禮來公司 (LLY) 0 Q0 法說會逐字稿

Good day.

My name is Jackie, and I will be your conference facilitator today.

At this time, I would like to welcome everyone to the ImClone systems fourth quarter and year end earnings release conference call.

All lines have been placed on mute to prevent any background noise.

After the speaker's remarks, there will be a question and answer period. [OPERATOR INSTRUCTIONS] Thank you.

It is now my pleasure to turn the floor over to your host, Andrea Rabney, Vice President of corporate communications.

Ma'am, you may begin your conference.

Thank you, Jackie.

Good morning and welcome to ImClone systems quarterly earnings conference call.

Today's call has been scheduled to discuss the Company's financial results for the fourth quarter and full year of 2005, which we announced earlier this morning.

With me today are Joe Fischer, interim Chief Executive Officer, Ronald Martell, Senior Vice President of Commercial Operations, Eric Rowinsky, Senior Vice President and Chief Medical Officer and Michael Howerton, Senior Vice President and Chief Financial Officer.

On a legal note, I must remind everyone that certain information discussed on this call may constitute forward-looking statements within the meaning of the Federal Securities Laws.

Although we believe that expectations reflected in these statements are based on reasonable assumptions, we cannot give assurance that the expected results will be achieved.

We refer you to our Exchange Act filings for factors that could impact the Company.

For forward-looking statements made during this call, the Company claims the protection of the Private Securities Litigation Reform Act of 1995, and assumes no obligation to update or supplement such statements.

I would now like to turn the call over to Joe Fischer.

Thank you, Andrea.

Clearly, this morning's announcements are a lot to digest.

I would like to start my remarks by introducing myself to those of you on the call, and by discussing briefly what my tenure as interim Chief Executive Officer of ImClone will entail.

As many of you know, I've been a member of the ImClone Board since 2003.

My background includes Senior level managerial and operational experience at large global consumer product and healthcare companies, including Dial Corporation and Johnson & Johnson.

As interim Chief Executive Officer, I'm charged with leading the Company during a period where ImClone strategic alternatives are being reviewed, to determine the best course forward for maximizing shareholder value.

The Board of Directors has engaged the investment bank Lazard to assist in this review.

Among the alternatives being considered are a merger, sale, or strategic alliance.

The Company is proceeding in consultation with its existing partners as this process moves forward.

The decision to undertake this process follows a review of the Company's business, products, assets and current strategic position.

ImClone is in a very strong position today.

We have a product in Erbitux with over 400 million in U.S. sales last year.

Each successive quarter seeing notable sales increases.

In 2006, we expect to launch Erbituxin a second tumor type, and we hope to see mature survival data in a variety of settings, that could give this compound a significant advantage over potential competition.

We also have a pipeline that we believe is unrivaled among our peers.

This pipeline includes a number of clinical stage therapeutics aimed at of some the most exciting targets in oncology today.

We believe that these compounds have the potential to make tremendous progress over the next two years, some reaching Phase III testing in a variety of indications.

In addition to our clinical pipeline, we're developing a host of mid and late-stage preclinical compounds, that will begin to enter the clinic over this same timeframe.

Add all of this to our strong financial position, manufacturing, development, and commercialization capabilities, and most would agree that ImClone has evolved successfully over the past few years.

But for ImClone to realize the full value of Erbitux, the pipeline and other assets in an increasingly competitive market, we believe the scale is critical factor.

Our current size combined with the time and resources required to realize our commercial benefit from our existing pipeline, may limit our ability to achieve our full potential.

For this reason, we feel that it is now appropriate to initiate a process of exploring ways to enhance shareholder value, and unlock the potential of our assets.

That said, I must remind everyone that while it is our intention to execute an appropriate transaction, we cannot make assurances that any particular alternative will be pursued, or that a transaction will occur.

To that end, we'll continue to operate as a company in the ordinary course, and we will continue a program of robust investment in the future of our products.

Because we believe our human capital, our employees, are an important asset in any eventuality, it is our goal to continue to provide for their development as the Company moves forward.

Now, to speak more about Erbitux, our pipeline and our financial position, I'll turn the call over to Ron, Eric, and Michael.

Ron?

Thank you, Joe.

I would like to remind you all that while I will discuss Erbitux and colorectal cancer and other tumor types, our field professionals do not promote it in any way other than for its labeled indications.

As you noted from our release, Erbitux revenue continues to grow.

