have you ever seen a corporate travel policy that goes into these specifics, Mr. Kopperl? Mr. Kopperl. I have not. Ms. DeGette. And what was the purpose of enacting such a policy? Mr. Kopperl. I'm glad you asked that. Ms. DeGette. I am too. Mr. Kopperl. We, ever since I joined the board, have had an expense account procedure. The--beginning in 1994, this procedure was codified in a lengthy--I'll call it ``booklet,'' a document that explained what the procedures were for expenses to be reimbursed. And this ``booklet,'' if you will, is still valid today. Ms. DeGette. And when was the booklet promulgated? Mr. Kopperl. In 1994. Ms. DeGette. Okay. Mr. Kopperl. Okay? Ms. DeGette. But this document---- Mr. Kopperl. I'll come right to that if you just give me one more moment. Ms. DeGette. Yeah. Mr. Kopperl. Beginning in probably 1996 or -7, I was asked by the board or by the other--I was, anyway, by the other members of the audit committee to review Dr. Waksal's, Sam Waksal's expense account. In 1996, we instituted a very important change, and that was that all charges that Sam Waksal ran up on his American Express credit card, which I think was the only credit card, corporate credit card had to be paid by Sam Waksal personally. So if he wanted anything, if he wanted the company to pay anything, he had to come to the company and ask for reimbursement. Ms. DeGette. Right. Mr. Kopperl. It was not that the company was paying the bill and then going to Sam Waksal and asking for reimbursement. Ms. DeGette. You need to summarize fast, because I don't have a lot of time. Mr. Kopperl. So there were a lot of expenses for which he asked us to reimburse him, and we--and we went through our financial department, which lumped expenses into three different categories: clearly business expenditures, clearly personal expenditures and those that needed to be discussed. I was the guy who was supposed to review those, all of those, and I decided in late January 1998 that this was taking far too much of my time and that we had to come up with a better--a better system, and that's why you have this. Ms. DeGette. Okay, great. Thanks. But see, here's the thing: The 1992 loan for $275,000 was for personal expenses run up on the credit card. Then you have the 1994 policy, then you have this audit committee meeting in 1998. It's like you guys kept doing stuff, but it never changed. And I just have one final kind of comment, and you can respond, any of you, Mr. Goldhammer, if you want. Here you have a forgery which Mr. Landes, a lawyer, says, well, it's because he didn't understand a procedure. I never knew a standard procedure to be a forgery. In 1991, then you have a whole systematic taking out of money and loans, abuse of credit card charges on the corporate credit card for almost a 10-year period. Then you have another forgery. Then you have insider trading around Christmas of last year, which I haven't even gotten to ask about. And it still takes the board almost 6 months to fire the guy, and he's only fired 2 weeks before criminal charges are brought. I am--I'm just--I'm stunned, and I'll yield back the balance of my time. Mr. Greenwood. The Chair thanks the gentlelady and recognizes the gentleman from Kentucky for 10 minutes to inquire. And before doing so, I would note that I believe there will be two votes here, so at the end of Mr. Fletcher's questioning, we'll probably recess until 3:30. Mr. Fletcher. Thank you, Mr. Chairman. My concern--I wasn't here for all of the testimony. I've certainly read through and reviewed some of it. I wanted to address the concerns I've got about looking--during this period of time particularly when the studies were going on, there seemed to be a lot of promotion going on about the effectiveness of Erbitux and what it was going to do in the treatment of colon cancer particularly. At the same time, we have this scientific advisory board and a lot of publicity goes out of certainly the distinguished members of that board. And let me ask, I know--Dr. Mendelsohn, I believe, is a member of that board. Is that correct? Mr. Mendelsohn. Yes, that's correct. Mr. Fletcher. And certainly you have a very distinguished record as being, I guess in your testimony, President of and Professor at the M.D. Anderson Cancer Center at the University of Texas, so you probably have a lot of experience, if not personally, at least from a management standpoint, of overseeing cancer trials, protocols, I assume. Are those done at M.D. Anderson cancer center? Mr. Mendelsohn. Yes, they are. Mr. Fletcher. Let me ask you, as a member of that scientific advisory board from 1997 to 2001--is that right? Mr. Mendelsohn. And earlier, yes. Mr. Fletcher. Okay. Who were some of the other members on that board? Mr. Mendelsohn. Dr. Zvi Fuchs, Dr. Tom Deuel, Dr. Tom Shenk, Dr. Arnold Levine and myself, and for a while, Dr. Fred Sparling and Dr. Gerald Keusch, K-e-u-s-c-h. Mr. Fletcher. It would seem to be a very distinguished group and people well known in the oncology and immunology communities; is that a fair assessment? Mr. Mendelsohn. Yes. Mr. Fletcher. Let me ask you why the advisory board was established. Mr. Mendelsohn. The scientific advisory board, when I joined it in 1992, had the main function of reviewing the research that was going on at ImClone because they were doing research, studying not only Erbitux. Well, they weren't even studying Erbitux; they didn't have it. They were studying a variety of approaches to treating cancer, and they were also looking at licensing opportunities to bring in compounds. And we would review the research that others were doing that the company might license, and we would review the company's laboratory research program. Mr. Fletcher. Let me ask you during the period--I mentioned 1997 to 2000, did that--the scientific advisory board meet during that period of time? Mr. Mendelsohn. Up until around 1996 or 1997, it met as a group regularly. After 1997, the company's emphasis shifted more toward two or three products that they were actually bringing into clinical trials, and the scientific advisory board was consulted with individually or in groups of two or three, as needed. Mr. Fletcher. So--it did not meet as a group of six or seven? Mr. Mendelsohn. No. It did not. Mr. Fletcher. Let me ask you, because during--you know, the problems I see here and as we had the previous hearing on this was that we've got some very distinguished and able members on the board, on the scientific advisory board as well, and yet all the time we had a flawed protocol. We had protocol that wasn't being followed even in the trials at some very distinguished centers. Were any of those trials being done at M.D. Anderson? Mr. Mendelsohn. The registration trials on colon cancer were not being done at M.D. Anderson, but other trials were done at M.D. Anderson. Mr. Fletcher. Let me ask you, it seems rather odd to me that you've got a scientific advisory board that is really made up of some very distinguished members and yet, and I assume their responsibility, somewhat, was to oversee the scientific side of these protocols that were going on. And yet they were so flawed and yet the whole time when the scientific advisory board was not meeting, not overseeing the protocols--or at least if they were, they were doing an ineffective job--you have the company and the board still promoting this product as being very promising in the future. Mr. Mendelsohn. You've asked a number of questions. First of all, the scientific advisory board members that I named were nearly all Ph.D.s and were much more focused on the preclinical work than the clinical work. The protocol was not reviewed by that board for flaws at all. It was not the business of that scientific advisory board to review the protocol. Mr. Waksal. Congressman, if I could interrupt for a moment---- Mr. Fletcher. Yes? Mr. Waksal. A couple of points. First, the statement made that the protocol was obviously flawed: The company, the investigators who were working on that protocol did not feel, and I don't believe--feel today that that protocol was flawed. Second, the promotional aspects of using our SAB for promotional reasons that had not been done by the company: I think it's--it is not a fair characterization to state that the company was out promoting a flawed protocol or a flawed effort. What we were doing was, we were working to move this drug forward through clinical studies, and I believe we were doing so in an appropriate way. Mr. Fletcher. Let me interrupt you just a minute, Dr. Waksal, because I---- Mr. Waksal. Please. Mr. Fletcher. I want to make sure--you're saying that you felt like ImClone during this period of the trials of Erbitux was practicing sound science during the process of getting FDA approval, or at least to the extent that you were working on the phase II studies. Mr. Waksal. Well, let me emphasize that. I strongly believe we were doing sound science and appropriate science the entire time we were working and moving this process forward. Absolutely. Mr. Fletcher. Well, let me say, when we spoke to the parent company, and the way they oversee protocols, and when we--you were here in the previous hearing; we talked. There was apparently very little oversight. There was a great deal of information put out on how promising this drug was. Mr. Waksal. I'm sorry, sir. What information was put out that was inappropriate on how promising the drug was? Mr. Fletcher. Well, I think, given the fact that the emphasis seemed to be more on the marketing of Erbitux than it was on overseeing the trials---- Mr. Waksal. I don't believe that's the case. I believe we were working very hard. We're a very small company, very small company that used clinical research organizations, individuals with great knowledge in this area, to oversee these studies and protocols; and we worked closely with them to move it forward. Mr. Fletcher. I think clearly from what the FDA presented and how the protocols were not followed, and from the last hearing we had where the oversight, I