禮來公司 (LLY) 2007 Q1 法說會逐字稿

Good day.

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

At this time, I would like to welcome everyone to the ImClone Systems 2007 first-quarter earnings release conference call.

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

After the speakers' remarks, there will be a question-and-answer period.

(OPERATOR INSTRUCTIONS) Thank you, and it is now my pleasure to turn the floor over to your host, Miss Ana Stancic.

You may begin your conference.

Thank you.

Good morning, everyone, and welcome to ImClone Systems' first-quarter 2007 conference call.

I'm, Ana Stancic, Senior Vice President of Finance.

With me are Alex Denner, Chairman of the Executive Committee of the Board, Richard Mulligan, Member of the Executive Committee, Michael Bailey, Senior Vice President of Commercial Operations, Eric Rowinsky, Senior Vice President and Chief Medical Officer, and Dan O'Connor, Senior Vice President and interim General Counsel.

Alex will begin today's call with an overview of our most recent initiatives and achievements.

I will follow with a brief overview of our first-quarter results.

Michael will discuss the commercial aspects of ERBITUX followed by Eric who will discuss the clinical development of ERBITUX and our pipeline antibodies.

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 filings for factors that could impact the company.

The forward-looking statements made during this call, the company claims the protections of the Private Securities Litigation Reform Act of 1995 and assumes no obligation to update our supplement such statements.

I will now turn the over to Alex.

Thank you, Ana.

Good morning, and thank you, everyone, for joining the ImClone Systems first-quarter earnings call.

A great deal of activity is taking place at ImClone, and you can be assured that the level of activity will only increase.

During my quick remarks, I would like to summarize our strategy, briefly discuss some developments over the past few months, highlight continued focus on key issues, and call attention to some changes on our Board of Directors.

ImClone's strategy consists of three parts.

One, to maximize ERBITUX through ensuring excellent commercialization and full clinical development.

Two, to develop our pipeline as aggressively as possible while considering some select partnering opportunities.

Three, to invest in other key growth areas such as research and manufacturing.

As I emphasized in the previous earnings call, in addition to implementing strategy, we are dedicated to addressing a number of specific issues at the company, including our BMS relationship, that is our relationship with Bristol Myers, the CEO search, ongoing litigation, and cutting costs and approving operational efficiency at ImClone.

In the last quarter, significant progress has been made in each of these areas.

The first quarter has been marked by several decisions and milestones.

We believe that the entirety of clinical data on the EGF receptor antibodies that was released over the past few months establishes ERBITUX's position as a drug with major clinical importance.

Also, we are excited that two of the three trials that AACR chose to highlight at their meeting were ImClone trials.

Importantly we received FDA approval for use of ERBITUX in an additional dose configuration, a 100-milligram vial, giving customers greater flexibility and convenience in drug preparation.

In addition, this month we submitted a supplementary BLA seeking the approval of our manufacturing facility, BB50, as a second manufacturing source for ERBITUX.

We are making significant investments in our commercial and clinical capabilities.

Michael will discuss the decision to increase the size of our sales force, and Eric will discuss the expansion of clinical, regulatory, and medical affairs group.

We are pleased to announce that Andrew Bonfield, the Chief Financial Officer of Bristol, will be joining our Board.

We look forward to benefiting from his contributions.

Also, John Fazio has resigned from our Board, and we thank John for his service to the company.

We are enthusiastic about ImClone, encouraged by the positive changes at the company.

Now, I will turn it back to Ana.

Thank you, Alex.

In the first quarter of 2007, the company achieved total revenues of $141.5 million, operating income of $46.8 million, and net income of $28.8 million, resulting in diluted earning per share of $0.33.

Worldwide revenues of ERBITUX in the first quarter of 2007 reached $306.1 million, compared to $227.9 million in the first quarter of 2006, an increase of $78.2 million, or 34%.

While I will not go into details with respect to each of our revenue components, let me briefly discuss the fluctuation in manufacturing revenues.

As you saw in our press release this morning, manufacturing revenues decreased in the first quarter of 2007 by $2.8 million, or 15% from the comparable period in 2006.

This decrease is attributable to improved manufacturing process which has resulted in a decrease in the cost of producing ERBITUX.

In fact, volume purchases from BMS in 2007 increased by 23% compared to the first quarter of 2006.

With respect to our operating expenses, as we noted during our year-end conference call, we are evaluating our physical infrastructure as well as the level of internal investment dedicated to our operations.

Our goal is to continue to aggressively manage expenditures in areas where we can generate economies of scale and redirect our investment to areas that we believe will derive long-term benefit to our shareholders.

Our primary emphasis are to continue to invest in the development of ERBITUX, to actively develop our pipeline candidates, and to strategically invest in our ability to reach our customer base.

With respect to our infrastructure, in the first quarter of this year, we concluded that it would not be cost effective for us to develop the Spring Street facility in Manhattan as the headquarters for our research organization.

As a result, we have expensed approximately $3.2 million of fixed assets related to this facility in the first quarter of this year.

This writeoff is included in research and development expenses.

Regarding our clinical and regulatory expenses, we spent $13.8 million in the first quarter of 2007.

Compared with $15 million in the comparable period in 2006, it should be noted that last year's number includes approximately $4 million due to BMS for reimbursement of expenses incurred on ERBITUX trial in excess of our contractual annual budget.

Such cost-sharing between us and BMS was in effect from 2004 through 2006.

And at this point we have no cost-sharing agreement for 2007 or beyond.