U.S. in-market net sales of Erbitux for the fourth quarter were $121 million, compared to $107 million for the third quarter 2005, and $87.9 million for the fourth quarter 2004, an increase of 13% and 38% respectively.

Full year 2005 Erbitux sales reached $413.1 million compared with full year 2004 sales of $260.8 million.

A 58% increase year-over-year.

Fourth quarter penetration in the first, second and third plus line population, were approximately 4%, 13% and 31% respectively.

Compared to third quarter 2005 penetration rate of approximately 4% in the first line, 14% in the second line, and 30% in the third plus line setting.

Consistent with the third quarter, use of Erbitux in all lines of colorectal cancer represented 79% of total usage.

On average, Erbitux was used in combination in 82% of metastatic colorectal cancer, Erbitux treated patients in the fourth quarter, compared with 85% in the third quarter.

We continue to believe that there is significant room for growth in Erbitux-approved indication, and that 2006 will be a pivotal year for this therapy, in terms of both label expansion, and new and important clinical data.

I would like to now turn the call over to Dr. Eric Rowinsky to discuss these near term clinical and regulatory milestones.

Eric?

Thank you, Ron.

As Ron and Joe mentioned, we expect that 2006 will see several significant transformative events for Erbitux.

The year will be an exciting year.

First is the anticipated regulatory approval of Erbitux in squamous cell carcinoma of the head and neck.

Head and neck cancer is a difficult disease to treat, and one with few treatment options that truly benefit patients who typically have many co-morbid conditions, and do not tolerate the toxicities of standard chemotherapy.

Radiation therapy is the mainstaying treatment of local, regional advanced disease, which is how most patients present, and over the years chemotherapy drugs have been combined with radiation therapy to improve outcome.

However, these efforts have largely been precluded by the significant augmentation of side effects, including mucositis, which can lead to considerable discomfort, and even therapy discontinuation of the patients.

As the randomized Phase III data we presented demonstrated, Erbitux when added to radiation therapy, not only improved median survival by 20 months, a virtually unheard of achievement in oncology, but did so without significantly adding to radiation associated toxicity.

The true measure of these data and the benefit of Erbitux should be borne out, as more and more physicians gain experience with this new and exciting treatment modality, assuming a positive decision by the FDA on our SBLA.

The next significant events for Erbitux relate to clinical data maturing in 2006.

By the end of this year, we expect to have mature Phase III data, with survival or progression-free survival end points in first, second, and third line colorectal cancer patients, as well as first line pancreatic cancer patients.

By the end of February, these four Phase III trials, which are pivotal and registration directed, will be fully accrued.

These registration trials are all addressing significant questions about the impact of the use of Erbitux, and are intended to be used to fully support new indications, and if successful, could have a significant impact on Erbitux's use in the U.S. and worldwide.

They would give Erbitux an important advantage over competitors or potential competitors in colorectal cancer.

We also have broad plans beyond these indications for Erbitux.

In 2006, we'll have a number of other trials nearing full approval to support registration and non-small cell lung, and in patients with metastatic head and neck cancers.

Furthermore, we expect to launch a number of randomized studies, in both new types of tumors and indications, as well as in combination with other biologic therapies, particularly bevacizumab, or Avastin, in various first line settings.

With an ever increasing field of targeted therapies, the key to successfully developing a compound is good, clinical data, and access to clinical resources.

Erbitux is on a past yield significant data across a broad array of cancers over the next few years, and is well ahead of this potential direct competitors in this regard.

Our pipeline is also in an exciting time right now.

The antibiotics currently in the clinic, all target pathways validated either in the clinical or preclinical settings.

What differentiates them from many competing products or product candidates, is that they're all receptor targeting IGG-1 antibodies.

This is an approach we believe, based on a variety of preclinical benchmarks to be the most efficacious way of shutting down signalling pathways key to tumor development.

Because three of these antibodies target clinically validated pathways, including epidermal growth factor receptor pathways, and VEGFR-2, also known as KDR.

We hope to begin randomized trials as soon as possible, after each antibody completes Phase I feasibility testing.

Over the last quarter, A-12 and IGG-1 antibody against the insulin-like growth factor receptor 1, which many think is the most exciting cancer target started in Phase I evaluations, and in IND for 18-F1, a unique IGG-1 antibody against another VEGF receptor, that's VEGF-R1, which is found on both tumors and vascular cells was obtained.