think, maybe it's due-- because of a small company or whatever, but it certainly came far short of what was necessary to ensure it. And yet we have--even here, someone has suggested that, you know, the board maybe should--the scientific advisory board should meet. Let me read this: ``Dear Sam and Harlan: ``I'm sorry there's been some turbulence and possible misunderstandings relating to the final approval of C225, Erbitux. I know this must be distressing for everybody since many outsiders apparently are suffering from a lapse in confidence in the company as a result of various public statements and disclosures. I suggest that your scientific advisory board could help if you were to bring us together to review the situation in some detail. ``I realize that I am not a cancer investigator, but I think the board could be very useful at this particular time and I suggest that you do bring us together again for this purpose.'' Do you recall this letter? Mr. Waksal. Yes it's from Dr. Fred Sparling. It was very kind of him to reach out to us. Mr. Fletcher. That's correct. And yet, was his advice followed? Mr. Waksal. Well, his advice was that we pull together the scientific advisory board. We have much greater depth with a great deal of other clinical advisors, that have expertise in this area, that we worked with to start to address the issues and concerns. Now clearly, sir, one of the problems we had with our clinical study was that we had faulty documentation. That is something that I talked about at the last hearing, something that I regret took place and something we are still working to make sure is in place and corrected. Regarding the advice we were receiving, we had great expertise from the oncology community, from individuals with great expertise, from all of these centers, 25-plus centers, who were working with us to make sure that our protocols were well defined and moving forward appropriately. Mr. Fletcher. Let me just say that we have some letters from Dr. Sparling saying that basically he ended up resigning, I believe because of the lack of response that he received; or at least, I think he felt like the scientific advisory board was not being taken seriously in the role, and he eventually resigned. Let me ask Dr. Mendelsohn something. I mean, there's a tremendous expertise on this board, and I grant that. And, to me, it's amazing that with this expertise, you've got such a promising drug--which still seems promising to me, from the literature--and yet, at the same time, you seem to have a company that has more emphasized the marketing and being concerned about that than making sure that the science was done well. You have mentioned that there was problems with the data collection. There were patients that were taking it in the protocol that did not meet the design of the protocols or the standards of the protocol. Those are the very basic elements of research. And folks like yourself that have been in this business a long time know that throws out all of the research and makes it really lack credibility. Mr. Mendelsohn. The protocol was developed with the advice of medical oncologists from some of the world's greatest institutions, 27 of which participated in carrying it out. There were numerous meetings. I went to those meetings to give background. I often attended meetings to give background and the scientific rationale for what we were doing; and then these various experts from many institutions around the country, that you're aware of because you've seen the list, would get together and work with the company. Then the company also brought in expert consultation from individuals who worked closely with it and developed a protocol. The protocol was managed through a---- Mr. Fletcher. When did you first find that the protocol wasn't being followed as it was laid out, and when some of the data collection was inadequate? Mr. Greenwood. If the gentleman would yield for a moment. We have under 3 minutes to make this vote, two votes with regards to Iraq, so it's important that we get there. So I'm going to ask that we recess at this moment, and we'll return at 3. [Brief recess.] Mr. Greenwood. The subcommittee will come to order. Mr. Stupak. Mr. Stupak. Thank you, Mr. Chairman. Dr. Waksal, the questions that Mr. Fletcher asked and one that bothers a lot of us up here, we continue to hear you say, look, there is no problem with Erbitux, it is just some missed documents, missing documents, things like that. But yet it continues to be--in January 2002, the Cancer Letter to Trade Journals said--put down some of the reasons why the FDA did not approve your fast track authority there. And those are some very serious problems with the protocol and with your application. It is not just missing documents. And in fact, it really raised some very, very serious questions. And that is what all of us believe up here. You continue with this line that, well, it is just this or this missing. What do you base that on? Mr. Waksal. Well, first of all, let me say that I am not saying that there were not problems with the biologic license application. The question is, I keep saying there are no problems with Erbitux. Well, indeed there were problems with the application. Mr. Stupak. There is serious problems with your protocol. Mr. Waksal. Well, no, sir. There were problems with the excuse of a protocol. There were problems with the documentation. Mr. Stupak. High rates of patient ineligibility. There were so many waivers given. Even Bristol-Myers Squibb, who was your partner in this whole thing, their independent radiology review showed that strict scrutiny of the study data yield only a response of 12.5 percent, but yet you are promising 22 percent. Mr. Waksal. Well, that is not true, sir. I never promised 22 percent. What we reported--what we reported was very clear. The scientists that were involved in the trial, the oncologists reported at their sites based upon---- Mr. Stupak. Based upon studies which showed high rates of patient ineligibility and waivers given to patients. So the study that you relied upon with 22 percent wasn't--and you couldn't achieve it with all these waivers and high patient ineligibility. Mr. Waksal. Well, if I could comment. Again, with respect to response rate, the response rate at the independent sites and then subsequently done by an Independent Radiology Advisory Committee showed the response rate in the 19 to 20 percent range. Now, whenever you get that information, the next question is, were are all those patients eligible? Were all those appropriate? There were deviations. In every study, in every protocol there are deviations. We just---- Mr. Stupak. Not at the rates we have seen here. Mr. Waksal. Well, while one could argue whether the rates here were higher than others, I have to state that every protocol, every study has protocol violations and deviations. Most importantly, the comment that only 12.5 percent response rate is, in my opinion, understating the real value of what was shown. It was in a worst-case scenario. Mr. Stupak. This is Bristol-Myers Squibb's study that says it is 12.5 percent. Mr. Waksal. Yes, 12.5 percent. Mr. Stupak. That is your partner in this whole thing who would want to see it to be a very successful drug and would not downplay the number. Mr. Waksal. They didn't downplay the number. As you remember, when they sat here, they said they didn't look at 12.5 percent as a failure. They believed 12.5 percent was a very excellent response rate in this type of drug in this kind of patient population. Mr. Stupak. Well, not really. That is not what they said, because Erbitux was being used with other combination drugs, and you couldn't make a determination whether it was the Erbitux which was fighting the cancer or the combination of the other treatment. Mr. Waksal. Well, that is the real question that we are trying to identify right now. As you know, we did a single agent study. And with the single-agent study, we had a 10.5 percent response rate. And that work is continuing to go forward. Mr. Stupak. If it is just missing data and improper documentation and not unusual numbers, in your estimation, have you ever rehabilitated this application to get it renewed again by the FDA? Mr. Waksal. Well, the world has changed. Mr. Stupak. Well, no. Yes or no. That is all. Mr. Waksal. Well, the answer is, yes, we are doing so. We are rehabilitating the study. Mr. Stupak. You haven't done it. So if it is just simple missing documentation, why is it taking so long? Mr. Waksal. Well, we have collected the documentation. And what we are doing right now, before going forward irresponsibly, to review anything without the guidance of the FDA, we have been in continued meetings with the FDA to get their appropriate guidance as to the right way to reevaluate the data and the documentation in this trial. Mr. Stupak. Who is your--who is ImClone's P R person that they get you all this free advertisement on 60 Minutes and USA Today? Mr. Waksal. Well, if I could just comment. The 60 Minute story was a very strong and negative story about ImClone. It was about compassionate use. And we did not participate in any way. And the other one that was mentioned was a Business Week article. Mr. Stupak. Sure. But my question is---- Mr. Waksal. I have to say, the author is here today. And the company had no role at all in moving that forward. Mr. Stupak. I don't want you to stall on my time. My question was, who was your P R firm? Mr. Waksal. We do our own invested relations and PR internally. Mr. Stupak. So ImClone got the USA Today articles, the Business News articles, the 60 Minutes article? Mr. Waksal. Well, actually, it is the journalists that initiate those articles. We went ahead and cooperate with their journalism. We cooperate with newspapers, journalists, et cetera, while the stories are being done. Mr. Stupak. So the promotions we have seen are basically international ImClone putting forth their spin on their Erbitux. Mr. Waksal. Well, actually, I just said that that is