Therefore, if we eliminate the $4 million expense from our 2006 actual, our expenditures for clinical and regulatory initiatives have increased by approximately $2.5 million from the comparable period in 2006 and by $3.5 million from the fourth quarter of 2006.

Such increase is primarily due to increased costs related it our two Phase II studies combining ERBITUX, Avastin, and chemotherapy in pancreatic and non-small cell lung cancers and incremental costs related to our five other clinical pipeline products which we plan to advance into Phase II evaluations during the second half of 2007.

From a balance sheet perspective, we continue to have very strong financial flexibility with cash and marketable securities in excess of $1 billion.

This quarter, we generated $13.7 million of cash from operating activities.

We used $25.1 million for investing activities, and we generated $13.7 million in financing activities.

Regarding our expectations for the remainder of '07, from a revenue perspective, while we feel very optimistic about the potential of ERBITUX in the marketplace, especially in light of the emerging performance of ERBITUX relative to this competition, we continue to believe that it is not appropriate for us to provide guidance at this point.

We have updated our guidance on milestone revenues based on the most recent clinical budget for 2007.

And we expect that milestone revenues will range between $115 million to $135 million.

Our decision to increase our sales force will result in incremental expenses in 2007.

The incremental investment in our sales force offset by our continued commitment to control other administrative expenses throughout the organization is expected to result in an overall slight increase from 2006 in marketing, general, and administrative expenses.

Our operating effective tax rate for 2007 is expected to be approximately 41%, which is not indicative of our actual tax payments in 2007, which are expected to be less than $3 million.

In addition, our first-quarter effective tax rate includes a discrete charge of $4.5 million, related to certain tax return method changes filed in the first quarter of this year, as well as certain deferred tax charges.

I will now turn the call over to Michael to give you an update on our commercial operations.

Michael?

Thank you, Ana.

During the first quarter, sales for ERBITUX continued their resistance to competitive erosion within the US end market net sales, totaling $160.1 million.

This is less than a 5% variance from the previous quarter.

According to third-party sales data, ERBITUX has and continues to command the dominant share of EGFR market share sales.

During this quarter, our proportion of EGFR sales remained relatively stable, suggesting plateauing in growth for our competitor.

Additionally, as observed last quarter, third-party patient data suggests that a substantial portion of the competitive drug share continues to come from our colorectal cancer patients who have previously received ERBITUX.

This is consistent with the observation that the overall ERBITUX colorectal cancer patient share only slightly declined quarter over quarter, and the fact that ERBITUX plus Irinotecan has retained the distinction of being the most frequently used regimen in third-line treatment of colorectal cancer.

In the head and neck marketplace, we realized modest share and sales growth to ERBITUX, which is largely reflective of the fact that ERBITUX is already the most frequently used agent for metastatic head and neck cancer patients.

Finally, as we saw last quarter, there has been no reported competitive EGFR MAb use in this space.

Importantly, during the past six months, significant additional clinical data has emerged.

This data will ultimately serve to further differentiate the two approved EGFR MAbs.

Included in this wave of data were the findings from the Pace study, which importantly, is the first reported randomized study of panitumumab in combination with chemotherapy and colorectal cancer.

As Amgen announced on March 22, patients on the study who received panitumumab had significantly worse overall survival and progression free survival versus the control group.

However, it is important to note that this announcement occurred too late in the quarter to have had a significant effect on our quarterly sales.

Moving forward, we believe this new wave of evidence will reinforce the fact that ERBITUX has an IgG1 monoclonal antibody is the only EGFR MAb that in randomized clinical trials has shown the ability to improve survival now in both colorectal cancer as well as in two clinical l settings for patients with head and neck cancer.

Additionally, the body of ERBITUX and competitive data demonstrates that ERBITUX is the only EGFR MAb that can be safely combined with chemotherapy or radiation to produce significant improvements in cancer patient outcomes.

Finally, this body of emerging data will reinforce the need for clinicians the need to utilize the practice of evidence-based medicine rather than to attempt to extrapolate findings from one antibody to another.

This practice will ensure the patients will see the most efficacious therapy without compromising safety or overall patient care.

In light of the data recently presented for ERBITUX and panitumumab in colon cancer, it's essential that we emphasize the differences between these two products.

To accomplish this and to strengthen the ERBITUX market position in the most rapid and comprehensive manner, ImClone has made the strategic decision to expand our field force.

Specifically, we added 27 oncology sales professionals to our existing 37 to make a total sales force size of 60.

With this force, it will now be possible for us to reach all prescribing medical oncologists, as well as those who influence the decisions to use ERBITUX for our approved indications.

The expansion is currently underway, and we expect to have the new organization fully trained and mobilized prior to this year's ASCO.

We're extremely excited about this expansion and firmly believe it will generate significant return for ERBITUX.

To conclude, we have effectively defended our colon marketplace in the face of significant competition.

Looking forward we believe that the expanding body of positive ERBITUX clinical data coupled with our dominant lead and clinical development and our expanded commercial presence will solidify our leadership position and present significant future opportunities for growth within the colon and head and neck marketplaces.

Eric will now discuss the details of the emerging clinical data for ERBITUX, as well as the promise of our unique pipeline.

Thank you, Michael.

And good morning, everyone.

First quarter has been an exciting one for both ERBITUX and the ImClone pipeline with many significant milestones achieved and more to come this year, including the results of two pivotal studies of ERBITUX in non-small cell lung cancer.

Over the last two quarters, ImClone, along with Bristol-Myers Squibb and Merck KGaA have announced the topline results of five pivotal trials including evaluations of ERBITUX in the first, second, and refractory metastatic colorectal cancer settings.