We expect Phase I studies of both 18-F1 and 3G-3, and antibody to another exciting target that's platelet derived growth factor receptor alpha, to begin this year.

As such, we expect by the end of 2006, four compounds could be in Phase II or Phase III testing, with two others in Phase I. Add this to a strong preclinical pipeline of mid to late stage compounds, and the full potential of ImClone's future becomes quite clear.

I'll now turn this call over to Michael to discuss our financial position.

Thanks Eric.

As you saw in our press release this morning, during 2005, the Company recorded total revenues of $382.9 million, operating expenses of $303.9 million, net income of $98.9 million, and earnings per diluted share of $1.14.

This performance reflects continuing growth of Erbitux globally and the Company's program of focused investments to support our products, Erbitux, and the pipeline, our manufacturing assets and physical plant, and our employees.

Since we've provided considerable detail regarding 2005 results in our press release, I'll focus the balance of my comments this morning on 2006.

Of course, we'll be happy to answer any questions you may have regarding 2005 results during the question and answer period following our prepared remarks.

In 2006, we're continuing to execute a program of focused investments, designed to sustain our competitive position in the short term, and ensure that we're adequately positioned for sustainable longer term growth.

Our financial expectations and plans for the year reflect these objectives.

First, with respect to revenues in 2006.

Royalty revenue will continue to reflect 39% of Bristol-Myers end market sales, and a range of between 6.5 and 7.5% of Merck's end market sales.

For the foreseeable future, the Company is continuing its practice of not providing sales guidance.

While we understand that investors are anxious to refine their sales models to more accurately project this component of revenue, we are reluctant to provide estimates, in light of the uncertainty of the approvability, timing, and potential impact of Amgen's Panitumumab, as well as the current uncertainty with respect to the commercial benefit of the potential new head and neck indications for Erbitux.

License fees and milestone revenue in 2006 will include the continuing amortization based on clinical development spending of the $650 million received thus far from Bristol-Myers Squibb.

In addition, should we receive the final milestone of $250 million from BMS on the approval of the head and neck SBLA, we'll also begin to amortize this amount.

At the anticipated rates of clinical spending for 2006, amortization of milestones for the full year, assuming the receipt of the additional $250 million should approximate $250 million.

Including a catch-up effect of receipt of this final milestone of approximately $115 million.

Manufacturing revenue in 2006 will continue to reflect Erbitux shipped to our partners for commercial use, although no such product was shipped to Merck in 2005.

The price charged for commercial material is based on our actual cost to manufacture the product, plus in the case of BMS only, a 10% premium.

The selling price to our partners which will be used in 2006, will be essentially equal to the price used in 2005.

Collaborative agreement revenue will continue to include the purchase of Erbitux for clinical use by our partners, as well as reimbursement by Bristol-Myers of certain regulatory, clinical and marketing expenses incurred on behalf of Erbitux, and reimbursement for certain royalty expenses, which we expect to approximate 4.5% of U.S. end market sales during the year, in accordance with the existing terms of the BMS agreement.

Now, turning to expenses.

A new category this year is stock option expense under FAS-123R.

The total stock option expense estimated to be recognized in 2006 in accordance with FAS-123R, and included in the following expense categories, is approximately $10 million.

Research and development expenses include costs to support our preclinical research efforts, as well as development costs including process scale up, toxicology, and production of non-Erbitux clinical materials for our pipeline.

These costs are expected to approximate $140 million in 2006, including approximately $3.5 million, attributable to stock option expenses recognizable under FAS-123R.

The significant increase versus 2005 reflects additional efforts in support of our non-Erbitux pipeline, including third-party manufacturing costs, costs associated with producing clinical supplies of Erbitux for use by ImClone and our partners, which of course are reimbursed as a component of collaborative agreement revenue, and expansion of basic research activities.

Clinical and regulatory expenses in 2006 are expected to increase significantly versus 2005 as we embark on a number of studies in support of expanded use of Erbitux, as well as later stage clinical development programs for four pipeline products.

In addition, we are significantly enhancing our medical affairs programs and expanding our regulatory capabilities.

As a result, total, clinical and regulatory expenses are expected to reach approximately $90 million for the full year, including approximately $1.5 million, attributable to stock option expenses recognizable under FAS-123R.

Of course, a contractually determined portion of the Erbitux-related expenses will continue to be reimbursed as a component of collaborative agreement revenue.