not. The case the company hasn't put forward a spin at all on Erbitux. We have relied on data from reputable centers, from reputable studies to disclose what is taking place with this drug and how it is being used in patients. Mr. Stupak. Were you at the meeting when you sat down with the FDA before they granted you the fast track authority? Did you go to that meeting? Mr. Waksal. The meeting in August 2000? Mr. Stupak. Right. Mr. Waksal. Yes, I was. Mr. Stupak. And who was with you from ImClone? Mr. Waksal. We had a large group of people there. We had Dr. Mike Needle. There was a long list. And I don't have those names right in front of me, but I would be happy to provide them to you. Mr. Stupak. If you would, that would be great. Dr. Mendelsohn, how much time have you spent working on Erbitux? Mr. Mendelsohn. I have been studying Erbitux--I produced Erbitux in my laboratory in the early 1980's. And until the year about 1998, I was studying it in a laboratory that I ran or collaborated with. Mr. Stupak. Can you tell us when Erbitux first sought to find someone to manufacture it, to get it licensed and approved through the FDA? Mr. Mendelsohn. The first contact was in the middle to late 1980's. Mr. Stupak. And so it has been well over 10 years in trying to get this drug manufactured? Mr. Mendelsohn. That is correct. Mr. Stupak. And why the difficulties in getting it? Mr. Mendelsohn. In the 1980's, the company that licensed Erbitux, which was C225, from the University of California was---- Mr. Stupak. Was that Ely Lilly? Mr. Mendelsohn. That was originally Hybritech, which was bought out by Ely Lilly. Mr. Stupak. Okay. Mr. Mendelsohn. Just flashback to that period, no one believed that monoclonal antibodies were going to be that important. And the concept of blocking a growth factor receptor, which was our idea, was still very novel. Hybritech was bought by Ely Lilly. They had had a bad experience with another antibody, and decided not to pursue things further. And actually, the University did due diligence and got the license back from Ely Lilly. And at that point, ImClone took the license from the University of California with a more aggressive posture. Mr. Stupak. And you still have confidence in this drug? Mr. Mendelsohn. Yes, sir. Mr. Stupak. Can the application be rehabilitated, or is it going to take more time to get it in a position where it can be presented to the FDA? Mr. Mendelsohn. In my opinion, the application is ready to be rehabilitated. But I believe---- Mr. Stupak. Did you work with Bristol-Myers Squibb this time, or did ImClone do it on its own again? Mr. Mendelsohn. Bristol-Myers Squibb and ImClone have collaborated closely on this. And I am very pleased about that. Mr. Stupak. All right. Ms. Vaczy. Ms. Vaczy. Yes. Mr. Stupak. I am looking at--Mr. Stearns had asked you some questions along these lines about your memo you did back, under Tab 21, on the companywide blackout for no trading for a week because you were expecting to hear something back from the BLA on Erbitux. Have you ever done one of these before for ImClone? Ms. Vaczy. A companywide blockout? Mr. Stupak. Tab 21. Ms. Vaczy. We have done blackouts before. Yes. Mr. Stupak. For ImClone? Ms. Vaczy. Yes. Mr. Stupak. Why did you do this one on December 21, 2001 at 3:30 in the afternoon, which happens to be a Friday? Why would you do it? Ms. Vaczy. Well. Mr. Stupak. The week is over. The market is ready to close, close in about 22--34 minutes. Ms. Vaczy. December was a very busy time, and there was a lot going on. And the situation with the BLA was---- Mr. Stupak. Can you turn on your mike or either pull it up a bit? I can hardly hear you. Ms. Vaczy. The situation with the BLA was evolving. And it was not until December 20 that we had a certain communication from the FDA that got us sufficiently concerned that we felt it was appropriate that no one within the company trade any longer. Mr. Stupak. Well, then were you aware that the stock trades that went on prior, between December 12 and 20 then that Mr. Stearns pointed out to you the list of? Ms. Vaczy. I am aware of them now. I would need to look at the list to say what I was aware of. Mr. Stupak. So you didn't know anything about it back then? Ms. Vaczy. I would need to see the list to know specifically what I knew at the time. Mr. Stupak. Well, it is Tab number 1 in your book there. It is on the second page. It gives some dates of all these sales. The third page has quite a few of them. The point being, as Mr. Stearns pointed out in his questioning, that there was a lot of people who moved a lot of stock between December 12 and December 21. Ms. Vaczy. Well, I think what--as Dr. Waksal had mentioned, we had previously submitted to the staff of the committee. It was by no means an unusual number of employees engaging in option exercises in sales in December than prior months. So we didn't consider it unusual activity. And the individuals, as we were discussing with the Tom Gallagher e-mail and his reference to only a select group of senior management having any information, none of those people are on this list. Mr. Stupak. Well, tell me, when did you issue another one of these blackout orders, companywide blackout orders for ImClone? Give me another time. Ms. Vaczy. Name a previous time? Mr. Stupak. Yeah. Ms. Vaczy. Well, I think just--could I give you sort of an explanation of how we have typically administered---- Mr. Stupak. No. I just want to know another time when you have done it. Ms. Vaczy. Okay. Mr. Stupak. So I can go back and make comparisons between those who sold in and those who sold out. Ms. Vaczy. Okay. I know that one was issued companywide when the company entered into a license agreement with Mark Cage, E A A. Mr. Stupak. And when was that? Ms. Vaczy. That was--I believe it was December 1997. Mr. Greenwood. The time of the gentleman has expired. Mr. Stupak. Thank you, Mr. Chairman. Mr. Greenwood. The Chair recognizes himself for 10 minutes. And let me return to the board members, if I might. On March 26 of this year, the press reported that Sam Waksal had failed to report 50 stock transactions over a 10- year period. The question is, did you see this article? And, were you aware of these allegations before the article was published? Any of the members of the board? Mr. Goldhammer. Well, I saw the article. I was unaware that he never filed a Form 3. Mr. Greenwood. Anything different from Mr. Kopperl or Dr. Mendelsohn? Mr. Kopperl. I also saw the article and was not aware. However, I would point out that the company had always had a procedure in place. All employees, officers, and directors were very aware that. And it worked. Mr. Greenwood. Except in these instances, to your knowledge? Dr. Mendelsohn. Mr. Mendelsohn. I don't remember when I was made aware of it, but it was around that time. But I don't remember whether it was through the company meetings or through the media. Mr. Greenwood. But you weren't aware of it at the time? Mr. Mendelsohn. Right. Mr. Greenwood. On March 20 of this year, Sam Waksal appeared before the Securities and Exchange Commission to give sworn deposition testimony, and invoked his fifth amendment privilege against self-incrimination. On the next day, March 21, ImClone's independent directors recognized that Sam Waksal had a personal constitutional right to refuse to answer the SEC's questions, but decided it was not appropriate for the board to leave Sam Waksal in place as president and CEO in circumstances where he had refused to answer questions put to him by the SEC. The next day, on March 22, Sam Waksal reversed his decision on asserting his privilege, and wished to testify before the SEC. Is that your understanding of those facts, as I have set forth, correct? Mr. Mendelsohn. Yes. Mr. Greenwood. And as a result, Sam Waksal remained CEO of ImClone; is that correct? Mr. Mendelsohn. Yes. Mr. Greenwood. One of ImClone's directors, Richard Barth, dissented from the board's actions and resigned from the board on April 2, 2002, because he thought Sam Waksal should be replaced as CEO; is that correct? Mr. Goldhammer. Yes. Mr. Mendelsohn. I don't know why he resigned. But he certainly was---- Mr. Greenwood. Okay. Mr. Mendelsohn. [continuing] making that statement. Mr. Greenwood. Perhaps you can turn to Tab 40 in your binder. That is just his letter of resignation. It doesn't go to his motive. Sam Waksal's personal financial problems resulted in ImClone issuing several promissory notes to extend loans to Dr. Waksal because of his use of corporate credit card for personal expenses. We have gone over some of that. That is correct. Is that right? Mr. Mendelsohn. Yes. Mr. Greenwood. Due to Sam Waksal's history of irresponsibility and using his corporate credit card, ImClone imposed special procedures to review Sam Waksal's expenses and determine what should be reimbursed. We have already discussed that as well. Mr. Mendelsohn. Yes. Mr. Greenwood. You agree with that? Given all of these problems that you knew about in April 2002, you still retained Sam Waksal as CEO, and you gave him a bonus of $415,000, which, had he been terminated as advocated by Richard Barth, ImClone would not have been obligated to pay; is that correct? Mr. Goldhammer. That was a payment for 2001. It was paid in 2002, as this began to unravel. Mr. Greenwood. But what---- Mr. Kopperl. Mr. Chairman, if I may. We had a contractual obligation to pay Sam Waksal a bonus. I think the sum actually was $450,000. But whatever it was. Prior to entering into the Bristol-Myers Squibb transaction, Bristol insisted that employment contracts be negotiated and put in place with Sam Waksal, Harlan Waksal, and two or three others. And it was under that, the terms of that agreement with Sam Waksal that the company was obligated to pay. Mr. Greenwood. And you feel that that obligation existed despite his conduct? You didn't feel that he had breached his end of the bargain? Mr. Kopperl. As of that time, our attorneys advised us that we should make the payment. Mr. Greenwood. All