禮來公司 (LLY) 2007 Q2 法說會逐字稿

Good day.

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

At this time, I'd like to welcome everyone to the ImClone Systems 2007 second 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.

It is now my pleasure to turn the floor over to your host, Dan O'Connor, ImClone Systems Senior Vice President and general counsel.

Sir, you may begin your conference.

Thank you very much and good morning, everyone, and welcome to ImClone Systems's second quarter 2007 conference call.

I'm Dan O'Connor, Senior Vice President and general counsel for the Company, and with me today are: Alex Denner, Chairman of the executive committee of ImClone's board of directors and a member of our board; Richard Mulligan, member of our executive committee and member of the Company's board of directors; Michael Bailey, Senior Vice President of commercial operations; Eric Rowinsky, Senior Vice President of clinical development and chief medical officer; and Ana Stancic, Senior Vice President of finance.

Alex will begin today's call with a top-level review of our most recent achievements.

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

Ana will conclude with a discussion of our second quarter financial results.

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 upon 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'll now turn the call over to Alex.

Alex?

Thank you, Dan.

Good morning and thank you for joining our call today.

The second quarter of 2007 was a very active period for ImClone and we have continued our progress into the third quarter.

Importantly, we announced late last week that we have amended our existing agreement with Bristol Myers for the development and commercialization of ERBITUX in North America.

With us, BMS will invest significant additional funding to expand our ongoing ERBITUX clinical development program by several hundred million dollars.

While we can't provide a number due to competitive reasons, this amended agreement represents significant increase in BMS's financial commitment to ERBITUX when compared to our original agreement.

With this additional financial commitment, the scope of our development activities expands dramatically.

We will conduct numerous Phase II and Phase III clinical trials that will further explore the activity of ERBITUX in a wide variety of therapeutic settings.

We have proven the effectiveness of ERBITUX in both colorectal and head and neck cancers, and based on the success, we are confident of its value in other indications, including brain, breast, bladder, esophageal, gastric, lung, pancreas and prostrate cancer.

This program is not exploratory.

It is squarely focused on registrational opportunities.

In 2007 and beyond, this allowed us to significantly reduce ImClone's R&D expenses for ERBITUX, while at the same time expanding the antibodies development.

For example, we now expect ImClone's portion of the ERBITUX R&D spend in 2007 to be $35 million to $40 million less than what we had anticipated earlier in the year.

As we stated late last year when the board began evaluating the relationship of ImClone and BMS, our goal was to seek ways to optimize our collaboration in terms of realizing the full potential of ERBITUX.

We believe this expanded program with BMS greatly enhances the long-term value of ERBITUX in treating a wide range of cancer patients.

We believe it is tremendously beneficial for both ERBITUX and ImClone.

Moving to other developments, I would like to highlight the specific progress we have made during the second quarter and review other key corporate initiatives, including positive changes we've made to strengthen the board of directors.

Our second quarter sales represented an important milestone, the reversal of a declining sales trend since the introduction of (Panitumumab, while sales in Europe increased dramatically.

Additionally, we nearly doubled the size of our sales force during the second quarter and now have 64 sales professionals in the field as of July 1st.

With the second quarter performance of ERBITUX and the expansion of our sales force, we believe we are well positioned for a positive second half of the year.

Mike will provide more detail on this in just a moment.

In addition, we have been focused on aggressively cutting nonessential costs throughout the organization.

We had a major presence at the ASCO and AACR meetings presenting extensive clinical data on more than 100 abstracts on several different tumor types.

These abstracts build on the growing body of ERBITUX data and bolster the value of our robust pipeline of IGG-1 fully human antibodies.

We also recently achieved several significant regulatory milestones.

The FDA has accepted for filing and review a supplementary BLA for ERBITUX, which includes evidence that ERBITUX is the only monoclonal antibody to show improved over-all survival as a single agent in colorectal cancer.

This supplementary BLA has been granted priority review and we expect the FDA action date to be early October.

In April, we submitted a supplemental BLA seeking their approval of our manufacturing facility BB50 as a second manufacturing source for ERBITUX, Based on our initial interactions with regulatory authorities, we are optimistic about the outcomes of these filings.

Beyond ERBITUX we have made a great deal of progress in advancing the development of a number of our clinical antibodies during the quarter.

Most recently we announced that the first of our Phase II clinical trials of A-12, our IGFR antibody for advanced colorectal cancer, has commenced patient enrollment.

We expect to enroll very shortly our first patients in each of our Phase II studies of 1121b, our VEGFR-2 antibody in renal cell carcinoma and 11F8, our fully human EGFR antibody in colorectal cancer the.

In total, we will have six new disease-directed trials initiated by the end of August.

Eric will provide an update on the exciting progress of our clinical pipeline in just a few minutes.

Overall, we believe ERBITUX is effectively positioned in the marketplace and that ImClone is one of the most promising pipelines, it not the most promising pipeline of novel antibodies existing today.

We've received a number of substantial proposals from large pharmaceutical and biotech companies to partner our pipeline candidates.

This interest further validates their significant stand-alone value.