Marketing, general and administrative expenses should approximate $80 million in 2006, including approximately $4.8 million attributable to stock option expenses recognizable under FAS-123R.

The increase versus last year is principally attributable to increased marketing efforts in support of the potential head and neck indication for Erbitux.

Royalty expenses in 2006 will continue to include 12.25% of U.S. end market sales through the first quarter, with 4.5% of U.S. end market sales expected to be reimbursed as a component of collaborative agreement revenue resulting in a net royalty burden to ImClone of 7.75%.

In subsequent quarters, the gross royalty expense on U.S. end market sales is expected to decline to 9.25%, resulting in a net royalty burden of 4.75%.

In addition, a small single digit percentage of non-U.S. sales is also included.

Based on our current expectations of purchases by our partners, we expect to begin to reflect full cost of manufacturing revenue in 2006.

As we have guided in the past, such costs approximate 10 to 15% of U.S. end market revenues.

Now, turning to the tax rate for 2006.

If the $250 million milestone payment is received this year, we would expect our accounting tax rate to be approximately 25%.

This rate is favorable to our previous tax rate guidance of a 35% rate, principally due to the benefit of incremental research and development credits that became available as the result of a study completed during the fourth quarter of 2005.

As you know, we announced in 2005 that the Company's Board of Directors had approved a share repurchase plan up to a total aggregate amount of $100 million.

During the fourth quarter of 2005, we purchased 811,416 shares at an average price of $30.78 per share for aggregate consideration of approximately $25 million.

As we have in the past, we'll continue to refine this guidance throughout the year.

That concludes our prepared remarks.

I would now like to open the call up for questions.

Jackie?

Thank you. [OPERATOR INSTRUCTIONS] We'll pause for a moment to compile the Q&A roster.

Your first question is from May-Kin Ho of Goldman Sachs.

Thank you.

I have a question for Joe.

What happened between November and now, that the Board decided to ask for an outside advisor to look at the Company, and also you mentioned that you need scale.

What are the things that you cannot do on your own, because obviously you have your own development program, and some of the things in the pipeline are still kind of early at this point.

Yes.

You know, the decision to undertake this process follows a review of the Company's current strategic position going back several months.

And we have focused on, you know, a critical component as size, and that combined with the time and the resources required to bring our commercial benefit from our existing pipeline, that may limit our ability to achieve our full potential.

That's why we think it is appropriate at this time to initiate a process of exploring additional ways to enhance shareholder value, and unlock the potential of our assets.

And can you expand a little bit about the relationship with Bristol?

We understand that there is a stand still until mid-September unless third-party makes a bid for about 35% or more of the company.

If indeed that happens, how much time does Bristol have to respond?

Michael can give a little more detail on that.

Hi, May-Kin.

It is Michael Howerton.

You've described it exactly correctly.

Bear in mind that Bristol under the existing agreement, always had the right to approach our Board of Directors with an offer to acquire the Company at their discretion.

The standstill just prevented them actually from buying additional shares in the open market.

And Bristol essentially is at a standstill once we make public, that we theoretically have determined to place 35% or more in the market.

Bristol essentially has noticed within two business days that they can come to us as well.

Okay.

And then just last question, don't want to hog the whole line here.

Ron, can you talk about Erbitux, looks like the penetration is about the same as last quarter.

What is happening that the sales are increasing so rapidly?

Sure, good morning, May-Kin.

As we've experienced in the last couple of quarters, the market continues to grow, and grow significantly.

As evidenced by both the third plus line setting, as well as the specific patient population, the Oxaliplatin and the irinotecan failure population.

To put that into perspective, over the course of the quarter, the third plus line grew from approximately 31,000 patients, to a little over 34,000 patients in that market.

So, that market continues to grow, and if you look specifically at the OIF patient population in the third quarter, or in the fourth quarter, I'm sorry also, it grew from about 11,000 patients, to slightly over 14,000 patients.

So, we believe that while it may not reflect itself in share, specifically, our message is that this is a patient population that, as the FDA has granted us the ability to save, benefits from treatment with Erbitux, we really believe that our messages are driving the market as we would hope to, in bringing these patients that previously have no other therapies into this market place.

While it is not reflected in share, it certainly is reflected in the size of the market.

What are the numbers for the first and second line?

I don't have the numbers for the first and second line with me right now.

We can certainly follow up on that.

Thank you very much.

Thank you.

Your next question is from Mike King of Rodman & Renshaw .

Hi, good morning, guys.