Two of these ERBITUX studies were recently presented at a symposium at the AACR meeting last week entitled "Breakthroughs in clinical research" that highlighted three of most important trials presented at this prestigious meeting.

In a refractory colorectal cancer study the effects of adding ERBITUX to best supportive care were profound, and the primary end point to overall survival was easily met.

These results established ERBITUX to be the first and only EGFR targeting agent ever to improve survival in the setting.

All of the study end points including program recession-free survival and tumor response significantly and strongly favored ERBITUX, and the effects of ERBITUX on quality of life will be presented at ASCO's annual meeting this June.

In the second pivotal trial that was highlighted at the AACR meeting known as Epic, colorectal patients who failed a platinum-based therapy were randomized to treatment either with ERBITUX plus Irinotecan or Irinotecan alone.

Although the primary endpoint of increasing overall survival was not met, all other relevant endpoints, including progression-free survival and tumor response were significantly improved in patients treated with ERBITUX plus Irinotecan.

The lack of the survival difference in the study was most likely due to the confounding effects imparted by the commercial availability of ERBITUX, which we now know increases survival after failure of oxaliplatin and Irinotecan.

Approximately half the patients assigned to the treatment with Irinotecan alone eventually received ERBITUX post-study.

And of those patients, about 90% of them received ERBITUX in an even more effective way, that is combined with Irinotecan.

We have performed several ad hoc analysis that will highly suggest that the survival end point was indeed confounded by ERBITUX administered post study.

To illustrate the magnitude of the effects of ERBITUX on other end points, the median progression-free survival was increased by 54%.

The tumor response rate was nearly quadrupled.

And complete responses, which rarely occur in this setting, were noted in nine patients receiving the ERBITUX-plus Irinotecan compared one patient treated with Irinotecan alone.

The effects of ERBITUX on quality of life will also be presented at the ASCO meeting this June.

Further supporting this direction and topping off this wave of evidence-based data, we are pleased about the completion of our pivotal first-line study known as Crystal, conducted by our partner, Merck KGA, n metastatic colorectal patients' randomized treatment, with the chemotherapy regiment Folfiri with or without ERBITUX.

We recently announced that the primary end point improved progression-free survival was met, and the results will also be presented at the ASCO meeting this June.

We believe that physicians will interpret the totality of these results as evidence that ERBITUX benefits patients with early stage colorectal cancer, as well as strong confirmation of the merits of ERBITUX in highly refractory disease, where it is the only therapeutic ever demonstrated to extend survival.

In essence, these highly relevant results will position ERBITUX in earlier stages of the disease.

In addition,, several pivotal studies in the adjuvant colorectal setting, meaning ERBITUX added to chemotherapy after colorectal cancer surgery, a setting in which new active drugs can really make a major impact in extending survival and increasing cure rates, are strongly accruing patients in both the US and worldwide, and discussions about the prospects for a third trial evaluating the merits of ERBITUX combined with Avastin and chemotherapy in the adjuvant setting are progressing well with a major cooperative group.

Recently we learned from the southwest oncology group that the combined treatment of ERBITUX plus Gencitabine did not incur significant improvement in survival over Gencitabine alone in untreated patients with advanced pancreatic cancer, in which there are few meaningful treatment options.

These data have been transferred to ImClone and three parties, that is Swag, ImClone, and BristolMyers-Squibb which engage in joint efforts to understand.

The specific results of the trial will also be presented at the ASCO meeting in June.

Nevertheless, we still consider pancreatic cancer to be an important area of focus, and based upon activity noted with ERBITUX in the earlier studies, we are pursuing additionally -- additional, biological-based evaluations of ERBITUX in both early stage and advanced disease, including a pilot study of ERBITUX and Avastin and evaluations of our pipeline agents to improve the outcome for pancreatic cancer patients.

And we recently announced that in a randomized multicenter study, known as Extreme, ERBITUX combined with platinum-based chemotherapy meant the primary end point of increasing overall survival in recurrent and/or metastatic head and neck cancer.

There has been no anti-cancer therapeutic in the modern era, let alone a targeted therapy, that has ever accomplished this important hurdle of improving survival in this setting.

And we anticipate continued interest in the increasing strengths of ERBITUX in head and neck cancer as soon as physicians learn of these results, which will also be presented in June at the ASCO Meeting.

Turning to ImClone's principal areas of focus from a clinical regulatory standpoint -- we have been expending considerable resources to expand and strengthen our clinical development, medical affairs, and regulatory developments to accomplish several goals.

First, we are developing coherent regulatory strategies based on these new data to expand in ERBITUX's current indications and to enable compendia listings.

Secondly, we're using developing a series of randomized multicenter trials to quantify relevant activity with ERBITUX and other tumor types, such as cancers of the rectum, bladder, prostate, esophagus, stomach, and others, as well as evaluating ERBITUX on less frequent dosing schedules.

A major thrust of our past, present, and future plans with ERBITUX is to evaluate the merits of combining it with a wide variety of chemotherapy regimens, radiation and targeted therapies, particularly Avastin.

Over the years we have generated and continue to generate abundant clinical data with all types of ERBITUX-based combination regiments.

With and without Avastin.

In colorectal cancer and other tumor types.

These studies have consistently demonstrated intriguing clinical, antitumor activity, as well as predictable toxicity.

It is important to emphasize that ERBITUX is approved worldwide and indicated for use in combination.

The overwhelming majority of its use is in combination, and it was the combination of ERBITUX and Avastin in a study known as Bond 2 in which this EGFR and VEGF inhibitor cocktail first showed prominent antitumor activity with minimal enhancement of toxicity.