We continually assess these types of partnerships for developing our antibodies for their potential to contribute to the future success of ImClone, enhance shareholder value, and bring new treatment options to patients.

We are fortunate to have the resources to be able to invest in the promise of our pipeline in a manner that will maximize the clinical opportunity.

In the press release we issued this morning, we included a pro forma income statement which provides separate specific revenues and expenses for ERBITUX and our pipeline activities.

This pro forma income statement also breaks out noncash items to make it easier to read.

As you can see, in the first six months of the year, ERBITUX, if looked at as a separate P&L, generated net income of $106 million and we spent approximately $59 million on developing our non-ERBITUX pipeline.

We believe this analysis helps clarify the multiple value drivers of ImClone.

On the corporate development front, our search for a CEO continues.

While we are not in the position today to provide a detailed update on the search, we are hopeful that we will be able to do so sometime in the next month.

The board is committed to selecting the right person for this critical position and the executive committee is very engaged and works closely with senior management of the Company on an ongoing basis.

I would like to add that we have a very strong senior management team directing day-to-day activities to ensure that we execute successfully and continue to move the Company forward.

We have made a number of important hires at the Company.

For example, we are pleased to report that Dr.

Larry [Whitty], a former research executive at ImClone, has rejoined as Senior Vice President of research.

Lastly, we are pleased to note that we have taken action to further strengthen our board of directors with the appointments of three new directors within the last four months.

Andrew Bonfield, the CFO of Bristol, joined our board in April.

Jules Haimovitz , a seasoned financial executive, joined our board in May and now heads up our audit committee.

And Dr.

Tom Deuel, a preeminent scientist with a background in oncology, joined our board in July.

We believe these talented individuals will make important contributions to the Company as we continue to grow and execute on our strategy.

The board of directors remains very optimistic about ImClone's future and long-term success and we look forward to reporting on additional positive developments prior to our next quarterly conference call.

I will now turn the floor over to Michael to give you an update on

Thank you, Alex.

The second quarter U.S.

in-market net sales for ERBITUX increased to $162.1 million from $160.1 in the first quarter of 2007.

Although this quarter-over-quarter increase in sales was modest, it represented an important milestone in that it marked the reversal of a declining sales trend observed since the introduction of Panitumumab.

During the quarter our dominant share of EGFR markets sales increased from the first quarter of 2007.

This increase in ERBITUX share of EGFR market sales is likely attributed to the differential clinical outcomes which are achieved when these distinct EGFR monoclonal antibodies are used in combination with chemotherapy.

As mentioned in our first quarter call, since the Panitumumab launch, we have effectively defended our core colorectal cancer marketplace by using the body of clinical evidence to position ERBITUX plus Irinotecan as our EGR regimen of choice.

As a consequence of this extent, the ERBITUX sales upside from regaining share loss from Panitumumab is limited.

With that said, significant competitive events have occurred at the end of the second quarter which may enable us to more aggressively take back share from Panitumumab in colorectal cancer markets.

These events include a presentation of the [pace] data at a scientific meeting in July and the late June inclusion of an FDA-mandated warning statement in the Panitumumab package insert.

These quarter-end events will serve to further inform oncologists about the best evidence-based treatment choice for their refractory colorectal cancer patients during the second half of 2007 and beyond.

Moving to the patient market share, during the second quarter, ERBITUX patient share in second-line colorectal cancer, as well as our strategic market of third line plus colorectal cancer, modestly increased quarter-over-quarter.

In the head and neck cancer marketplace, even in the absence of promotion of our strong extreme study results ERBITUX continued to be the most frequently used agent for metastatic head and neck cancer.

As mentioned on our last quarterly earnings call, we made the decision to add 27 oncology sales professionals to our existing 37, for a total of 64.

We've successfully completed the hiring and training of all the additional field sales professionals, and at the beginning of July, the new alignment was fully implemented.

This expanded field force will now call on customers that represent more than 95% of ERBITUX business.

We expect to begin realizing the positive effects of this expansion during the second half of 2007.

The key priorities for this expanded field force are: One, to continue to regain colorectal share lost to Panitumumab; two, to capture additional share at the expense of Avastin and [Delota] in the third line plus colorectal cancer marketplace, where the evidence indicates that there is little or no activity for the agents; and three, to grow our existing share in the indicated populations of head and neck cancer.

As Alex mentioned, we had a significant clinical presence at AACR and ASCO during the second quarter, with strong data presented for ERBITUX use in the first line, second line and highly refractory colorectal cancer, as well as in the first-line metastatic head and neck cancer setting.

These findings, in combination with the existing body of clinical evidence, place ERBITUX in a class by itself among antibody therapies.

It's important to note that the majority of these data represent therapeutic settings that are outside of FDA-approved uses for ERBITUX and therefore are promoted by our sales force, and may not be reimbursed by payers until we obtain comprehenda listing for an FDA indication.

In an effort to expedite appropriate patient access to ERBITUX, we recently submitted applications to obtain U.S.

compendia drug listings for ERBITUX use in first and second line colorectal cancer, as well as for first-line metastatic head and neck cancer.