Congratulations on the nice quarter, and then the great year.

I just wanted to ask a nuts and bolts question of Michael first, and that is the collaborative revenues were lower than we expected and you had a concomitant reduction in R&D.

It seems a bit counterintuitive, given all the trials that are going on.

I wonder if you can give us some color on that?

There are a couple of things that happened during the consensus models, Mike.

The first is that in fact, collaborative agreement revenue is down sequentially quarter to quarter, and versus last year.

Principally because of the absence in the fourth quarter of this year of a significant purchase of clinical supplies by Merck in the previous quarters, in the $10 million range.

As we don't incur the expense in R&D, we don't get reimbursed as well.

What also happened is, as we compared to consensus, the other largest comparator is that in fact the amortization of license fees and milestone revenues are down quarter to quarter.

Also because once again, counterintuitively, it is really just a matter of timing.

It doesn't reflect an absence of activity on the part of either ImClone or Bristol-Myers, with respect to conducting the trials, but rather when we actually pay for some of the things with respect to these trials that are ongoing.

As you know, as the lower clinical and regulatory expenses may occur, we get to amortize lower milestones.

What's not reflected in the financials is you still see an increase in the clinical and regulatory line.

What that's reflecting is a lot of non-Erbitux activity, which is not necessarily reimbursed.

Excuse me, which is not reimbursed.

Right, understood.

Just as far as clinical supply, given that you now are providing a higher cost of material to both partners, particularly in the United States with Bristol, do you think that there just might be lower sales going forward in that regard, just because as the products drop shipped, there is not a lot of incentive for Bristol to keep much Erbitux hanging around?

Certainly, I assume you're talking about materials for commercial use, as opposed to clinical use.

Yes.

Bristol, I'm sure, based on their own inventory management, unlike in 2004, where their initial purchases which are reflected as our manufacturing revenue, included a significant amount of safety stock, I mean obviously they're going to manage from an uncertainty position, with respect to head and neck, but certainly it is not as if they're stockpiling materials to hold from us, because they have to pay us for it.

Right.

Okay.

And then I'm just wondering, what, maybe Ron can answer the question or Eric, about the upcoming year, as far as what publications we might expect from such studies as TREE and BOND, or others, that might make their way to the Compendia, and you know, enhance the competitive profiles of Erbitux.

Hi, Michael.

It is Eric.

I think this year, you're going to see a number of publications, because of the variety of journals which have some embargo restrictions.

We really cannot talk about some of these.

But I think you'll be seeing several high value publications very soon, and we anticipate and we are trying to get many of the very intriguing studies, and certainly those studies with very robust data, such as bond two published as quickly as possible.

As well as study 144 which was a single agent Erbitux study, which showed a response rate of 13 to 14% in very refractory patients, so we're really right now digging in and riding some of these and submitting.

But I'm sorry about not being able to fully engage you in the answers.

It is largely due to publication policies.

Right.

Mike, this is Ron.

Further to your question about Compendia, as you know, it has been our strategy all along that if you look at our clinical development program, to support every clinical program that we have seeking an indication, there is a parallel program to support Compendia within that same patient population, and the data sets that Eric has described that I'm certain we'll have more questions about this morning, there is an associated Compendia strategy, along with each one of those patient populations.

Right.

Not to put you on the spot but I guess to ask the question more pointedly then, given that, and I know you don't want to violate publication rules or such.

Is it likely that we'll see a study published that could support Compendia listing, that will show the use of Erbitux in combination with Avastin in colorectal cancer?

It is likely that you'll see it within this year, yes.

Okay, great, I'll jump back in the queue.

Thanks.

Thank you.

Your next question is from Steve Harr of Morgan Stanley.

Couple of questions.

First question is the company currently engaged in any conversations with any outside parties on the acquisition front?

Or is this the beginning of the process?

This is the beginning of the process, Steve.

Okay.

Second question, on the pricing of Erbitux, I think one of the concerns the Street has had over the course of this year, is the potential impact of a launch on Panitumumab on the price in this market place.

Maybe I could turn this question around, and what is the company's current position or thoughts on price, if the CRYSTAL study were positive, or if the drug looked like it could increase its second line penetration?

Good morning, Steve.

This is Ron.

Steve, as a reminder, what we have stated and the CRYSTAL study may indeed bring that to fruition, is that should the use of Erbitux be placed in settings based on clinical data where extended exposure may create a cost prohibitive setting, then we would like to do something to offset the cost of the drug and certainly, CRYSTAL is one set of data in the first line setting, that could create an extended exposure opportunity for Erbitux.

