Imclone's founder could still go to jail

ImClone, the biotech firm embroiled in an insider dealing scandal, has said it will resubmit a marketing application for the cancer drug which sparked the case.

Earlier this week, its Erbitux drug received favourable clinical trial results from its European marketing partner Merck, prompting ImClone to now re-apply for US marketing approval.

Trials of the same drug conducted by ImClone were rejected by the federal regulator in 2001 for being difficult to decipher.

The decision sparked a sharp fall in Imclone's share price and a furore over alleged 'insider dealing' of shares before the news broke.

ImClone's former chief executive Dr Samuel Waksal was charged last year for telling family and friends to sell their shares, a day before the FDA refused to review its new cancer drug.

The scandal widened as it emerged Mr Waksal was a close friend of the US lifestyle guru Martha Stewart, who also offloaded ImClone shares worth about $228,000 shortly before the regulator rejected the biotech firm's application.

Tainted image

Martha Stewart, once the queen of etiquette and home baking, has denied illegal insider dealing, insisting she had a pre-arranged sale agreed.

But US prosecutors are claiming she committed fraud and indicted her earlier this week on five counts, including conspiracy and lying to investigators.

Martha's lifestyle is looking less sparkling

And in the latest twist to the debacle, Ms Stewart is now being charged with securities fraud for insisting she was innocent.

The prosecutors claim this was manipulating the market to protect shares in her own business, Martha Stewart Living Omnimedia.

Words of warning

Imclone's decision to pursue a marketing application sent its shares up 22% during early trade on Friday, but the rally did not last and it closed down 14 cents at $38.39.

Analysts said they expected the FDA to move swiftly with a "fast track" review of Erbitux.

"We expect no more than a six month review," said Cory Kasimov, an analyst at Ryan Beck & Co.

"But we think the FDA could potentially act much sooner than that."

However, market watchers have warned investors not to be too hasty in buying back ImClone shares. John McCamant, editor of the Medical Technology Stockletter, said:

"I don't believe ImClone has all the information together to submit a filing right now."