In addition, we are preparing our FDA applications to achieve the broadest label supported by our significant body of ERBITUX clinical data.

Due to compendia FDA review cycle timelines, commercial results from these efforts are not expected to be realized until early 2008.

To conclude, we have reversed the negative sales trend and regained our positive momentum in refractory colorectal cancer by establishing ERBITUX as the EGFR monoclonal antibody of choice to be used in combination were chemotherapy.

With our expanded field force we expect to increase share in markets where ERBITUX has proven to provide significant clinical benefit and received FDA approvals.

Overall, we're encouraged by our competitive position and optimistic about our prospects for growth in the second half of 2007.

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

Thank you, Michael, and good morning.

The second quarter of 2007 was a very productive period in terms of ImClone's clinical development efforts, with the achievements of several milestones for ERBITUX and considerable advancements of our early clinical pipeline.

I'll first review our progress with ERBITUX in colorectal, head and neck, and lung cancer, and then I'll move on to our clinical stage pipeline beyond ERBITUX.

Since the beginning of 2007, ImClone, along with its partners, have announced top-line results of several pivotal trials of ERBITUX, including the valuations in the first and second line and refractory metastatic colorectal cancer settings.

In the second quarter, we announced the acceptance of an SBLA based on the results of our refractory study, which demonstrated that ERBITUX markedly improved survival in this setting.

This SBLA, which was granted priority-review status by the FDA, will form the foundation of our strategy to garner regulatory approval for ERBITUX in earlier disease, as well.

We plan to enter into discussions with the FDA this quarter to solidify our regulatory strategy in early stage disease going forward.

This will principally be based on the results of our first-line study, known as CRYSTAL, and supported by the positive results of additional Phase II and Phase III studies.

As Michael stated, applications have also been forwarded to various U.S.

drug compendia to list ERBITUX as a therapeutic option in earlier colorectal cancer settings.

The results of Phase III studies of ERBITUX in gastrointestinal and head and neck cancers were highlighted in our presentation at the ASCO meeting last month, where we delivered a number of preliminary presentations.

One of the most important presentations described the results of the CRYSTAL study, in which metastatic colorectal cancer patients were treated with either ERBITUX plus chemotherapy, FOLFIRI, or FOLFIRI alone.

Progression-free survival, the study's primary end point, was significantly increased in patients receiving ERBITUX to a level comparable to that demonstrated for Avastin in a large recent trial of Avastin combined with some commonly-used first point chemotherapy regimens.

However, in contrast to Avastin in the aforementioned study and consistent with the results of early Phase II ERBITUX studies, the response rate was significantly higher in patients receiving ERBITUX plus chemotherapy compared to chemo alone.

An important secondary observation of CRYSTAL, perhaps the sleeping giant and paradigm shifting implication, is that the relative likelihood of undergoing surgery of curative intent was three times higher for patients receiving ERBITUX plus FOLFIRI compared to FORFILI -- FOLFIRI alone, excuse me.

These results may be of much greater impact than they seem, if the CRYSTAL surgical resection data are interpreted in the context of CRYSTAL being a large study performed in a large number of countries in many types of treatment centers, all with different surgical practices.

It's important to note in CRYSTAL 10% of patients with liver metastatic at their only site of disease had no residual disease found at the time of potentially curative surgery after treatment with ERBITUX plus FOLFIRI compared to only 4.5% of those treated with FOLFIRI alone.

In thinking about the future, given the fact that the primary focus of the CRYSTAL study was on standard clinical end points rather than on maximizing potentially curative surgery, we believe that much higher rates of curative resections will be achieved with ERBITUX, as more surgical assessment and management practices are Incorporated into clinical studies and standard care.

Therefore, the CRYSTAL results should be viewed as a springboard for the next series of ERBITUX studies to maximize the rates of curative reception.

Although considerable progress impalating symptoms of colorectal cancer as well as modest improvements in survival have been made over the last several decades, building on the results of CRYSTAL using the multimodality approach may impact on metastatic disease in a way that patients, their families and physicians have only dreamed about; that is increasing the opportunity for long-term cancer-free remissions as well as real cure.

For these reasons, we believe that the totality of the CRYSTAL results, including increased progression-free survival, response rate, and curative reception in patients receiving ERBITUX, will ultimately result in a major position for the agent in early-stage disease.

Also, two pivotal studies in the AGAVIN colorectal cancer setting, meaning added to chemotherapy after initial colon surgery, a setting in which new active drugs can really make an impact on survival and cure rate, are strongly accruing patients.

Another recent major milestone for ImClone and its partners was the presence of top-line results of the Phase III extreme study and the presentation of these results.

The primary end point survival was significantly increased in patients with local regionally recurrent or metastatic head and neck cancer who received first-line treatment with ERBITUX plus chemotherapy compared to chemotherapy alone.

To put this into perspective, there has been no anti-cancer therapeutic in the modern era, let alone any targeted therapy that has ever accomplished the important hurdle of improving survival in this setting, and we anticipate continued interest in the increasing strength of in treating head and neck cancer patients, as physicians increasingly become aware of these results.