right. The April 15, 2002 issue of Fortune reported that an investigative report showed that Sam Waksal--quote: ``Sam Waksal seems to have developed a pattern of forming partnerships for real estate, restaurant, and small business ventures, and then borrowing money from these ventures and not paying it back.'' Over the past 20 years, the report shows dozens of lawsuits and tax liens have been filed against Waksal by the IRS, New York State, American Express, banks, and brokers, arts galleries, contractors, and individuals. And if you want evidence of that, you can look at Tab 41. Did you see the article in April? And, were you aware of these allegations before the article was published? Mr. Kopperl. I had better look, because I don't know. Mr. Goldhammer. Before the--I mean, before this article was published? Mr. Greenwood. Right. Were you aware of any of this litany of problems that the CEO of your company had for 20 years, where he had dozens of lawsuits against him, tax liens filed by the IRS, New York State, American Express, banks and brokers, art galleries, contractors, and individuals. My question is, were you aware that he had this long history of financial irregularity? Mr. Goldhammer. Yes. I was aware that he had a lot of problems with his personal finances. I didn't know about every specific. Mr. Greenwood. Let me ask you this, Mr. Goldhammer. I have constituents in my district, and we all do, who lost money on ImClone, who bought ImClone stock because they believed it was a promising company. They lost a lot of money. Now, your job obviously as a member of the board of directors, as chairman of the board, was to protect them, to protect the value of their investment. And I am wondering how--given what you have just said, that you were aware that he had this long tortuous history of financial mismanagement, how did you see that keeping him on in his position as CEO of this company was consistent with your duty to protect the investors in the company? Mr. Goldhammer. Well, first of all, we talk about these loans that we gave him. We did not give him loans. Mr. Greenwood. That is not what I am talking about in this. Mr. Goldhammer. Okay. Waksal, in the last--Sam Waksal, in the last, I would say 2 years or so, the last couple years---- Mr. Greenwood. Turn your microphone toward you. Mr. Goldhammer. In the last 1\1/2\, 2 years, that he seemed to be out of his financial problems. He wasn't coming to me to try to get loans to help him, you know, et cetera, et cetera. And I think it is because he was borrowing a lot of money from banks. I am guessing that. I don't know that. But I know his-- he had a lot of securities, and I know he would probably have no hesitation in borrowing money against it. Mr. Greenwood. But did you have moments as a member of this board where you thought to yourself, is this guy worthy of our trust as the CEO of this company, given his lifestyle? What-- did you have times where you worried about whether or not this company and its future and the fate of its--the patients waiting for its product, that he was the right guy for this job? Mr. Goldhammer. Yes, I have. Mr. Greenwood. And did you share that? Was that an opinion, as far as you know, that was held by other members of the board of directors? Mr. Goldhammer. I just can't answer that. Mr. Greenwood. Have you ever had discussions with any other board members where you guys would have a drink and say, I don't know about this guy. He is--really seems to be---- Mr. Goldhammer. Not really. Mr. Greenwood. No? Mr. Kopperl, Dr. Mendelsohn, either one of you have such concerns? Mr. Kopperl. The board actively considered whether to continue Dr. Sam Waksal as the CEO, beginning---- Mr. Greenwood. When was that? Mr. Kopperl. Beginning in January. Mr. Greenwood. Well, that was after all of this, after the insider trading issue and so forth. But I am talking about in all of the--the litany goes on and on about financial irregularities with Sam Waksal. And my question to you as a board member is, as you observed this behavior, this conduct, did you have moments as Dr.--as Mr. Goldhammer did, when you wondered whether he was--his judgment was sound enough to run this company and protect its investors? Mr. Kopperl. We--I speak for myself--regarded Sam Waksal as the visionary who started the company, and in particular, enabled Erbitux or C225 to be brought to ImClone and to develop that. Mr. Greenwood. So he was the company. Mr. Kopperl. So he wasn't--if you mean was he the whole company? No, he wasn't. But---- Mr. Greenwood. Not literally. Mr. Kopperl. Of course. But I mean, we figured--we felt that he---- Mr. Greenwood. Was he indispensable? Mr. Kopperl. That he was largely indispensable. And that also, because there were additional drugs in the pipeline. Mr. Greenwood. Let me ask a final question. On September 27 of this year, an article from the Wall Street Journal entitled ``Four Prestigious Labs Ousted Waksal for Questionable Work'' outlines a number of allegations about improper research practices by Sam Waksal at Stanford, the National Cancer Institute, Tufts, and Mt. Sinai. And that article is in Tab 58 if you want to look at it. The question to the board: Were you aware of any of these allegations before the article was published? Mr. Kopperl. I was not, for one. Mr. Goldhammer. I was not. Mr. Greenwood. Mr. Goldhammer says no. Dr. Mendelsohn? Mr. Mendelsohn. A similar story appeared in Vanity Fair during the summer, which I read. So that was when I was first made aware of it. Mr. Greenwood. Did that cause you concern? Mr. Mendelsohn. Certainly. Mr. Greenwood. Did you act upon those concerns? Mr. Mendelsohn. He was no longer running the company. Mr. Greenwood. Okay. So it was---- Mr. Mendelsohn. This past summer. Mr. Greenwood. It was this past summer? Mr. Mendelsohn. Right. Mr. Greenwood. That was the first you learned of any of this? Mr. Mendelsohn. That is correct. Mr. Greenwood. My time has expired. The Chair recognizes the gentleman from Florida. Mr. Deutsch. Thank you, Mr. Chairman. Dr. Mendelsohn, if I can actually follow up on what the chairman was just saying. You licensed Erbitux, ImClone, in 1993 after joining their scientific advisory board in 1992. The article that the chairman referred to states again there are at least four institutions that Sam Waksal was asked to leave, Stanford, National Cancer Institute, Tufts, Mt. Sinai, in each case because of suspicion of dishonesty in his research. When you licensed your product or your invention or your research, did you do any kind of due diligence about Sam Waksal before agreeing to place the intensity, the--your idea in his hand? Mr. Mendelsohn. Congressman, let me explain that the patent for the invention was held by the University of California. I had absolutely nothing to do with the negotiation of the licensing. Dr. Waksal asked me who had the patent, and I told him. And I told him, you will have to contact the Patent Office at the University of California to negotiate. And the entire negotiation was done without my participation. Mr. Deutsch. So you are not aware of any kind of due diligence that they would have done? Mr. Mendelsohn. I am unaware of what they did. That is correct. Mr. Deutsch. I mean, would it have been appropriate for them to have done some type of due diligence? Mr. Mendelsohn. They may well have. I just don't know. I mean, I was no longer at the University of California at that time, and they controlled the patent. Mr. Deutsch. I mean, it sounds like this is, to some extent, your life's work. I mean, you have obviously a great deal of pride and personal time, and besides finances, invested in this. Mr. Mendelsohn. That is correct. Mr. Deutsch. And obviously, I think you are sincere in trying to get the product into use in America and throughout the world. Obviously, the company that--if it was licensed, it would be a key ingredient in that. I mean, were you concerned about what type of company you were licensing the product? Mr. Mendelsohn. Yes. I was certainly concerned. And, of course, the license had been held by a major pharmaceutical company that did not move the antibody forward. I had talked with a number of other pharmaceutical companies who were not interested in moving this idea forward. And, frankly, I was delighted when I met Dr. Sam Waksal that he quickly saw that this wasn't just immunotherapy with an antibody,but that we were attacking an oncogene product called the EGF receptor, which is relevant in large numbers of human cancers and might be an attractive thing to bring forward. So when he contacted the University of California, and I knew he was doing that, I was delighted that there was somebody who seemed to have the energy and the vision to try to bring this forward. It was a small startup company instead of a big drug company, but I had found no one else to do it. Mr. Deutsch. Dr. Mendelsohn, in the tendered offer by Bristol-Myers last year, you made $6.3 million off the sale of 20 percent of your ImClone holding to Bristol. Mr. Mendelsohn. That is correct. Mr. Deutsch. That would put your total of ImClone holding at about $30 million at the time; is that correct? Mr. Mendelsohn. At the value of $70, that is correct. Yes. Mr. Deutsch. Why did you not feel that your interest in ImClone was not significant enough to inform the M.D. Anderson patients enrolled in the Erbitux trials of that potential conflict? Mr. Mendelsohn. Right. Well, let me say that I am very conscious of conflict of interest and potential conflict of interest. From the point of view of conflict of interest, I have never treated a patient with C225. And I--from the point of view of potential conflict of interest, whenever I have given scientific talks or written papers or had public meetings, I have always stated my holdings in the company and my membership on its scientific advisory committee and on its board. In November last year, before any of this happened, because of the concern I had about even a perception of conflict of interest, I