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ImClone Tax Liability Less Than Expected

The biotech company files delayed earnings report and restates results. Net loss widens in 2002.

June 24, 2003|From Bloomberg News

ImClone Systems Inc., the biotech company at the center of an insider-trading scandal involving Martha Stewart, said Monday that its liability for unpaid taxes at the end of 2002 was about $38.8 million, which is less than expected.

The company had said liabilities, including those related to former Chief Executive Samuel D. Waksal's failure to pay some state and federal taxes, might be as much as $60 million.

ImClone, which delayed reporting earnings and restated results for the first three quarters last year because of the issue, has said it legally must cover Waksal's tax bill.

Monday's fourth-quarter report and restatement allow investors to focus on ImClone's cancer medicine, Erbitux, for which the company plans to seek U.S. approval by the end of the year, investors said. New York-based ImClone has been trying to get Erbitux back on track since U.S. regulators rejected the drug in December 2001.

"They finally got the actual numbers out, and people can stop worrying about it," said Jim McCamant, an ImClone investor who holds about 5,000 shares. "Erbitux is the big issue for ImClone, and it's finally going well."

For the fourth quarter, ImClone said it had a net loss of $39.4 million, or 54 cents a share, compared with $55.8 million, or 77 cents, for the last three months of 2001.

Last year's net loss widened to $157.9 million, or $2.15 a share, from $127.6 million, or $1.84 a share, the year before, according to the restatement released Monday. For the tax liability, the company took charges of $3.4 million and $25.3 million against 2002 and 2001 earnings, respectively.

Nasdaq officials had threatened to remove ImClone shares from the exchange if the company didn't meet a Monday deadline for filing a 2002 report. ImClone plans to report results for this year's first quarter by July 7, it said.

ImClone executives could not be reached for comment.

Shares of ImClone, which is developing Erbitux with Bristol-Myers Squibb Co., fell 38 cents to $30.47 on Nasdaq.

Waksal, who founded ImClone in 1985 and ran it until he resigned last year, was sentenced June 10 to more than seven years in prison for insider trading. He admitted telling his daughter, Aliza, to sell ImClone shares a day before the Food and Drug Administration turned down the company's original Erbitux application. He said he never told her why he urged her to sell.

Stewart learned from her broker's assistant that the Waksals were selling and unloaded $228,000 in ImClone shares, according to prosecutors. She pleaded not guilty this month to charges of obstructing the investigation into that sale.

While probing the extent of liability for Samuel Waksal, ImClone found it also had potential liabilities for former General Counsel John B. Landes and Chief Scientific Officer Harlan Waksal.

The company said it also might have liability of $12.6 million in taxes not withheld from former Chairman Robert F. Goldhammer.

ImClone wrote down $3.4 million in last year's second quarter for Landes after determining he probably didn't have enough money to pay. Harlan Waksal was ImClone's president and CEO until April, when he resigned along with Goldhammer after the Securities and Exchange Commission probe began.

ImClone also said it misused proceeds from a 1990 bond offering, making the bonds taxable after August 1995. ImClone plans to cover any tax obligations for bondholders by settling with the government directly, reporting its liability at $851,000 in 2001 and $953,000 in 2002.

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