Based on these impressive results, we have also forwarded an application to various U.S.

drug compendia to list ERBITUX as a therapeutic option in this setting, and we anticipate discussions with the FDA in the near future about filing a supplemental biologic licensing application.

More recently, ImClone and Bristol Myers announced results from a Phase III study of ERBITUX, plus the Tuxane and Carboplatin, in the first-line treatment of metastatic nonsmall cell lung cancer, a study known as BMS-099.

The study did not meet its primary end point of increasing progression-free survival as assessed by an independent review committee.

However, key secondary end points, including response rate, has assessed independently and progression-free survival, as assessed by investigators were significantly higher in patients receiving ERBITUX.

This North American study was one of several trials intended to establish the role of ERBITUX in the treatment of advanced lung cancer.

Interestingly, BMS study 100, a smaller randomized trial evaluating a different chemotherapy regimen, Gemcitabine and Cisplatin, with or without ERBITUX, which was recently presented at ASCO, demonstrated appreciably higher response rates, progression-free survival and median survival in patients treated with ERBITUX.

However, [Flex],a non-U.S.

Phase III study of ERBITUX and not studies 099 and 100, is our pivotal registrational trial in lung cancer and top-line results are expected to be available in the second half of 2007.

Now there are many relevant differences between Flex and study 099, including Flex's larger size, greater statistical power, its primary survival end point, its eligibility restricted to patients whose tumors are EGFR expressing and the availability of new therapies in the U.S., such as a vast, enduring trial 099, which was not the case in Europe during the Flex study.

Perhaps the most exciting recent event for ERBITUX providing a trajectory for a greatly-expanded use of the agent is the recent amendment to the agreement between BMS and ImClone.

Over the last several years, ERBITUX has progressed from just a concept to a real treatment that actually improves survival in patients with highly-refractory cancer.

Given the importance of EGFR and seeing the recent successes with ERBITUX in first-line colorectal and head and neck cancers, under the agreement, we now have a new clinical development plan comprised primarily of randomized Phase II and Phase III studies in gastric, esophageal, prostate, breast, bladder and stage 3 lung cancer.

These studies are intended to ultimately register ERBITUX in these additional indications.

Lastly, I'd like to turn to our clinical pipeline beyond ERBITUX.

Our clinical and preclinical pipelines are rich and comprised of IGG-1 fully human antibodies against targets that are unique, representing a tremendous opportunity for ImClone.

Considerable progress has been made during the second quarter in advancing the development of five early clinical antibodies with three that have already entered or are poised to enter phase II and III trials during the second half of 2007.

Our lead clinical pipeline candidate, 1121b , in contrast to other anti-VEGF targeting therapeutics, completely blocks receptor signaling induced by all [lykems] and may be among the most potent therapeutic in its class.

In Phase I trials, major regressions in highly-refractory cancers, including heavily pretreated sarcoma, melanoma, and gastric and neuroendocrine carcinomas, tumors which are not known to be responsive to Avastin, [Suten] and other VEGF-targeted therapeutics have been observed.

In addition to the major responses, an appreciable portion of patients have had objective evidence of benefit, with about 50% of patients in Phase I trials remaining on study for at least six months without tumor progression.

Because of these exciting results, as well as the favorable safety profile of the agent, we have designed an initial stage of Phase II and III studies, some of which are randomized and many of which can enable accelerated or full registration of 1121b.

For example, in the second half of 2007, we are planning to evaluate 1121b in previously untreated patients with melanoma in a randomized Phase II study.

Phase II trials will also evaluated the agent in kidney cancer patients who have failed treatment with an approved tirasing carnase inhibitor and in patients with recurrent ovarian cancer.

If successful in these indications, which constitute unmet medical needs, we will likely pursue accelerated registration strategies.

Furthermore, right after Phase I, or in that period, we plan to enact a Phase III global study in women with metastatic breast cancer in the first-line setting in the fourth quarter of 2007 or the first quarter of 2008, and we're considering a second Phase III trial in an entirely novel indication in 2008.

Both studies are ambitious.

but intend to fully register 1121b.

In the second half of 2007 we also plan to evaluate the merits of 1121b, combined with standard first-line regimens in patients with lung, colorectal, prostate and liver cancers, and will study the incremental value of the agent combined with Avastin and chemotherapy in metastatic breast cancer.

During the second quarter, we completed Phase I trials of A12, which targets the insulin growth factor-like receptor that is emerging as one of the most important targets in contemporary cancer research.

Our strategy for the initial stage of these directed studies of A12, one of which has already begun to enroll patients, will be broad, generally randomized and in indications that will shape the foundation for subsequent registration.

Since the combination of A12 and EGFR-targeted therapies, particularly ERBITUX, is highly synergistic in many tumors and preclinical studies, we have a randomized Phase II evaluation of A12, versus A12 plus ERBITUX patients are colorectal cancer who have failed EGFR-targeted therapies.

A similar study in patients with head and neck cancer who have failed platinum-based therapies is expected to begin soon.