instructed at M.D. Anderson that on all patient consent forms, my name be placed as a member of the board and holder of stock options at ImClone. This was done prior to the news article that has been referred to in these hearings from The Washington Post. And The Washington Post article acknowledges that in the article that I did do that. I have bent over backwards to support research with any product that blocks the EGF receptor. I was contacted by AstraZeneka at M.D. Anderson and asked, would you be willing to study ERISA. I put them in contact with the same doctors that there were studying Erbitux. And in point of fact, there have been more studies of patients on ERISA at M.D. Anderson than with Erbitux. So my goal is to get the patient the opportunity to have access to any drug that that particular patient and his or her physician feel has the best chance to help them. Mr. Deutsch. I guess the focus though, is really on the issue of informed or--informed potential conflict, and the fact that the M.D. Anderson policy on disclosure would have seemed to require that disclosure when it was not. Mr. Mendelsohn. No. There were no requirements that the president disclose. I added that to our policies voluntarily. It is being discussed thoroughly. In the past 2 weeks, the American Association of Medical Colleges has put out guidelines, which I am reading carefully. But I want to assure you that there was no policy at M.D. Anderson about this. When I came to M.D. Anderson, I put in a policy that no one who has a vested interest in experimental drug can treat a patient with that drug. That was novel then. This was something that I did on my own initiative at M.D. Anderson. Mr. Deutsch. So I guess the bottom line of your testimony to this point is that you felt there was no conflict in terms of the disclosure requirement on any outside standards? Mr. Mendelsohn. I believed that. But I also was concerned enough about the potential perception of conflict of interest that I added that. I regret that I didn't do that at the very beginning when all of this started. But I added that to our procedures at M.D. Anderson without prompting and of my own volition. Mr. Deutsch. One of the continuing trends or questions that we have asked and that has been going on is really the independence and diligence of outside directors which shareholders must rely upon to keep management honest and protect the interest of important corporate decisions. You serve or served on both the ImClone board and Enron, obviously two firms whose shareholders have taken a great deal of financial adverse effect, while very well compensated managers have been charged with crimes involving their fiduciary duty. Would you tell us that you feel whether you did your job successfully, or did the management of these firms--what happened? Did the system fail? Mr. Mendelsohn. We are here, I believe, to talk about ImClone, and I believe that I have fulfilled my duties and that management has fulfilled its duties. Management has admitted in front of this subcommittee that there were aspects of the way that the registration clinical trial was carried out, which could have been done better. And we are hoping to have this ratified by the FDA after we hear from them the final details. But the answer to your question is, yes, I believe I have fulfilled all my duties. Mr. Greenwood. Let me--while we await the return of other members, let me ask question of you, Dr. Waksal. I made reference to this article that was in the Wall Street Journal just a couple of weeks ago about, entitled ``Four Prestigious Labs Ousted Waksal for Questionable Work.'' Were you aware of these allegations? Mr. Waksal. I was not. Mr. Greenwood. Okay. When you were a resident at Tufts New England Medical Center, did the chairman of the Department of Medicine, Sheldon Wolfe, complain to you about Sam Waksal, who was not a medical doctor, covering for you by seeing your patients at Tufts New England Medical Center? Mr. Waksal. No, he did not. Mr. Greenwood. You were not familiar with that allegation or concern at all? Mr. Waksal. Well, I know that I was not there at the time. I do know that Dr. Sam Waksal, not masquerading as Harland Waksal, did speak to a patient that had been under my care. Mr. Greenwood. Okay. Did ImClone have a succession plan for Sam Waksal? Address this to the board of directors. Mr. Goldhammer. We did not have a succession plan for Dr. Sam Waksal. Although, I personally thought that as the company got larger, that Sam would be inappropriate to have a large company because it just wasn't his style. He was wonderful with the young company, building a young company. The reason I had never really even thought serious about firing him along the way, A, because we never lost any money by any loans that we lent him or anything like that. He always paid it back. But he was the spirit for our young research group. And it is so important with a young company, you have just got to let them breathe. And he would do that and he would encourage them. Mr. Greenwood. Would you ever consider him in the future as having a role at ImClone as an employee, as a director, as an officer, as a consultant, knowing what you know? Mr. Goldhammer. I would consider having him a consulting something if he so desired. I doubt if he would do it. Mr. Greenwood. Okay. Mr. Goldhammer. He would be excellent. Mr. Greenwood. Even if he is convicted? Mr. Goldhammer. Oh, no, no, no. But he would be an excellent consultant, is what I meant. Mr. Greenwood. Would you, Mr. Goldhammer, describe the membership and purpose of the executive committee at ImClone. Mr. Goldhammer. Well, the membership today at ImClone is, the executive committee has three outside board members and Harlan. Mr. Greenwood. What was it last year? Mr. Goldhammer. Before we changed it, it was myself and Harlan. And while Sam was here, he was on it, although we didn't have any meetings. Mr. Greenwood. According to the bylaws of ImClone, which are in Tab 19 if you need to refer to them, actions by the executive committee must be ratified by the full board at the next meeting; is that right? Mr. Goldhammer. Yes. Mr. Greenwood. Were all actions by the executive committee agreed to among yourselves, Sam and Harlan Waksal put to the board for approval? Mr. Goldhammer. I believe so. Mr. Greenwood. You have acted as a director on the boards of Kidder, Peabody and Company, the Boston Stock Exchange, Eastern Line Corporation, and Community Connected, Incorporated. Was it ever the practice of the executive committees of those firms to act without eventual reporting and approval by the full boards? Mr. Goldhammer. No. Mr. Greenwood. Okay. Mr. Goldhammer. Some of the young ones don't really have an executive committee. Mr. Greenwood. But where there are executive committees, they always reported to the boards. And let me ask Mr. Kopperl and Mr. Mendelsohn, as members of the board, were you given minutes and documents of all meetings or decisions by the executive committee? Mr. Kopperl. I don't believe that we--I do not believe that we were given minutes of the executive committee meetings. Mr. Greenwood. Okay. Did you and the board ratify all actions of the executive committee? Mr. Kopperl. I do not recall specific instances, Mr. Greenwood. However---- Mr. Greenwood. Let me give you some specific instances. In January 1998, a loan in the form of a promissory note to Sam Waksal in the amount of 100--nearly $130,000. Did you approve that? Mr. Kopperl. I do not recall. Mr. Greenwood. Okay. That is at Tab 4. In October 1998, a loan in the form of a promissory note to Sam Waksal in the amount of $100,000. That is in Tab 6. Mr. Kopperl. I do not recall whether the board ratified that. We would have to look at the minutes, obviously, of the board. Mr. Greenwood. Okay. And February 2001, a loan in the form of a promissory note to Sam Waksal in the amount of $282,200. Mr. Kopperl. That was indeed ratified by the board. Mr. Greenwood. That one was. Well, you are one for--you can remember one for four. In August 2001, an extension of the February loan of $282,200 to Sam Waksal for another 4 months. Were you aware of that? Mr. Kopperl. I am certainly aware of that. And indeed, the audit committee on October 10, 2001 took up the issue of the $282,200 loan and questioned the documentation of this loan. However, I would add that the loan was repaid in full with interest, I believe, on November--in mid November 2001. Mr. Greenwood. Okay. Dr. Mendelsohn, have you ever attended one of ImClone's EGFR, epidermal growth factory receptor summits? Mr. Mendelsohn. Yes. Mr. Greenwood. Where and when did you attend that? Mr. Mendelsohn. There were a number of them. Yes, I have attended a number of them, probably most that they had. So the answer would be yes. But I don't remember the locations. Mr. Greenwood. How about Cancun, Mexico in the winter of 2000? Mr. Mendelsohn. Yes. Mr. Greenwood. Who paid for this program? Mr. Mendelsohn. ImClone. Mr. Greenwood. Mr. Landes, did you ever perform legal work for another company while at ImClone? Mr. Landes. There were such occasions, yes. Mr. Greenwood. What was the nature of this work? Mr. Landes. There was a company called Tribeca that--for which a license was given from the University of Chicago. I was involved in helping that company obtain that license. Very little time was spent, but it was within my expertise. And that was a company that I expected, and still may be the case, might have some scientific synergy between its work and that of ImClone. Mr. Greenwood. And who paid your fees for that service, that work? Mr. Landes. As I recall, I received--I did receive a small fee for that I believe from the Tribeca company. But again, that--I don't think that fee necessarily represented the compensation entirely for the work. Again, this was something that I believed would have potential synergy between---- Mr. Greenwood. Is it fair to say that ImClone paid you to do that work? Mr. Landes. Mr. Chairman, I think it is possible