In addition to that, [Epoch] in the second line setting could do that.

As well as a couple of other data sets that may come available this year.

But CRYSTAL certainly is one of those, and we will work with our partner, Bristol, to develop an appropriate pricing strategy to multiple market forces.

One could be either available as clinical data, or potentially competition.

Ron, what kind of boundaries would you put around as cost prohibitive?

It obviously depends on the benefits that you bring.

Is there some type of number we should thinking of? $60,000, $80,000, $100,000, as a number that extends beyond, which people will tolerate?

Steve, we've certainly have done the modeling around that.

And if it were not in the light of a potential competitive situation, I would probably share a little bit more of that with you.

Given the fact that we are also potentially going to be in a competitive pricing setting, I would prefer, at this time, not to discuss what those specific numbers are, but to assure you that we have modeled those, and based upon the efficacy of the drug, we have one set of numbers, then another one potentially on competition.

Okay.

I'll jump back in the queue, so I can allow some other people to ask questions.

Thank you.

Your next question is from David Witzke of Banc of America Securities.

Yes, thanks.

Can you remind us, regarding your manufacturing assets, I guess those others could view those as strategic.

Or minus the status of BB-50, capacity of BB-36 and BB-50, and how this compares to current Erbitux demand.

Thanks.

Hi, David, it is Michael.

BB36 which is obviously the only facility that's up and running at the moment has, I think we've stated in the past.

It has maximum capacity of 250 kilos annually.

BB50 when completed, theoretically, titers and better yields aside is going to be roughly 3 times the size of BB36.

So, as you know, we intend to commission really ultimately 2 suites initially of BB50 and we would expect that first suite would be dedicated to Erbitux, and the second suite, although some of this is [fungible], because we have external manufacturing opportunities as well, could be devoted to pipeline, clinical, and potentially commercial use later on.

Michael, just a reminder, the Erbitux current demand in kilograms, the run rate.

I'm sorry?

The current run rate on Erbitux demand in kilograms?

It is tough.

It is basically right now, probably BB36 is theoretically producing sufficient global demand for clinical and commercial supply, based on 2005 usage.

Very good.

A question for Ron.

Regarding use with Avastin, did you see an uptick this quarter, and how did it compare to the prior quarter?

Good morning, Dave.

In fact, what we saw was maybe a flattening off of the use with Avastin, in both second and the third plus line setting.

I wouldn't say it represented a decrease but maybe a flattening off of the use from what we reported in the third quarter.

Is that primarily in the second line, or are you seeing in first line as well?

Second and third line as you might expect from the data presented as ASCO GI a year ago from the VON 2, which is really the refractory setting, that has then been extrapolated to both the second and the first line, so the predominant combination use is in the second and third plus line setting.

Thanks.

I didn't quite catch your comments on, you mentioned 79% of sales were colorectal cancer, and then something about 82% metastatic.

What I'm trying to get at, is how much was off label use, outside of colorectal for the quarter?

That 82% to clarify was combination use.

That would make 18% of the patients receiving monotherapy, and to accurately state the 79%, it is not 79% of sales.

It is 79% of patients on Erbitux are receiving it in colorectal cancer.

It is consistent with what we observed in the third quarter as well.

Thank you.

Thank you.

Your next question is from Jim Reddoch of FBR.

Good morning and thanks for taking my question.

First question is, there seems to be a little confusion in the market place on Bristol and the standstill, but when you say that Bristol can come back to you after there's been an offer, what exactly do you mean by that?

They then have the right to what, match the offer, or counter the offer, right?

Let me try again, because I don't think I was entirely clear when May-Kin first asked the question.

Under the terms of the existing standstill agreement which expires in September of '06, Bristol is prohibited from making open-market purchases of our stock beyond that which would bring them back to, from an anti-dilution standpoint, to bring them back to 19.9%, because they're roughly 17.4% to the Company now.

They have not yet made any such purchases.

So, that's their first limitation.

However, under the terms of that agreement, they have always had the right to approach our Board with certain constraints, to make an offer for the Company.

Having said that, what's new now in the theoretical face of potentially working through this process, and potentially seeking a buyer for the Company, is that we have an obligation to provide Bristol within 2 business days of us providing material nonpublic information to a third party, contemplating the sale of 35% or more of our stock.