In addition, a cooperative group will soon initiate a randomized study of Ironotecan and ERBITUX with or without A12 in colorectal cancer patients in the second-line setting.

Favorable activity with A12 in any one of these trials will lead to registration-directed programs.

In addition, we plan to sponsor Phase II trials of A12 in pediatric and adult soft tissue sarcoma known to be driven by aberrations of the signaling pathway in hormone receptor positive breast cancer and in both first and second-line metastatic prostate cancer settings.

Additionally, the National Cancer Institute is expending considerable resources on trials of A12 and has accepted ten first-stage proposals by consortia and cooperative groups to evaluate it in indications that did not overlap with those selected by ImClone, including liver, pancreatic, breast and lung cancers, as well as sarcoma and pediatric cancers.

In the present quarter, we also expect to enroll patients in a Phase II trial of 11F8, our fully human IGG1 anti-EGFR therapeutic combined with chemotherapy in Europe.

Lastly, during the first half of 2007, considerable progress was made with our Phase I studies of 18F1, which uniquely targets VEGFR-1 expressed by both malignant blood vessels and tumors alike, and 3G3, which only targets the tumor growth and survival factor, platelet-derived growth factor alpha, and we anticipate completing these Phase I trials in the second half of '07.

Phase II trials of these agents are expected to begin during the first half of 2008.

Finally, we have made considerable progress in advancing additional antibodies against unique targets, including [FLT-3], [RON], and GP-75 in preclinical studies, and anticipate entry of at least one new therapeutic, interclinical development in 2008.

I'd like to now turn the floor over to Ana to provide a review of our financial results for the second quarter.

Thank you, Eric.

Good morning, everyone.

I will briefly discuss our financial results for the second quarter and update our guidance for the remainder of the year, including some specifics on how the amendment to the BMS agreement will impact our financial results for the remainder of the year.

Let's start with our second quarter results.

In the second quarter of 2007, we achieved total revenues of $150.4 million, operating income of $41.3 million and net income of $31.9 million, resulting in diluted earnings per share of $0.36.

Global revenues of ERBITUX were $319.2 million, compared to $274.8 million in the second quarter last year, an increase of $44.4 million or 16%.

Manufacturing revenues were $23 million this quarter, a decrease of $5.3 million from the second quarter of 2006.

As I mentioned during our first quarter conference call when we experienced a similar decline, the decrease in manufacturing revenues in the first half of this year is due to efficiencies in the manufacturing of ERBITUX and not to a decrease in the volume of purchases from our partners.

In fact, second quarter volume purchases from our partners increased by 11% this quarter, compared to the second quarter of 2006.

For the full year of 2007, we anticipate that total manufacturing revenues will be in the range of $70 million to $75 million, based on the current anticipated demand from our partners.

Turning to operating expenses, we spend $33.7 million in research and development in the second quarter of this year, an increase of $6.1 million compared to the second quarter of 2006.

This increase is primarily due to incremental expenses associated with the manufacturing of pipeline products.

Effective July 1st of 2007, we transitioned our efforts in our (inaudible) plant from producing ERBITUX to producing pipeline products.

Our current plan is to produce two of our product candidates during the second half of 2007.

We therefore expect that total research and development expenses for the full year of 2007 will be in the range of $160 million to $165 million.

During the second quarter we spent $14.8 million in clinical and regulatory expenses.

Although the level of expenditure this quarter is consistent with the comparable quarter in 2006, the prior-year's expense included $3.5 million due to BMS for reimbursement of expenses incurred on ERBITUX trials in excess of the contractual annual budget.

We have not accrued our liability to BMS this year for costs expected to be [in excess of the annual clinical budget.]

Marketing, general and administrative expenses this quarter decreased by $4.4 million from the second quarter of last year.

This decrease is primarily due to cost savings initiatives and a decrease in legal expenses, partially offset by incremental costs associated with the increase of our sales force.

We continue to aggressively pursue cost saving opportunities in these area, as well as in the rest of our operations.

For the full year of 2007, we expect total marketing, general and administrative expenses to be approximately $75 million.

With respect to royalty expenses, effective at the end of July, our total domestic royalty expense decreased from 9.25% to 8.5%.

Therefore, our actual royalty expense on domestic net sales of ERBITUX, net of royalty reimbursement, is 6%.

Gross margin or manufacturing revenues was less than 1% in the second quarter of 2007, primarily due to the timing of when we sell our inventory.

Although we will continue to need to experience fluctuations in our quarterly gross margin, we still expect that our full year in gross margin will be in the range of 5% to 9%.

From a cash flow perspective, we generated $41.1 million from operating activities in the first six month months of this year, of which $27.3 million was generated during the second quarter.

Our balance sheet remains strong, with total cash and marketable securities of $1.1 billion, total assets of $1.9 billion, and working capital of approximately $1.1 billion.

We expect our total capital expenditures for the full year of 2007 to be approximately $20 million.

Now, let me briefly discuss one of the key components of the amended co-development and (inaudible) agreement with BMS, specifically as they pertain to the clinical development of ERBITUX.