that one could take that view, at least a portion of that. Yes. Mr. Greenwood. And Sam Waksal, that was Sam Waksal's company; correct? Mr. Landes. I don't really know the nature of the ownership of Tribeca. I knew that Sam was involved. And Sam had also again explained to me his concept, which I thought and still think was a valid one, that there would be synergies between a company like that, which was working in the area of herpes simplex infectious diseases and our work in cancer. Mr. Greenwood. Mr. Landes, who at ImClone cleared your carry forward sales transaction of $2.5 million worth of ImClone stock on December 6 of last year? Mr. Landes. That was cleared by Cathy Vaczy. Mr. Greenwood. Was she your subordinate? Mr. Landes. She worked in my department and I supervised the department. Yes. Mr. Greenwood. Did you see any problem with your support and it being able to clear your trade? Mr. Landes. I did not. Mr. Greenwood. If you made such a trade now, who would clear the trade? Mr. Landes. Now, it would be cleared by Daniel S. Lynch, who is the chief financial officer of ImClone. Mr. Greenwood. And why was the policy changed in that regard? Maybe I should ask Mr. Kopperl that question. Mr. Kopperl. I believe that it would be Mr. Saffron, who would approve or disapprove any such. Mr. Greenwood. Is he the CFO? Mr. Kopperl. No. He is senior vice president and general counsel. Mr. Greenwood. So why did you make that change? Mr. Kopperl. We made the change because in--I forget, was it February or March of this year--we determined that the insider trading procedures, which were in place and which everyone is aware of, needed to be strengthened. And this-- perhaps it was even later than that, Mr. Greenwood, because it may have been shortly before the Oxley-Sarbanes bill or law, that we determined that there would be a new, more rigid procedure followed. Mr. Greenwood. Ms. Vaczy, at the time, did you see any impropriety with you approving the transaction for your superior? Ms. Vaczy. I did not. Mr. Greenwood. Okay. And what is your understanding right now as to who would clear such a transaction under the current regime? Ms. Vaczy. Clear transaction by Mr. Landes? Mr. Greenwood. Right. Ms. Vaczy. It would be done by Mr. Lynch, who is our CFO. The structure under the revised policy are members of the legal department are approved by the CFO. Mr. Greenwood. So we just had a different answer from Mr. Kopperl. So---- Mr. Kopperl. I defer to them, as to the legal department, sir. Mr. Greenwood. Okay. Dr. Waksal, who was Sonya Benahutta? Mr. Waksal. I believe she is a friend of Sam Waksal's. Mr. Greenwood. Okay. If you turn to Tab 60, according to a September 30, 2002, letter from Omelvani and Meyers, Sonya Benahutta was not an employee at ImClone, and yet ImClone has produced records of a cell phone paid by ImClone, but used by Ms. Benahutta in addition to e-mails have been produced showing Ms. Benahutta as being on the ImClone e-mail system. Can you explain why a non-employee at ImClone would have use of an ImClone cell phone and have access to internal ImClone e-mail? Mr. Waksal. I know nothing about this. Mr. Greenwood. Do you know--so you don't even know if it is still the case that that--that these things are happening? Mr. Waksal. I do know that it came to my attention that she had been on ImClone's e-mail system. It was brought to my attention by the systems people. And my understanding is that she was---- Mr. Greenwood. When was that? Mr. Waksal. That was about I guess 3 or 4 weeks ago. And from what I understand, she is--and I can't--I really would have to get back with you, but I do not believe she is on the system. When it was brought to my attention, I expressed---- Mr. Greenwood. Did she receive any other benefits or compensation from the company, that you were aware of? Mr. Waksal. She was not involved with ImClone Systems. Mr. Greenwood. But that was not exactly my question. Mr. Waksal. Not to my knowledge, sir. Mr. Greenwood. Thank you. The gentlelady from Colorado is recognized for 10 minutes. Ms. DeGette. Thank you, Mr. Chairman. Ms. Vaczy, when did ImClone begin to be aware that the FDA may--that there may have been some issues with the FDA removing Erbitux from consideration? Ms. Vaczy. As I said earlier, and I believe we discussed in the last hearing, it was December 12, Dr. Lee had a conversation with the FDA where minutes of that conversation reflect her concern regarding their change of tone. Ms. DeGette. And when did you become aware that the--was it around December 12 that you became aware of that issue? Ms. Vaczy. I attended a meeting on December 12, and I had heard about the meeting the evening of December 11 that we were going to discuss after the company's--the management operations meeting an issue relating to the BLA. Ms. DeGette. Now, at that point--do you know--do you know, were others at ImClone aware of FDA concerns before December 12? Did anybody tell you about that? Ms. Vaczy. December 12 was the first contact that I am reporting, and it is not I who have the direct contact with the FDA. But per Dr. Lee, who was the main communicator, the conversation she had on December 12 was the first time she was concerned that there might be issues with the acceptance of the filing. Ms. DeGette. And you imposed a blackout period for the sale of ImClone stock by insiders on December 21 of that year; correct? Ms. Vaczy. Well, it was a blackout companywide. On the 18th of December, we started precluding members of management trading. But we also, during that interim, December 12 to 18, we relied on the fact that the select members of management that had knowledge could not proceed with any transaction without first being---- Ms. DeGette. But there was no--do you have a written policy as of the December 18 of the blackout policy? Because just now today is the first I have ever heard of it as of that date. Ms. Vaczy. There was an e-mail on December 18 to members of management. Ms. DeGette. From you? Ms. Vaczy. Yes. Ms. DeGette. And what did it say? Ms. Vaczy. I think I have seen it---- Ms. DeGette. Do you have a copy of it? Ms. Vaczy. I may have seen it in your exhibits, I believe, if I am not mistaken. But I don't recall. Ms. DeGette. Mr. Chairman, if we can ask permission for Ms. Vaczy to find that memo, I think that would be very helpful. Mr. Greenwood. Perhaps have you found it? Tab 21. Try Tab 21. Ms. Vaczy. I may be mistaken. Ms. DeGette. Yeah. Because we don't have---- Ms. Vaczy. But I can nonetheless speak to it. Okay. I am advised I was shown it during my interview where counsel is reminding me, and we are obtaining it now. Ms. DeGette. Okay. We have not been produced any evidence of a written blackout policy before December 21. So, Mr. Chairman, if that is the case, I would ask this witness to produce that policy for our committee. Ms. Vaczy. It has been suggested that I read the Bates ranges of two documents in front of me. HCEC-30479, and 78. Well, no, I am sorry, not 78. 79--and HCEC-30496. And I think maybe I am perhaps confusing you. On the 18th, an e-mail was sent to members of management reminding them that they were required to get preapproval of any transaction from the legal department under the insider trading policy. Ms. DeGette. So, in fact, you did not impose a blackout period on the 18th; you imposed it on the 21st? Ms. Vaczy. Well, no. If I can---- Ms. DeGette. Well, really, that is true. On the 18th, you said if you want to sell your stock, you have got to get preapproval. Ms. Vaczy. Yes. But then we had, I think, perhaps three members of management who contacted us and we said no. Ms. DeGette. Oh. Who contacted you? And during what time period? Ms. Vaczy. There were members of management on the 18th who said would we be permitted to sell stock. Ms. DeGette. Who was that? Ms. Vaczy. Let us see. I recall one gentleman, Gary Palter, who is a member of our management. Ms. DeGette. Was he aware of the FDA concerns? Ms. Vaczy. He was not---- Ms. DeGette. As of the 18th? Ms. Vaczy. To my knowledge, no, he was not in the group of members of management. Ms. DeGette. He just happened to ask you could he sell his stock? Ms. Vaczy. We would ask have to ask Gary, but I believe so. Ms. DeGette. Well, I am asking you what he asked you. Ms. Vaczy. He said would--and it is not in this e-mail, and I am just trying to recall. Ms. DeGette. Sometimes people have independent recollections, too, from e-mails. So that is what I am asking for. Ms. Vaczy. Okay. After sending the e-mail on the 18th, reminding management---- Ms. DeGette. That they had to check with you? Ms. Vaczy. That is right. Ms. DeGette. Okay. Then he called you. Ms. Vaczy. Yes. Ms. DeGette. Who else called you? Ms. Vaczy. I don't--I don't recall. Ms. DeGette. You said three members. Ms. Vaczy. Yeah. I remember there were three people, but I don't remember necessarily who they were. Ms. DeGette. Okay. If you could look at Tab 19 in your notebook. That is the ImClone Systems, Incorporated Board of Directors Handbook. Are you familiar with that---- Ms. Vaczy. I am. Ms. DeGette. [continuing] document? Ms. Vaczy. Yes, I am. Ms. DeGette. Okay. If you could look at page 21 of that document. Ms. Vaczy. Yes. Ms. DeGette. Okay. And D says: ``there will be periods of time when it is clear that material non-public information is known by several employees, officers, and directors of the company.'' And then it goes on to say there would be a blackout period when that happens. Are you familiar with that policy? Ms. Vaczy. I am. Ms. DeGette. Now, wouldn't it be the case that a blackout period should have been imposed from December 12 on, since at that time there was knowledge of material non-public information? Ms. Vaczy. Congressman, we looked at this very carefully during this entire period. And our feeling was, no, not until the communication on December 20 was it appropriate to put in place a companywide blackout. Ms. DeGette. Well, then why did you, on the 18th, tell people they couldn't sell their stock? Ms. Vaczy. It