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Source of Tip on ImClone Drug Is Identified

Probe: Lobbyist passed along word, which reached the Waksals, that the FDA would reject firm's Erbitux.

June 17, 2002|JUSTIN GILLIS | WASHINGTON POST

WASHINGTON — The previously unidentified consultant who obtained and passed along critical information in the ImClone Systems Inc. stock scandal was Samuel D. Turner, a prominent lawyer and Capitol Hill lobbyist who has long represented health-care interests in Washington and has cultivated ties at the Food and Drug Administration.

A Capitol Hill source named Turner this weekend after days of uncertainty about the identity of the intermediary who conveyed word that ImClone's cancer drug, Erbitux, was about to be rejected by the FDA. Rep. James C. Greenwood (R-Pa.), who has led an investigation of the matter, confirmed the intermediary's identity.

ImClone's former chief executive, Samuel D. Waksal, was arrested last week and charged with violating securities laws by tipping off relatives after he received the information so they could sell stock before the public was informed.

Turner did not return messages and calls.

It is not clear that Turner did anything wrong. Greenwood said he understood that Turner was formally representing Bristol-Myers Squibb Co., ImClone's partner on Erbitux, at the time he passed along the FDA information. If that is true, the FDA official who gave Turner the information, Richard Pazdur, almost certainly had a legal right to do so, and Turner would have had a right to receive it.

But that does not mean people who received Turner's information had the right to sell shares ahead of the bad news. Some members of Congress have said the FDA "leak" was unwise at best. And it has fed investor suspicions of other leaks at the FDA that are being used to earn unfair securities trading profits. "Short sellers," investors who bet a stock will fall, made millions late last year by placing bets against ImClone's shares in the weeks before the FDA rejected Erbitux.

Sources Saturday filled out some of the details in a chain of events that was the subject of testimony last week before a House panel headed by Greenwood. These events in December cost investors millions of dollars.

Erbitux, designed to slow tumor growth, had been under development for years. New York drug giant Bristol-Myers agreed last fall to pay as much as $2 billion for a stake in ImClone, also of New York, and for rights to the drug. By December, ImClone had submitted test data to the FDA that it hoped would lead to final approval, and the company's stock had soared.

But FDA reviewers found numerous problems with ImClone's application. They decided in mid-December to reject it but did not tell the company, ordering ImClone to stop pestering them and to await a final decision on Dec. 28.

Bristol-Myers executives apparently asked Turner, who had represented the company on Capitol Hill, to find out what he could. Bristol-Myers spokeswoman Tracey Furey said Saturday that she was uncertain whether Turner was formally representing the company in December, and she declined to comment further.

Testimony before the House panel indicated that a Bristol-Myers "consultant" called an FDA official Dec. 24 and got confirmation that Erbitux was about to be rejected. The Washington Post in Saturday's editions identified the FDA officer as Pazdur; he did not return calls seeking comment.

Turner "did what he was used to doing, which is calling the folks [at the FDA] and saying, 'What's up with the application?' " Greenwood said. "Pazdur said, 'Yeah, it's looking pretty bad.' "

Three Bristol-Myers executives received an e-mail, evidently from Turner, just before Christmas, and on Christmas Day they gave the bad news to Harlan W. Waksal, then ImClone's chief operating officer. Waksal contacted his brother, CEO Samuel Waksal, the next morning. Samuel Waksal allegedly informed relatives who owned ImClone shares, and several of them sold large blocks of stock on Dec. 27.

The news was made public Dec. 28, and when trading resumed Dec. 31 the shares plunged. Samuel Waksal resigned last month, as criminal charges neared, and Harlan Waksal replaced him.

Greenwood said Saturday that he did not think Pazdur or Turner had acted improperly. Both are respected by cancer advocates, and Pazdur's name has even been floated as a potential FDA commissioner. Greenwood said the FDA should have told ImClone of its reservations early and given the company time to correct the Erbitux application.

FDA officials have declined to discuss the issue of a leak but have said an internal investigation is underway.

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