That sparked tremendous worldwide interest in developing combinations of target therapies.

Lastly, I would like to turn to ImClone's clinical stage pipeline beyond ERBITUX.

Both our clinical and preclinical pipelines, they're rich and comprised of a multitude of IgG1 human antibodies against targets that are both unique and of high value, presenting an extraordinarily great potential impact to cancer patients, as well as ImClone going forward.

Considerable progress has been made advancing new developments during the last quarter.

In addition to recently completing Phase I studies with 11FA, our fully human IgG1 antibodies targeting EGFR that is poised to begin Phase II development this quarter, and a pivotal trial in 2008, two Phase I studies of 1121-B, our blocking antibody against VEGF R2 which we feel is the best angiogenesis inhibitor in development was completed during last quarter.

As of the case in the previous quarter, further evidence of 1121-B's surprising ability to induce notable tumor responses as a single agent as well as a favorable safety profile have been observed during the first quarter.

Also during the first quarter, we completed two Phase I studies of A-12, which targets the insulin growth factor like receptor, perhaps one of the most important targets in contemporary cancer research.

In addition the NCI is expending resources in supplementing their clinical trials of a-12 in multiple application and is currently soliciting for specific trials planned in concert with ImClone in a nonoverlapping indication.

Over the next two quarters we will be rolling out our first stage of disease-directed study that comprise our aggressive plans for 1121-B and A-12, some of which will be directed toward registration.

Lastly, the first quarter has seen considerable progress with our Phase I evaluation of 18F-1, which uniquely targets VEGF R1, expressed by both malignant blood vessels and tumors like, and 3G-3 which potently targets the very important tumor growth and survival factor, platelet-derived growth factor Alpha.

We anticipate accomplishing these Phase I objectives with these agents in the second half of 2007.

This concludes our prepared remarks, with that, I'd now like to open the call up for questions.

Sharita?

(OPERATOR INSTRUCTIONS) We'll pause for a moment to compile the Q&A roster.

Your first question comes from Mike King with Rodman & Renshaw.

Hi, thanks for taking my questions.

I have several.

Let me be brief.

I was wondering if -- Michael, if you could perhaps give us a little bit of color.

I know that market sharewise it was too late in the quarter for the Pace study to have much effect.

I was wondering, did you experience any kind of reduction in duration in the third line and beyond setting that you might comment about?

I was wondering if docs might be -- were perhaps a little more ready to switch from ERBITUX to [vectovix] in the third and beyond setting because of the presence of that?

Yes, Mike, that's a great question.

To date, looking at kind of the raw third-party date, wee not seen a reduction.

However, we're doing specific queries into patients who are following ERBITUX, followed by panitumumab to see if that's a subset, if there's an effect.

And we've got those analysis ongoing.

Those are special requests.

So I don't have that information.

But I did look at the overall marketplace and there is no apparent effect.

Okay, great.

And then just a question for Eric.

I know that you cannot really get into the details of the pancreatic trial, but there's been some speculation about divergence of curves that might not have -- sorts of intuitively might be spreading apart but may not have achieved statistical significance.

Is there -- is there any benefit from -- from such an outcome in your mind?

Boy, Michael, I don't know where that comes from.

We're really waiting for SWOG to transfer -- for them to transfer the data to us.

And for us to really look at it.

And if that's the case, we'll analyze it, and perhaps we can discuss it during the next conference call or after it will be presented at the meetings.

We're going to be really looking hard.

This is going to be, I think, very important for us to understand relative to the effect of Tarceva and to understand biologically what's happened here in what subsets.

There may be differences, et cetera, but we have not begun to analyze the date.

Okay.

Fair enough.

One final one.

I was wondering if Alex could talk strategically about the pipeline.

You've got obviously the partnership with Bristol on ERBITUX.

But you guys have shepherded all your pipeline molecules along to the state they're at now.

All the interesting compounds, just wondering, is there anything that you might tell investors about what your longer term, strategic goals are for 1121-B, A-12, etc.

Hey, Michael, it's a very good question.

And we believe we just have a fantastic pipeline.

A fantastic preclinical pipeline and a late stage pipeline that looks good, as well.

So the issue that ImClone may have is that as the pipeline moves forward we're investing kind of in all the projects that we think are good right now, it may not be physically possible for a company our size to develop everything.

Eric's group is great, and -- and growing.

He's really increasing the size and capabilities of his group, as well.

But we may come to a point where we sort of have too much to deal with.

So we're -- we're doing that type of analysis now, and -- and frankly, we are considering, as I -- as we mentioned in the remarks, you know, some select partnering opportunities, but, we haven't made any decisions in terms of kind of exactly when and where we would do those -- what we would do in those partnering.

Okay, thanks, I'll get back in queue.

Thank you, the next question is coming from May-Kin Ho of Goldman Sachs.

I have a few questions.

First of all, Eric, can you discuss the data that was released by Roche recently on Avastin plus Folfox and Zelox.

Looking at the data, it seemed like the improvement was pretty small.

How we should think of that in context with the CRYSTAL data coming out?

Number one.

Number two, maybe Eric and Michael you can discuss what the implication in the marketplace would be for the recent head and neck cancer data, how is the drug being used now, and how would this data -- or the indication when it's approved effect the usage.

Then I have another question after that.

Sorry.

Hi, May-Kin.

As far as the -- as far as CRYSTAL, I think we can have a lot of great discussions after the presentation at ASCO.

But you're right, I think the physicians who will actually see the Roche data again at ASCO.