wasn't people in general. It was members of management. Ms. DeGette. Okay. Well, why did you tell members of management that if you feel you didn't have to impose the blackout period until the 20th of December? Ms. Vaczy. It was our feeling that management, being members of management, they are held to a higher standard. And we didn't feel it was appropriate at that time that management be trading. Ms. DeGette. But see, that is not what the company policy says. Is it? I mean, the company policy says whenever there is material non-public information, then everybody is in the blackout period. Ms. Vaczy. We didn't consider it to be material non-public information. Ms. DeGette. If you take a look--yeah. Who is ``we''? Who is ``we didn't consider it to be material''? Ms. Vaczy. Management of the company. We---- Ms. DeGette. Who in management? Ms. Vaczy. We--it would be our management group, our COO or CEO or CFO. Ms. DeGette. Who did you discuss the decision with to impose--to send out the memo on the 18th and then to impose the blackout period? Ms. Vaczy. On each--in each of these situations, we were discussing this all along during this period with our outside counsel. And I recall, it was Harlan Waksal and Dan Lynch who-- and I believe Sam Waksal was involved in the 18th, and then on the 20th it was Dan lynch and Harlan Waksal who---- Ms. DeGette. Who from your outside counsel did you discuss this with? Ms. Vaczy. We were discussing with our FDA counsel and with our securities counsel. Ms. DeGette. All right. If you will take a look at Exhibit 1 in the notebook, ImClone officer stock sales. It looks to me like there were nine sales of stock between--eight sales of stock between the December 12 and December 21. Ms. Vaczy. Are you looking on the third page? Ms. DeGette. Well, I am going to go back to something else. I have been given the wrong number. I just want to ask you a question, Dr. Mendelsohn. You had told Mr. Deutsch that you recommended implementing a conflict of interest policy at M.D. Anderson. And I guess I just wanted to know when you recommended that. Mr. Mendelsohn. There have been a number of stages. Right after I came there, I recommended a new policy that anyone---- Ms. DeGette. When was that? Mr. Mendelsohn. 1996. Ms. DeGette. Okay. Mr. Mendelsohn. So I think it went into effect in 1997, that anyone who had a potential financial interest in an investigational drug could not administrator that to a patient and could not be the principal investigator in a trial of it. Ms. DeGette. And I think that is great. But I also, see-- you probably know this. I am trying to do legislation. I have introduced legislation for even broader disclosure than that, because it seems to me someone like you who is a very, you know, fine scientist and really trying to do this, but anyone involved with the research institution that is doing clinical trials, patients should have informed consent of that conflict. Mr. Mendelsohn. Right. We--I agree with that statement, and in November 2001, prior to the article in the Washington Post and prior to the recent reports that have come out with recommendations, I instituted a policy at M.D. Anderson that my name would go on all clinical trials involving Erbitux. Ms. DeGette. And, in fact, in January 2001, prior to that, the Office for Human Research Protections recommended that you implement such a policy, correct? Mr. Mendelsohn. The Office of Human Research Protection-- the director of that office actually visited us at M.D. Anderson, and we discussed these issues. Ms. DeGette. Right. Mr. Mendelsohn. At that time it was recommended that we consider this kind of thing. Ms. DeGette. And that was after the Erbitux study was completed, right? Mr. Mendelsohn. That was after most of it had been completed. Which study are you referring to? Because the Erbitux study that was the study--that was the registration study, M.D. Anderson did not participate. We didn't participate in that study at all. Ms. DeGette. Right. I just have one last question for you. At the last hearing we--and I know some of the other members have touched on this a little bit, but at the last hearing we talked about the thousands of colorectal cancer patients who really had hope in Erbitux, and I guess I would just ask you if you could very briefly tell us, now that the FDA has taken the drug off of the fast-track approval list and all of these questions have been raised not just about the corporate improprieties, but also the research protocols and the clinical trials, my question to you is, what is ImClone doing to try to get that drug back on track with the research? Are you doing new trials, and what is your timeframe for that? Mr. Mendelsohn. I can give you some answers to that, and maybe Dr. Waksal can add. First of all, I believe we are still on the fast-track list, but they have not accepted our BLA, obviously. We are meeting with the FDA to try to find out exactly the criteria we should use, because we want to look at the data on that trial again. We believe that many of the issues that have been raised in the press are not relevant to that trial. Excellent investigators from many institutions stand by these data, and we want to have it reviewed in the way the FDA wants it, so it is reported and documented properly. Then ImClone is planning with its partner, Bristol, a large number of additional trials that are answering all the questions that have been raised, I believe. So we are very---- Ms. DeGette. Quickly, what is your timeframe for all of this? Mr. Mendelsohn. It depends which trials the FDA accepts. It could be--it could be a year. It could be 2 or 3. Ms. DeGette. Thank you. Thank you, Mr. Chairman. Mr. Greenwood. The time of the gentlelady has expired. Just a couple questions for myself and then I am going to turn it over to Dr. Fletcher to close the hearing. Dr. Waksal, at Tab 24 you will see a letter dated September 13, 2002, from O'Melveny & Myers to this committee, regarding the purchase of shredders in January 2002, an e-mail of January 7 between Sam's assistant and your assistant and the purchase order, which you signed. The letter says that you played no role in the decision to purchase the shredders other than signing a routine purchase order, the contents of which you did not review. Is it your practice to sign purchase orders without reviewing their contents? Mr. Waksal. It is my practice to review contents of purchase orders unless those purchase orders don't strike me and don't hit my attention that strongly. This was a purchase order of a relatively low amount of money, but most importantly, aside from the fact that they are shredders, as I have sent into this committee and certified, I did not at any time destroy any documents, nor did I instruct anybody to destroy documents, nor am I aware of anyone in the company destroying documents that are subject to any investigations that are taking place, other than what has been attributed to Dr. Sam Waksal. Mr. Greenwood. When you said you review purchase orders, and you sometimes, when something strikes you as seeming--did you know that you signed an order to purchase shredders? Mr. Waksal. As I have said, and I am embarrassed to say this, I don't remember this purchase order, and I am very clear on how that appears. The purchase of shredders gives an impression that during this period of time that there may be some motivation to do so. I have to say, there were shredders at the company and in all of our facilities already only 100 yards away from my office, and as I said, no shredder was used by me or anybody under my direction or anyone in the company to destroy or affect any documents that were relevant to any investigation. Mr. Greenwood. According to Sam Waksal's message log, you received a phone call from an SEC investigator on January 3, 2002. When did you first become aware that Sam had been called by the SEC? Mr. Waksal. I wasn't aware of that call, but I did know sometime around the 8th, around January 8, that indeed the SEC was making inquiries. Mr. Greenwood. Do you know now what inspired the preparation of a purchase order for shredders? Did you look back and say, whose idea was it to get shredders, and why, since you didn't see them--you say you didn't see that at the time? Mr. Waksal. Of course we have gone ahead and investigated this, and that is right--part of the documentation that was sent over to your office. Indeed, what was explained to me is that the administrative assistants were--felt that it would be good for them to have a shredder in a conference room close by their areas of work. It was in conjunction with routine practice, and it certainly wasn't anything extraordinary to them. At the time, the investigations were just early inquiries, and I don't believe there was any motive other than what, in their minds, was normal work activity. Mr. Greenwood. Just bear with us for a moment. Mr. Fletcher [presiding]. Again, I want to thank the chairman for conducting this hearing. I have got a few questions I would like to do in closing out. Let me ask, Dr. Mendelsohn, what is the incidence of colon cancer in the country at this time, or what do you expect it to be in the future? Mr. Mendelsohn. As I remember, well over 100,000 cases a year, and I expect it to go down, because if Americans all underwent colonoscopy, as recommended, the death rate would go down substantially; the incidence of disease would probably go up, we would pick it up early, but the death rate would go down. Mr. Fletcher. There are some that estimate that, you know, the incidence may double over the next 50 years. I am not sure how they---- Mr. Mendelsohn. That is correct. It is very interesting. It is a demography issue. We are an aging population, so that even though the risk of dying from many cancers has gone down because they are just diagnosed earlier and the therapy is better, because there are so many more older people, the incidence of the disease is going up, and that will continue until 2025, as I understand it, when