Bristol then has the right not to stop or impede that process in any way.

They have the right to, you know, once they receive that notice, make an offer or not at their request.

I think that's where the confusion has been, is that really they don't have any power except that they're another bidder, and maybe a privileged bidder would be another way to look at it.

Yes, that's correct.

They're a privileged bidder in that ,they're the only one to whom we must give notice that we're providing material nonpublic information to someone else.

Okay, great.

Back to David's last question.

Which I was going to ask also about the other 21% of sales in non-colorectal.

Can you give us some color on how that breaks up into, I would presume that head and neck would be at least half of that.

And then pancreatic and lung might be some of the other indications.

Can you help us parse that out a little bit?

Thanks.

Good morning, Jim.

Unfortunately, we won't be providing that level of granularity.

What I can tell you is that we did see a shift in the fourth quarter in the type of tumor types that the drug was used off label, and as you might expect, it is in the settings where we have the most data and the most advanced data, and where there's reimbursement support for that, and just a reminder, that would include then head and neck, lung, and pancreatic in those tumor settings.

Okay.

Actually, just a follow-up on your answer there.

When you say there's reimbursement support for these, that means lung and pancreatic are also being covered right now, and has anybody added that to Compendia, or just said outright that they are covering it?

Head and neck has been added to Compendia, lung and pancreatic have not been added to Compendia.

But we certainly are aware that reimbursement is taking place in those settings.

Okay.

Great, thanks.

Thank you.

Your next question is from Steve Harr of Morgan Stanley.

I'm sorry.

My questions were asked and answered.

Thank you.

Thank you.

Your next question is from Han Li of SunTrust.

Yes, good morning.

Two housekeeping questions.

One is does Merck EGA still have equity stake in ImClone, or any change of control provision for Merck EGA's partnership?

As far as we know, no to both questions.

Okay.

The second question is regarding the timing of the 250 million milestone payment following FDA approval for second indication for head and neck cancer.

Is it a 60 day, or is there time?

Yes, basically, they have to actually provide the cash within 30 days of us receiving formal approval from the FDA.

Okay, good.

Thank you.

Thank you.

Your next question is from Maneesh Jain from Thomas Weisel.

Some of the quick questions regarding some of the market data you shared.

It looks like you gained, besides market growth, had you some incremental growth in third line colorectal.

I was hoping you could share with us, what the third line colorectal cancer market looks like, in terms of monotherapy versus combo therapy, as it relates to Erbitux sales?

Sure.

Good morning, Maneesh.

This is Ron.

The third line setting approximates that of the overall market.

It is only slightly different by a percentage point or 2 in the mono/combo.

And I think probably the next question that is the appropriate one here, so given the potential for competition, what percentage of our sales reflect monotherapy in the third plus line setting, and in the fourth quarter that approximated about 6% of our total sales were monotherapy in the third plus line setting.

I specifically call that out, because based upon what we currently know of the potential for Panitumumab that should they gain approval, their indication would probably be something like single agent, in that refractory third line setting, so that again approximates about 6% of our total sales of Erbitux at this time.

Okay.

And just to roll along on that theme.

I was hoping that you could give us some color on how we can look at the 025 data, that we should see sometime in 2006, vis-a-vis the 408 data that we're expecting with a complete data set that we're expecting some time in 2006 as well.

Hi, Maneesh.

This is Eric.

We really had a very robust accrual, and are very well ahead of schedule on all three of our whole end registration trials, that is, the 025 study in refractory patients, and the EPOCH study, as well as Crystal.

We're very happy about that.

With regard to the 025 study, we believe that that study, is what a purist would say, a well-designed trial.

And that is, that basically fits the paradigm of how drugs, how other studies have been designed with the best supportive care of control arm.

That is a survival end point.

So, 02, the study of mid-400 patients, best supportive care versus Erbitux powered for survival, there is no crossover in the study and that study was performed in Canada and in Canada, there really was not an availability of Erbitux during the conduction of that trial, so we would not expect that the best supportive care arm would be tainted by the Erbitux treatments, or retreatments.

So, we really think it is a pure study, and we're really not intending to release progression-free survival early.

We think this study is very, very important from not only a data standpoint, but from a strategic standpoint, and we really want to really have the best survival data that we can have.

And therefore, we anticipate that the data release will be in the second half of '06, perhaps a presentation at one of the European meetings in '06, maybe ASCO GI '07.