We've seen the progression-free survival data, For those of you it was a study in which it was a randomization initially between Zelox and Folfox in which noninferiority was indeed seen with respect to [ INAUDIBLE ] , and secondarily randomization with and without Avastin where I think everyone was intrigued that here's Folfox, the most dominant region -- Folfox and Avastin, the most dominant regimen in the United States, yet the progression-free survival that everyone thought would be very -- very comparable to the first study that was presented by Dr.

Hurwitz with regard to IFL, was not as great.

And I think we're going to have to look at these data, I

I think the presenters at ASCO GI meeting looked and analyzed the data, analyzed PFS with or without a 30-day window.

And just to cut to the chase, it appeared that patients were really not getting the totality of the therapy as planned.

So something actually may have been happening, and I think in clinical practice, something does indeed happen during the administration of that therapy.

Patients drop out, doses are reduced, et cetera, which may have led to these results.

Nevertheless, the survival needs to be presented and probably will.

But it may actually infer that the original study that was presented upon which Genentech received the broad wide-sweeping indication is -- was probably -- could be an outlier.

With respect to the head and neck cancer results, with respect to extreme -- anything that improves survival.

And again, we can talk about the magnitude of that advantage at the after the ASCO presentations, I think will be extremely welcomed.

That wasn't intended to be a pun, for patients with this disease.

Everything that is added to chemotherapy really shifts that toxicity profile.

These patients do not tolerate toxicity.

And, I think when -- we'll be looking very closely and I think the physicians will be looking at the therapeutic index as well as the survival augmentation.

And I think this is going to be welcomed very, very well.

Yes.

To reinforce what Eric's saying, we're very excited to have now three different settings where we improve survival with ERBITUX.

Obviously that's a significant achievement for any product.

To be specific with regard to kind of market impact, remember as I mentioned in the script that we really dominate platinum refactory head and neck already with 50% share.

We've pretty much saturated that market.

This data will likely help us to move that therapy forward into the first line.

But then there will be some effect on the, second line because patients will have already seen it in the first line.

But there are some benefits in that.

One would expect the first line therapy to have a longer duration of therapy.

So there's a couple moving parts in it.

But I think overall, again, just from a gestalt, for the product three areas having three -- three different settings having shown improved survival, it's fantastic.

And obviously the first line is a very attractive place to be in the head and neck marketplace.

Can you remind us at this point for colorectal cancer, what's the penetration in the various lines of therapy.

Yes, we can give kind of general numbers.

Overall, it's in the mid teens.

And now there's -- this marketplace has gotten so -- somewhat layered and complicated from the perspective of looking at a share.

But if you look at third line, we're -- around 30%.

If you look at second line, we're in the teens.

First lines are in the single digits.

And --

panitumumab has made most of their in roads in the fourth line, kind of beyond the third line.

That's where you're seeing the growth that they've seen.

Right.

I see.

And last the question for Alex.

Can you comment on how the search is going on for the CEO, and then the announcement today about the appointment of the CFO from Bristol onto the Board?

Is there part of the contractual agreement of having people on the Board from Bristol or should we look at this in a different light?

No, okay.

Take a look in reverse order.

I think we're very happy that Andrew Bonfield has joined the Board.

I think he'd be able to add a lot to ImClone's Board.

As you know, Bristol has the right to appoint two people to our Board.

And Andrew Bodnar is competently serving on our Board of Directors as a Bristol representative.

As far as the CEO search, it's going well.

But we do want to make sure that things that -- that we do things properly.

And, you know, we've made significant progress in the CEO search, but we're not yet ready to announce anybody.

Okay, great.

Thank you.

Thank you.

Your next question is a followup question from Mike King with Renshaw & Rodman.

Rodman & Renshaw, Renshaw & Rodman, it's all good.

I wasn't ready for my name to be called so quickly.

Michael, I was wondering if you could talk about the -- does it help or hurt or is it neutral that there's no real data on the label for ERBITUX in use with oxaliplatin?

Does it help or hurt?

The label is going to be a better thing.

Obviously without oxaliplatin it raises imbursement concerns as far as ERBITUX use in combination with that agent.

So yes, very straight forward, yes, it does have an impact.

Okay.

And if I might just stick in with the marketing side, Bristol -- excuse me, on their call today, indicated that they were carving out a dedicated Spreisel sales force.

And I'm wondering what your thoughts are on -- on that in terms of focus on or away from ERBITUX.

No, I think it's a very good thing.

When Spreisel was launched it did take a little bit of attention away from the BMS sales force.

With this new announcement that they've made, they're going to -- my understanding is that they're going to take all of the new products and put them within this new satellite sales force.

So our sales force will be complete, the BMS sales force will be completely dedicated to ERBITUX.

Michael, there is Eric.

I also think that it's also a benefit in terms of the fact that doctors who are going to use Spreisel and ERBITUX really are very separate, they're becoming very separate subspecialties.

Sure.

That are dedicated to heme malignancies almost entirely.

Can we get a sense of what proportion of the sales force now is detailing both ERBITUX and Spreisel?

Do you know that answer?

Probably BMS is a better person to ask with regard to that.

But certainly the primary responsibilities, ERBITUX, if nothing else based solely on the magnitude of sales relative to Spreisel.

Okay.

Fair enough.

And then Alex -- I'm sorry, go ahead.

Go ahead, Michael.

Just --

I was just going to say just wanted to maybe have you elaborate a little bit more.

I know that you're happy with Mr.

Bonfield's appointment to the Board.

And I'm wonder figure there's anything beyond that.

And perhaps a little more focus from the Bristol sales force that you can speak to about --

I mean, I've known -- I've known Andrew for a while.