The amendment agreement specifies that each year BMS will fund 100% of the annual development costs up to a significant threshold and that we will contribute a fraction of the cost in excess of that threshold.

Although we are unable to provide specific details regarding this cost-sharing agreement, what I can say is that this amendment translates into significant savings for ImClone going forward, while increasing the (inaudible) investment in the development of ERBITUX.

Our financial impact of the amended agreement with BMS will be reflected perspectively beginning with our third quarter results.

To put the economics of this amendment into perspective, we anticipate cash savings in 2007 for ImClone are the range of $35 million to $40 million.

Therefore, we are revisiting our full-year estimate of clinical and regulatory expenses and now expect it to be in the range of approximately $55 million to $60 million.

We are in the process of analyzing how this amendment will impact the amortization of milestone revenue and we will provide that guidance on our third quarter conference call.

Lastly, you may have noticed in our press release this morning that we included a pro forma statement of income for the six months ended June 30, 2007.

This pro forma statement categorizes our GAAP income statement in three separate components: One, the ERBITUX economics; two, a noncash [computing of our GAAP P&L;] and three, the development of our pipeline.

The purpose of the pro forma statement is to provide everyone with the ability to clearly understand that ERBITUX has been and extremely profitable franchise for ImClone, and a a result of the newly amended agreement with BMS, we expect that ERBITUX (inaudible) will be significantly more profitable for ImClone in the future.

I would like to clarify that the effect of our new agreement with BMS has not been incorporated into this pro forma.

This concludes our prepared remarks.

With that, we'd now like to open the call up for questions.

Operator?

Thank you.

(OPERATOR INSTRUCTIONS) Your first question is coming from Geoff Meacham with JPMorgan.

Hi, guys, this is actually [Terry Coyne] in for Geoff.

Just a quick question.

Initial perceptions on the CRYSTAL study from the community, just wondering if you guys are finding that docs are comparing it with the Horowitz data or if they're actually going to be comparing it with the [Aspen] FOLFOX data, and has there been any pushback there?

Hi, this is Eric.

Good morning.

I think that the CRYSTAL data has been growing on people.

And, you know, of course the Horowitz data was the first set of data that we heard from a new angiogenic agent in the field of oncology, and I really think it sticks in the mind of physicians.

But as we educate physicians and I think as they hear about the Horowitz data and our data, I think the more they warm up to our data and the notion that ERBITUX is a real construct and a real player in this arena.

I think what's also really growing on physicians, and certainly it's been very enthusiastic in terms of the notion for really diving into the future studies along the lines, is also the resection concept.

To really improve, as I noted during the call, to really take those results and to optimize them.

So, I -- we're -- we haven't really had had a lot of time since -- since the ASCO meeting where these results were presented by investigators and our partner, Merck KGA, but as we conduct advisory boards, we just really are starting to feel the warmth that's actually progressing.

Okay, thanks a lot, and then just a quick follow up.

In terms of pricing as you move into earlier lines of therapy, I know you're not really expecting a commercial impact from the CRYSTAL study or the extreme study until early 2008, but can you just talk about efforts there to be competitive on the pricing front?

Yes, this is Michael Bailey.

We're -- as I mentioned on previous calls, we're doing a tremendous amount of analysis and partnership with BMS on optimizing patient access to -- to this drug as we move into earlier lines of therapy.

You're absolutely correct that this probably will be something we'll have to have formalized and finalized in the first part of 2008.

Okay, thanks a lot.

Thank you.

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

Hi, this is actually Vanessa in for Steve.

I have three quick questions around the cost sharing agreement.

First, there's the threshold value covered by Bristol.

Is that annual or a total program threshold?

It's annual.

Okay, thanks.

Every year Bristol pays 100% of expenses and then when they go over a certain amount, then -- then we pay a portion.

Okay, great.

And the portion of net ERBITUX expense going forward, is -- I mean could you -- what do you think your run rate is going to be?

Say that again.

I don't understand what --

So, in terms of --

Do you mean the clinical expense for ERBITUX going forward?

Yes, the clinical expense.

We're -- the clinical trial for ERBITUX, for example, on our P&L.

Well, in regard to 2007 or just generally or what?

No, So going forward, I guess -- yes, second half of '07 and then beyond?

Okay, we're not giving any guidance for future years.

Okay.

We are planning to invest significantly in ERBITUX because frankly we just know a lot about the antibody and we think it's a very exciting antibody to invest in, in terms of the latest news that's come out, giving us even more -- more enthusiasm about -- about ERBITUX

Okay.

Okay.

And then just one last one.

You've lowered the -- the R&D guidance now because of this amendment, so, how's this going to affect the collaborative revenues from Bristol?

It -- it really -- the collaborative agreement revenue -- the collaborative remedies from Bristol is basically reimbursement of our clinical regulatory expenses, so to the extent that we spend less, the reimbursement will be less.

Okay.

Okay.

Makes sense.

Great, thanks very much.

Thank you.

Your next question is coming from Han Li with the Stanford Group.

Yes.

Thank you for taking my questions.