And that trial will have sort of the same patient profile, in that it will have irinotecan / oxaliplatin for failure of patients, I would imagine, I guess the question is, is best supportive care in Canada, any better than best supportive care in Europe?

Best supportive care in Canada and Europe, I would suspect are the same.

That is really treating patients palliatively.

The difference with this trial was the fact that Erbitux was not available, or at least commercially, and the end point of course was quite different.

That is progression free survival in study 048, that is the Panitumumab study.

In the Panitumumab study, as you might recall, there is the opportunity for patients to crossover early, based upon symptoms.

That is symptoms can actually lead to the performance of a CT scan, or an assessment for disease, and since there was no blinding in the trial, there is the potential for a significant bias.

And we believe that that bias is actually not incorporated, or really not inherently a part of study 025.

Got you.

Okay.

And just one final question.

Eric, or Mike, Mike, you mentioned that you get some tax relief in '06 on the basis of a study being completed in the fourth quarter of '05.

I wondering if you could share what study that was?

We had mentioned earlier in the year, that we were undertaking a number of tax projects, to see whether or not we could mitigate our statutory rate, given the fact that we're domiciled in New York and New Jersey and a domestic manufacturer, and among those was basically a much closer look at research and development tax credits that could be available to the Company.

And based on the completion of that study, we're just confident that our tax provision from an accounting standpoint, will support a 25% rate based on current income projection.

Great.

So, could you share with us what trial that was?

Oh, no, maybe you're misunderstanding me.

I'm just suggesting that certain expenditures of the company such as ImClone, are classifiable for tax purposes as research and development spending.

It is not related to any specific trial.

It is related to an analysis of the type of investments we've been making over a number of years.

Okay, great, thanks, Mike.

You're welcome.

Operator, we have time for two more questions please.

your next question is from Geoff Meacham of J.P. Morgan.

A couple for Ron, with respect to Erbitux combination use.

You mentioned the fourth quarter about 82%.

That's down roughly 5% from earlier 2005.

About 87.

Just wondering if you can help us understand the dynamics there, or are we seeing a trend toward growing monotherapy use?

Good morning, Geoff.

I think at this point in time, that when we look at the data, there is a lot of variability month to month, as it relates to monotherapy.

And I certainly would not call it a trend.

When we have looked at this going back to before approval, we had expected maybe about 20% of patients to receive monotherapy based upon the constant fact, and in oncology that line to line, about 20% of patients just cannot tolerate any additional therapy, and that's true if you look from first line to second line, or second line to third line, or so on.

So we expect as long as we stay above the 20%, or below the 20% number, that that's the range that we would anticipate.

Just real quickly on the head and neck opportunity, I know this has been asked before, but can you give us a sense for the off-label use we've seen so far, the bias, if there is one, between first line and recurrent, and then any initial takes coming out of the LORHAN study, that you guys launched in the fourth quarter?

I'll start with the last question first. the LORHAN study, the Longitudinal Registry of Head and Neck.

It is too early at this point in time to cull any data from that.

While we in the head and neck community are very excited about this project, that it could yield some significant data, in the months and years to come.

It is just too early at this point.

Now, with respect to the head and neck market, as you might expect, the drug is being used where again, the biggest set of data are either in combination with radiation or whether the highest need is a single agent in the refractory setting, and where it is supported by Compendia.

So, across the usage there, it is fairly evenly split.

Okay, thanks.

Thank you.

Your last question is from Mike King of Rodman & Renshaw.

Thanks for taking my follow-up question.

Question for Joe.

I presume that had you been approached by Bristol-Myers, or any other suitor, with regard to an acquisition, that information would have to be disclosed in a public manner, would it not?

Yes, it is inappropriate for us to comment about any developments related to our discussion with partners.

Can I perhaps ask the question differently.

Can we rule out that you've been approached by Bristol or anybody else?

This is Mike.

It is an interesting way to ask the question.

I would say you can't rule out or rule in virtually anything.

As a matter of public disclosure, the mere fact that a company may entertain conversations with potential partners of potential transactions, is not a disclosable event at all.

Thank you.

Thank you.

I will now hand the floor back to the speakers for any closing comments.

I would like to thank everybody for joining the call today.

If you have follow-up questions, we'll be in the Corporate Communications department at 646-638-5058, and please don't hesitate to call.

Thank you and have a good day.

Thank you, this does conclude today's teleconference.

You may now disconnect your lines.

Have a wonderful day!