I think very highly of him.

Andrew Bonfield.

I think it's a great thing for ImClone.

Is there anything beyond that that investors can look at as far as concrete evidence that the relationship is warming?

You know, at this point, I don't want to, you know -- I mean, we're still in discussions with Bristol.

So at this point I kind of don't want to go beyond that.

I'm sure you can appreciate why.

Hopefully over time we -- we can kind of give more information about kind of how thing are developing.

Okay.

Great.

Thanks.

Thank you.

Thank you.

Your next question is coming from Steve Harr with Morgan Stanley.

Yes.

Good morning.

A couple of questions.

Alex, you mentioned that you made some progress on the litigation side.

Any potential we can get an update on where you guys stand on some of your IP issues?

Sure, hi, Steve.

This is Dan O'Connor.

I'll field that question.

So as we previously reported, the decision, the case was appealed and is currently on appeal.

And we have filed a declaratory judgment also with respect to the case seeking to invalidate the patent.

On April 24 we filed an answer in a case that was filed against ImClone by Abbott.

In our answer we've denied their claims of infringement and we intend to vigorously defend that case, as with all of our litigation.

And overall, as you might expect with litigation, we would not rule out the possibility of a fair and reasonable settlement.

Much past that I can't really comment.

All right.

And one of the questions I guess I have is why did you guys decide to add the sales force instead of Bristol Myers?

This doesn't change your royalty rate.

You're not reimbursed on this.

How much do you need to incrementally sell to make this a profitable decision?

We -- we think that what we're doing is in the best interests of ERBITUX.

Not the best interests of ImClone?

No, it's in the best interests of ImClone, as well.

But it's clearly in the best interests of ERBITUX.

All right.

And then what are your guys' thought as you try to push this drug into earlier stage patient populations about how you can capture the late stage patients' economics but still have a price that's reasonable or competitive in the first or second line setting?

Yes, Steve, it's Michael Bailey.

Those announcements are on ongoing in light of the new, earlier line therapy or data and colorectal cancer.

So I don't have an answer for you now.

But it's absolutely the question that we have to ask ourselves.

What is the tradeoff, and what would we have to do, to effectively optimize the product.

Great.

Thank you.

Thank you.

Your next question is coming from Gene Mack with HSBC Securities.

Thanks for taking the question.

First on -- on the P&L, just wondering how sustainable are the cost reductions in manufacturing, and then I have another followup.

Sure.

Let me -- let me just emphasize something in the area of cost saving.

I just want to make sure that everyone understands that the initiative that we have in place right now is not just cutting costs across the organization so that we can generate short-term savings.

Our emphasis here is to identify the contract to scale and to aggressively look at our contract with different vendors so that we can generate benefits with respect to cost reduction without sacrificing the operations of the company.

From a manufacturing perspective, the manufacturing efficiencies that we are referring to pertains to a change in the performance of ERBITUX that has generated increased volume or yield in the production.

Therefore, with the same cost structure, if you generate higher yield, obviously your price is coming down.

So that's basically what we're talking about when we say product efficiencies in the manufacturing process.

And we do expect that there are plans to have -- to have a new process, you know, a revised process that would need to be approved by the FDA to manufacture ERBITUX which we hope would be even more cost efficient.

And there are other things we can do around the whole manufacturing process to sort of do things more efficiently.

process to sort of do things more efficiently.

You mentioned a change in formulation.

How significant was that, and did the FDA have to weigh in on that at all?

Yes.

We did get approval from the FDA, and the increased volume was about 40% higher, increased volume.

Okay.

Great.

And on a clinical side I guess for Eric, I was wondering -- And I apologize if I missed this in the argument --

Just to be clear, you were talking -- When you said change in form Las Vegas, you're talking differently from the process change?

You're saying the 100-milligram vial, is that right?

I was referring to the formulation change that you guys just --

Okay.

And that -- that I guess it may be more of -- yes, more clearly described as a process change.

We had a formulation change, as well, where we introduced a different dose vial.

Okay.

A vial that comes in a different size.

Okay.

Okay.

I understand.

All right.

And then on the clinical side, Eric, like I said, I apologize if you maybe went over these.

I probably missed them.

I was wondering if there's any update on the intergroup, the full study, over ERBITUX versus Avastin.

No, that study is growing slower than we would like it to enroll.

But it is enrolling, and its a pace of enrollment over the past couple of months that's picked up.

Now we're anticipating some additional measures to really get that study going.

Including extending the study to other countries in North America.

And we're in negotiation at the present time.

The very, very present time.

And that would enable a quicker completion of the study.

And, I think it will happen.

Do you anticipate any difficulties from the readout of the PACE trial?

We haven't seen that thus far, no.

In fact, I think that with the strong ability of ERBITUX and Avastin to actually impact the fact post treatment, at least post first-line treatment, I think there's less concerns of physicians to randomize their patients.

So I -- I think if anything the recent data will augment enrollment in that trial.

And the last question is just update on the RTOG study.

It's the radio therapies plus or minus ERBITUX.

Yes, that's good very well.

The trial date you're speaking about is the chemo radiation plus or minus ERBITUX study, which is the main study that the radiation therapy oncology group is doing.

The -- I've just seen enrollment figures on that study.

And it's where the RTOG wants it and has projected it to be so we're quite happy with that.

Speculation on when results --

Gene, I can get back to you on that.

I don't -- I don't remember the first patient, last patient dates offhand.

Great.

Thank you very much.

You're welcome.

Thank you, your next question is coming from Yaron Werber with Citigroup.

Hi, thanks for taking my question.