Questions on the -- the co-development agreement with Bristol.

You agreed to have an increase to several hundred million dollars in development cost.

What's the term of the co-development?

Is it four or five years?

The -- the term of the co-development agreement is 2018, I think.

Oh, okay.

And in terms of regarding -- you give the guidance for the clinical and regulatory expense for this year it's like $55 million to $60 million.

Are you also keep the same -- keep the guidance for the -- the research clinical development for the pipeline, which earlier I remember, if correctly, you mentioned 45% increase?

Right.

Clinical and -- this is obviously -- Han, you know this, but just maybe to clarify for everybody, I don't even know why the [influencer] reports things a little different from any other companies.

But basically I would look at clinical and regulatory and R&D together as one -- one line item, which is how much we're spending on our pipeline.

Some of it's research.

Some is preclinical.

Some is clinical.

But in that number is just how much we're spending on the pipeline generally.

And then this is -- in the numbers that we reported, there's some part of that that's directly attributable to ERBITUX.

Does that help?

Kind of, but on the -- on actually research and clinical you lumped them, but which is -more ERBITUX if I understand correctly?

I remember earlier this year --

Clinical and regulatory is -- ERBITUX is mostly in clinical and regulatory.

There might be something in R&D, right?

In research and development, we have the -- our research department and what's in there related to ERBITUX is the clinical shipments of ERBITUX to our partner.

Okay.

And [on that line] your guidance earlier it's like 45% increase.

Is that still the case?

Yes, what I said was the guidance for R&D is between $160 million and $165 million and the basic increase in that category from last year is the fact that we're producing pipeline products in our BB50 plan in the second half of is this year, which gets expensed, and that's a significant portion of the increase from last year.

I see, okay.

And one last question.

For the Bristol partnership, you also mentioned there's a co-promotion change.

Can you elaborate a little bit?

Unfortunately we can't elaborate on that.

But there's do -- you do have a change on co-promotion?

Yes, but we can't talk about it, unfortunately.

Okay.

All right, thanks.

You're welcome.

Thank you.

Thank you.

Your next question is coming from May-Kin Ho with Goldman Sachs.

Hi, Alex.

On the amended agreement, right now are you saying that the spending would be less this year, but obviously the number of studies that you are doing is relatively limited where as next year that would be much increased.

So, could one assume that actually next year you might be spending more if you have the amended agreement?

Okay, we don't want to get into guidance for next year.

However, I wouldn't --

May-Kin, I would not make that assumption I would not make that -- I would not make that assumption and I'm saying that because there is a threshold this year and there will also be a threshold next year, which we can't -- we can't talk about, but I would not make that conclusion that our expenses will increase next year.

We also have considerable expenses May-Kin -- hi, this is Eric -- this year.

I mean we've had many, many studies rolling and some winding down with the residual expenses, as well as new studies that are starting this year.

And does the amendment change the royalty?

No.

No.

So why is Bristol doing this?

Does it mean more cash outlay for Bristol on this product?

We can't get into the -- we can't get into the specifics of what the cash outlays are for Bristol or anything like that, but I think both -- I think Bristol is doing this because they're in -- I mean you can ask them, but they want to invest in ERBITUX and obviously we do, too.

I think -- both companies -- ImClone and Bristol Myers I think really have come to a very -- very strong agreement here, where senior management of Bristol -- which has changed recently, as you know -- is -- they're a great group of people and they really know what they're doing and I think they're really investing in ERBITUX.

They believe in the -- they believe in the antibody, the data that we've had over time and even more recently suggests that there's a lot there.

So both companies are putting the pedal to the metal on the development plan here.

And a question for Michael.

You indicated that there's essentially stabilization of your market share.

How confident are you about this trend?

Obviously you have some early signals in the first quarter and we came out of ASCO having a lot more data.

May-Kin, thanks for the question.

In the past two quarters, appropriately, we've been focused on Panitumumab.

This quarter marks an important milestone in that we were able to, even in the face of Panitumumab and very recent disclosure of the data, although we had a press release, the presentation of that data is obviously imperative to our credibility perspective.

So, looking forward, we're confident that now we can allocate our resources, as I pointed out, in the three different areas.

One is really taking back the share from Panitumumab that, based on the evidence, clearly belongs to us.

The second is really refocusing back on our competitors of Avastin and Xeloda and those later in refractory lines of therapy where they've gained some inroads while we're fighting our Panitumumab battle.

On then finally on the head and neck marketplace where we are the dominant agent in that marketplace, but clearly there's some more opportunity there.

And maybe, Eric, you can comment on the next -- the six to 12 months, what are some of the things that we should watch out for in terms of results from the early stage pipeline?

Well, results -- if you're asking for results, I think as Alex stated, I'm -- just within the next two months, I think you can call it a blitz of new study starts.

With six new trial starts, with three of our pipeline products and all the trials that I named, that exhaustive list for 1121b and A12 will start in the next six months -- even less than that, five months -- including a Phase III trial that is going from Phase I to Phase III with 1121b and ten more NCI trials to begin likely in the first half of '08.

So, results -- we just started our trials of A12.