the baby boom gets finished. Mr. Fletcher. Probably most families, directly or indirectly, have been affected by colon cancer, and let me ask you, there's a reported 22 percent response, and these are the most complicated recalcitrant cancers that were tested. So would you say that the response rate to other cancers that were not so recalcitrant might be higher, or would you estimate that? Is there hope that that might be the case? Mr. Mendelsohn. There certainly is hope, and there's a hope that if we treated the colon cancer patients earlier with chemotherapy, not with a drug they had already shown resistance to, that we would get a better response, but this will all have to be tested in clinical trials. Mr. Fletcher. Let me ask you--and maybe I will ask Mr. Goldhammer this. What were y'all's calculations when you based the return on Erbitux of the projected rate of income, if you will, with the treatment of colon cancer, considering that the incidence, or rate, is going up because of the demographic changes that Dr. Mendelsohn described, as well as the possibility of using this not only in the recalcitrant cases, but earlier in the diagnosis of colon cancer? Did you y'all have numbers that you projected on the sales? Mr. Goldhammer. Yes, we did. Mr. Fletcher. Could you share those with us? What were your projected sales over the next 5 or 10 years? Mr. Goldhammer. I will do it roughly, but I might be able to send it to your office. Mr. Fletcher. Well, we would appreciate it if you would submit those, but can you give us a rough estimate? Mr. Goldhammer. Yeah. I think that we thought that year 1, for instance, we might have in a launch--$60 million or so in sales. We thought the next year would be $100 million and-- Harlan, help me a little bit. Mr. Waksal. If I can, our estimates ranged from $300 million to $1 billion over the course of about a 5-year period of time. Mr. Fletcher. So tremendous potential financially, and obviously there has been a lot of money that was invested in developing the drug; and Dr. Mendelsohn, I know you were very early in developing C225. Let me get back to the science. Let me say from my standpoint, you know, the Justice Department can take care of some of the other things. I am concerned of the fact that we have a drug, I think, that is still very promising. There are people out there not getting that because of some mistakes made, or at least it appears that way to me. Here in Tab 35, dated March 25, 2002, the FDA in their presentation in the first--it starts, ``The following captures the discussion that occurred during the FDA's presentation.'' This was a meeting regarding ImClone, regarding the study-- refusal-to-file letter issued to their BLA for Erbitux. It says, ``The FDA clearly stated to ImClone that the reanalysis of the data from this study''--and it is CPO 29923-- ``will not be sufficient to address the deficiencies in this application. This conclusion is based upon a determination that there are significant design and conduct flaws in the study that cannot be fully addressed by sending missing data. Data from an additional trial or trials that are adequate and well controlled are necessary.'' And yet, in my last line of questioning, Dr. Waksal, you seemed to insist that it was sound science, that the study was good. Now, let me ask you. I only see three options here: Either you all or some of you there were asleep at the wheel and not realizing what was going on; two, you don't--either that or you don't recognize what sound science is; or three, the FDA doesn't recognize what sound science is. Because we have quite a contradiction here. I wonder if you could help me out. Which one of those is the situation in your conclusion? Mr. Waksal. I think it is D, none of the above. Mr. Fletcher. I thought it might be that. Mr. Waksal. Look, there is no question, as I reported at the last session--the last time I was here, 4 months ago; and hopefully I won't be back in another 4 months to talk about this. However, I think what is really important, as I described, the study that was performed had deficiencies, deficiencies that we are trying to fix. However, at this stage we have not said that once we fix the deficiencies of that trial, that that trial will now be sufficient to move forward. The world has changed. There have been a number of issues that have come up that we need to attend to, and we stated at the last meeting, at the last congressional hearing that I attended, that ImClone would be looking to use a clinical development program that is a multifaceted program, using studies that are being done in Europe as a potential for working with our trial for approval and other trials in the U.S., as well. So we are not relying on that study at this stage. Mr. Fletcher. Well, what I think is clear from that--and I think the acknowledgment there is that you had a study whose protocol was somewhat flawed, even though you said it was designed by some of the leading experts in the field. You had the conduct of the study flawed, even in some of the leading institutions. You mentioned that you are a small company and probably oversight was not there, and yet you had the potential, it looked like, of making $300 million to $1 billion. You know, one of the things we learn in medicine is that the most dangerous people are the people that don't know what they don't know. Mr. Waksal. That is very true. Mr. Fletcher. And it disturbs me from that standpoint. Let me get back to Dr. Sparling's letter. He said in his last paragraph of his letter dated January 15, ``I know you are doing everything possible to get the drug filed and approved, and we are hoping this can be done as soon as possible for the sake of patients who need the drug.'' And I commend Dr. Sparling, because I think his focus was appropriate. The last sentence of his first paragraph in a letter dated February 21, it says, ``I just do not believe I can be useful as a member of the SAB, the scientific advisory board, and the long-term inactivity of the SAB suggests the SAB is not useful to the company.'' I will tell you, it has the appearance, the SAB, at least at this point--maybe early on, as Dr. Mendelsohn mentioned it was active, but--of being somewhat window dressing; and I don't know if there was a tremendous enthusiasm. But I want to get to one last question, and this---- Mr. Waksal. If you don't mind, sir, if I can just address that. I think your point is a very important one. Did the company use appropriate experts to help us and help guide us as we went forward? And I have to say, we did indeed. Members of the scientific advisory board were helping us in science, in basic research. The work we are doing clinically was done with oncologists, experts in the field, who were helping us as we went forward, and they had very different, distinct roles. Mr. Fletcher. And I understand that. I have been involved in some clinical studies and know that following the protocol is critical. Otherwise everything else doesn't count, because it has no credibility. Dr. Waksal, let me ask you a question, and this is a different one. I want to ask you about a particular disturbing story that appeared in the press, which does make us question your motives in the development of Erbitux. At Tab 49 you might see--you will see an article from the Atlantic Constitution entitled ``Patients, a Low Priority for Drug Industry Leaders.'' It tells the story of Ruth Ann Santino, 51, a mother of two teenage sons and a woman fighting for her life against colorectal cancer, the target of ImClone's drug Erbitux. At the advice of her doctor, she vigorously pursued Erbitux to the exclusion of other possible therapies on a compassionate-use basis. The CBS program 60 Minutes produced a piece on the availability of Erbitux, and Mrs. Santino was interviewed for the story. The allegation of the piece, as we understand it, was that the distribution of the drug to cancer patients was arbitrary and unfair. I don't want to make any comment about the veracity of the allegations in the 60 Minute piece, but I do want to ask you about what you, Harlan Waksal, did in response to this program. Mrs. Santino's husband, Fred Santino, says that after the 60 Minute show aired and 2 days before Mrs. Santino died, you called the Santino home, raising hopes that ImClone might throw a lifeline to this woman and family in distress, but instead took to task Mr. Santino, whose wife was dying next to him, for being unfair to ImClone on 60 Minutes. And to add insult to an unspeakable injury, you did not even ask about Mrs. Santino or offer her the use of the drug. First, let me ask you, did you make that phone call? Mr. Waksal. Yes, I did, but the call was not made to take issue with Mr. Santino. In fact, my call was made in a response to the fact that I wanted to correct some points on record. I wanted him to know that, indeed, we were doing nothing to single out his family, his wife or patients who could not get access to our drug, but that there was not drug available under a compassionate-use program. I didn't offer out hope. I offered what I believed was compassion and understanding that he was upset with the company, but I wanted him to know that the company was doing what we felt was right to get this drug approved and out there to patients like his wife. Mr. Fletcher. Did you offer the drug Erbitux to her? Did you have within the protocol of compassionate use, the power to offer that drug Erbitux? Mr. Waksal. One, I did not offer the drug. And second, the compassionate-use program had been stopped in January of that year. There was no compassionate-use program. There was no drug being used in compassionate-use studies other than patients already enrolled. Mr. Fletcher. Thank you. I think that concludes my questioning. I appreciate all of you being here, and we will adjourn the meeting. [Whereupon, at 4:16 p.m., the subcommittee was adjourned.] [Additional material submitted for the record follows:] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]