Just wanted to get an update from you.

Until the lung cancer program what might we see at ASCO?

Again I apologize if missed that, as well.

Can you tell us when you expect the data from this or the Bs99 study?

Yes, I mentioned specific dates.

It would be in the second half of '07.

And as far as what we will see from this, last year we had the SWOG trial, the multicenter trial that looked at combined chemotherapy plus ERBITUX versus sequential -- actually, we were very intrigued that the response rate was probably the highest that SWOG has ever seen.

And that was in the mid 30's.

Both of the studies, there will be followup of that study.

Both arms that trial actually met the end points for SWOG that was sufficient for SWOG to continue both of the arms and actually SWOG is working with the quartet of chemotherapy, Avastin and ERBITUX.

So Avastin and ERBITUX and this year will present an update of that trial and pharmacodynamics.

So the other study that will be presented, I think this is an interesting trial, is the BMS 100 study, which was revised to a randomized phase-two study of gencitabine cisplatinum, and I think you'll see some intriguing data there.

Frontline patients?

A frontline study, yes.

Any update on whether weather -- are we still on track to see the opus data being presented?

The Opus data, we've actually just seen the ASCO lineup and it will be presented at ASCO this year.

It's actually on the web site.

You can look and see what specific symposia that will be presented at.

Okay.

Terrific.

And then question, Alex, I just wanted to follow up on -- you mentioned the discussions with Bristol are still ongoing.

Is there a -- can you give us a little bit of an understanding as to what is the nature of the discussions, just a little transparency for us and from the outside.

And also, what is your line of thinking, we're in the middle of a very hot and M& A wave here.

Is ImClone looking now pretty good now that Amgen had its mishap.

What are you thinking on that?

Okay.

So we -- we are not planning to sell the company.

We're not spending any time trying to do that.

To answer your latter question.

And with regards to the Bristol discussion, I really can't say too much.

I think that it sort of -- I think everyone -- or many people in the investment community and just the world sort of know the situation and I think both companies are working to get to a place where we can work together.

Can you share with us what -- is it -- are you looking to if -- if you can comment at all, are you looking structurally oh change what each party is responsible for, or are we talking about the agreement or --

Yes.

I -- I really don't want to talk -- to discuss anything at this point.

And I don't want to sort of lead people to conclude that there's likely to be some dramatic change in the structure of the agreement.

That's -- I don't want to -- by saying nothing, I don't want to say that.

But I really don't want to discuss, kind of any of the details of what we're talking about.

Okay.

Fair enough, thanks, Alex.

Thank you.

Thank you.

Your next question is coming from William Sargent with Banc of America Securities.

Hi, thanks for taking my question.

I was wondering if there was any update just for getting a readout on the [Kyra] II study in 2008 and any update on strategy for filing of the two colorectal studies that we're seeing in the first half of this year and then also any update on negotiations over the Japanese territory.

With the partners.

Hi.

Well -- it's Eric.

Hi, Eric.

The Kyra II study and for everyone who may not know, that's the study of the Zelox Avastin plus or minus ERBITUX, is being performed really independently by a European cooperative group with the DSMB So there's a lot of distance between the companies in that group.

That study completed enrollment last Fall.

And certainly the DSMBs have met but we do not have a readout nor reports at the present time, and we're actually working and reaching out now.

But the actual -- the actual end point, primary end point is progression-free survival.

It should be met in early 2008.

But that group really is -- is quite independent.

So when they'll present the data is largely up to them.

You had -- I'm going to -- I know you had another clinical question, and I'm sorry that didn't -- I --

The filing.

We're currently, it's been very complex in that there are multiple studies, three studies have hit us at once.

Some of the trials were performed in the United States, others worldwide.

The CRYSTAL study, of course, being -- really being sponsored by Merck KGA.

So we're all -- what we really want to do and we're not going to -- I don't really want to talk about the strategy until we actually have our meetings with the regulatory agencies, and we are -- we are actually planning our strategy at the present time, but it will be -- I think our aim -- our aim is that of a comprehensive strategy that is -- that is, across lines, and also that is united with our partners both Bristol Myers and Merck KGA.

Really converging on if we can a worldwide strategy.

With regard to Japan, I'm going to let Dan O'Connor speak.

Sure.

So we've entered into previously with Merck and Bristol a -- a development agreement, a three-way development agreement for the development of ERBITUX in Japan.

And as contemplated under that program, we're looking toward entering into a commercialization agreement with the three companies for the development of the antibody in Japan.

And clinical activities which, Eric, I'm sure you can speak to are ongoing.

Principally focused in colorectal cancer.

Yes.

Well, you may know, we submitted our -- or registration package to the Japanese regulatory agency, and we've announced that with our BMS and Merck KGA several months ago.

And we're anticipating feedback actually very soon from the agencies.

And hopefully approval, I say hopefully by the end of the year.

I was actually speaking more to the royalty rate for Japan.

If that had been decided upon or where negotiations were --

No.

We're still working through that one with our partners.

Okay.

And Eric, just a quick followup on the Kyra II study.

The last DSMB report, can you say when that was or how --

No.

I think at this point we've -- we actually are going to get further clarity.

Eye I'd rather, you know -- I'd rather, you know, I think that any announcements really need to be -- real need to be done in conjunction with the cooperative group.

So at this point, I'd -- I'd rather not say.

We have not heard any -- anything negative thus far whatsoever.

Okay.

Thanks.

And one more quick followup.

Based on the comment earlier about difficulty with reimbursement on Folfox, where do you see the Opus trial data actually benefiting ERBITUX?

Is it from more of a reimbursement standpoint, or how would you interpret -- since it is a response rate, how would you interpret those results?

I think at the present time we'll really look at Opus.

Certainly Merck is going to look at opus and try to evaluate how Opus -- again, the primary end point is response rate.

It's a small study, will it help us broaden the indication?

I think right now we're -- response rate is not considered by the agency to be a surrogate for clinical benefits.

Certainly that might change over time.

The directionality of all the data may -- may help with regard to that.

Opus could be used for -- for lifting as well as for -- I think we have to really look at the date, and we haven't really seen mature data.

And again the -- the end points that I think we're going to be looking at most individually are progression free survival and overall survival.

But it's a very small study.

Great.

Thank you for taking my question.

Thank you, your next question is coming from Geoff Meacham with JPMorgan.

Hi, thanks for taking my question.

Question for you on the lung program, on the RT, the 0324 study.

Do you guys view this -- this trial as large enough to really be resistant or to be registration-enabling, and then would the regulatory hurdle be higher for locally advanced versus the metastatic indication?

Hi Geoff.

We've not started that study.

We've actually just got data from the phase-two trial.

And the RTOG is waiting to see as is the NCI, the results of the other pivotal trials in lung cancer before embarking on that particular trial.

Personally, I think that's an indication, that's a clear indication regardless of the results of the stage four studies.

And I see that as a very good and keen strategy pursuing that indication.

Largely because of the effects of the -- the combined effects of radiation and chemotherapy.

So this is -- and ERBITUX.

So I think that that particular indication is quite unique.

So that trial, the RTOG is waiting as long as the NCI for further data before embarking on it.

Okay.

Operator, we'll have time for three more questions, please.

Thank you -- Your next question is coming from Eric Schmidt with Cowen and Company.

Thanks for taking my call.

Just looking for a little bit more clarity on the Bristol Myers reimbursement obligations that you had in the past.

And it sounds like you don't have going forward.

Could you just explain what has happened there?

Was that something that a previous contract contemplated and for how long won't you be required to reimburse Bristol for the excess clinical costs?

Sure, Eric.

That contract with BMS right now specifies that there's an annual budget.

And that annual budget actually consists of two sections, one is for registrational l trials and one is for nonregistrational trials.

According to the contract, BMS is responsible for payment of the registrational trials up to the annual contractual budget.

And the nonregistrational trials we share on a 50/50 basis.

And as I mentioned before in the script, in the past three years, we have had an agreement with Bristol that any expenditures on our trials in excess of the annual contractual budget we will share based on a certain percentage.

And we've been disclosing that in the past.

The comment made before with report to the cost sharing is only related to any excess expenditures for ERBITUX in excess of the annual budget, so that we are still currently obligated to pay for them for 50/50 of nonregistrational trials.

And then going forward, you -- 2008, 2009, 2010, you won't be required to pay anything above budget for the registrational trials?

Well, I think we're discussing that with BMS at this point.

Okay.

Thanks for the clarity.

Okay.

Thank you.

Your next question is coming from Brian Rye.

Good morning, and thanks for taking my question.

Alex, you mentioned that the supplemental BLA for BB50 has been filed.

Could you remind us of the manufacturing capacity, hat will add and whether or not that plays into the company's thinking as it thinks about partnership opportunities and the timing of partnership opportunities for the drugs in the pipeline.

So -- so you mean like -- like we have three 11,000-litre reactors --

I mean, BB50 right now.

We have commissioned and validated suite one of BB50.

And that is what we have filed with the FDA for approval of that specific suite so that we have been producing ERBITUX in suite one since June of last year.

So all of the inventory that we have been producing since June of last year in BB50, at this point we cannot sell until we get approval from the F.D.A.

Thanks, Ana.

That was at the heart of my question.

Okay.

Thank you.

Your final question is coming from Jim Reddoch with FBR.

Thanks.

How is your competitor counter positioning with Vectorvix, And have you seen evidence of bundling with other Amgen products and are they also playing up that price differential?

Yes.

All of the above.

You know, we've talked about on previous calls kind of how they've positioned the product.

You know, I think in light of the Pace data, you've heard a lot more discussions, and I would argue the defensive discussions saying that safety is the most important thing for -- for the overall patients.

Again, our strategy and I really upon to focus more on that is -- is focused around evidence-based d medicine and the fact that data supports the use of ERBITUX in our indications.

Whereas certainly in combination with chemotherapy, again as I mentioned, being that patients in the first study that they've shown or they've reported as a randomized study in connection with the chemotherapy in colorectal cancer, and it appears to have failed.

That certainly solidifies our position as the evidence based choice in the EGFR monoclonal antibody therapy.

On the topic of convenience between these two drugs, how much ERBITUX use right now is once every two weeks versus once a week in the real world?

Depending on your source, it can be around about 25%.

Given that we've presented data at ASCO last year showing a PK comparability and presenting data at ASCO GI this year as well as the ACR, I guess we'll be presenting at ASCO again.

The idea that from a clinical efficacy perspective it appears to be very similar using Q2 weekly 500 mgs per meter square, it seems to be comparable to what we have as an indicated dosing.

Okay.

Thanks for the answer.

Great.

Nice quarter.

Thank you.

Thank you, and at this time there appear to be no further questions.

Okay.

That completes our call today.

Thank you all for joining us.

As always, if you have any additional questions that have not been addressed this morning, please contact the corporate communications office at 646-638-5058.

Thank you.

Thank you, everyone.

Thank you, this does conclude today's ImClone Systems conference call.

You may now disconnect and have a wonderful day.