We hope to have results of these trials -- preliminary results in '08.

In addition, we've just started a trial of 11F8, as well.

So, I -- I can't promise results very soon.

We just have to get the trials accrued.

This is a lot of activity.

And in terms of the second -- or the Flex study, do you feel that we should get the data this year?

We're anticipating that we will reach events and, of course, the study is run by our partner, Merck KGA, so they're running the study, the analysis, but I think they -- and we're anticipating top-line results in the second half of '07.

Merck has stated that they will -- they're planning a full presentation in the first half of '08, so I'm hoping very soon.

And based on what we know about the Bristol study, you listed some of the factors where the designs are different, et cetera.

The results from Bristol actually increase or decrease your confidence about Flex?

That's a very hard question, May-Kin.

We -- I think that there's activity in lung cancer.

The question is is it going to be relevant enough to hit a survival advantage in Flex and that's a very difficult question to ask and we'll have the answer in a couple of months.

Certainly it would be the first EGFR inhibitor ever to show activity in the first-line setting that's relevant, meaning survival.

So, May-Kin, I can't -- I mean lung cancer is one of those diseases where you really can't forecast unless you do the study.

Certainly we've had good indicators with end points in both 099 and 100 but just didn't make the grade when it came to the IRC, so we'll keep our fingers crossed for Flex.

Okay.

Thank you.

Thank you.

Thank you.

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

Thanks for taking my question.

The first is pertaining to the CRYSTAL filing, whether you've discussed that with the FDA, whether you have insight whether we may see the liver resection data on an approved label, and also exactly what the timing is for that SBLA?

Well, we're going to be discussing the study.

I think we'll have further insight with regard to -- to regulatory matters and our strategy after this quarter.

I'd like to not go into our specific conversations and discussion points with the FDA until we really have something that's -- that's real.

So, we've -- we've basically have just gotten data packages from our partners and we're working with both BMS and Merck KGA on real solid strategies that are somewhat global, and our discussions with the FDA are really just starting now.

Okay.

And then question for Ana on the royalties, I think if I heard properly, you said that the royalty expense went down in the second quarter or maybe it was just that it's going down in the second half, but I'm afraid I missed the details.

I know it was a change 9.25% change down to one point -- sorry, 8.5% -- yes, 8.5%.

8.5%.

That was effective at the end of July, so you will see that in the third quarter and going forward.

And what was the reason for that?

One of our -- one of the patents expired.

Okay, so that's --

In the United States.

Yes, okay.

So, U.S.

royalty from here on out should be more like 8.5%?

Yes.

Thank you very much.

So the net royalty of 6%, because we get something reimbursed, as well.

Thank you.

Your next question is coming from Michael King with Rodman & Renshaw.

Good morning, thanks for taking my questions.

First question was for Ana.

Was having a little trouble keeping up and I just wanted to be clear.

Did I -- I thought -- on the gross margin guidance, were you saying cost of goods 5% to 9% or were you saying 85% to 89% is your anticipated gross margin?

The gross margin is between 5% and 9%.

Gross margin between --

Gross margin.

So, manufacturing revenue less cost --

Okay.

Right, right, right.

Okay.

And question for Michael on head and neck.

The market seems to have reached maturity rather quickly, I'm just wondering what factors are going to drive growth in that space, because it seems like you made very good early gains and then those have just kind of gone flat.

So what are going to be the key drivers of head and neck?

Mike, thanks for the question.

I think clearly one of the key drivers will be the extreme data, as Eric described in his section and I'm sure you're very familiar with.

As we mentioned, we submitted that for a compendia and clearly we want to be filing that as soon as possible, so I think that may -- may be a major factor.

Additionally -- and Eric may be able to comment on -- there's a variety of ongoing studies in head and neck in combination with chemo and radiation.

So, we really continuing to explore those opportunities are going be the catalyst for future growth.

Okay, and can you -- Michael, as long as I got you, can you talk about other studies that have been submitted for compendia?

Yes, basically we've got three key studies that are submitted for compendia.

That was the CRYSTAL data, the EPIC data -- we highlighted in that the resection information in the CRYSTAL, obviously -- and then the EXTREME study.

Okay.

And question for Eric on Flex.

Let's assume Flex is positive.

How will the FDA deal with Bristol 99 and 100?

You know, that's a good question.

I really think it depends on the robustness of Flex as far as what the label would read and if 099 and 100 need to be utilized and supporting label expansion.

You know, Michael, I think the FDA really looks at -- it really looks at the impact of the data itself with regard to the broadness of the label.

Will 099 and 100 help us?

I think they will in really discerning that these other regimens do have activity, and I think some of the design issues in the study could be pointed out to the agencies.

But this is all speculation and we'll just have to wait for the results of Flex to determine whether or not we will need 99 and 100.

Okay.

Okay.

And then I had two quick follow ups for you, Eric.

First, with regard to other indications for ERBITUX, one of the tumor types that was not present on your list of breast, bladder, et cetera, was liver, and I noticed that there was encouraging data at ASCO for Tarceva and Avastin and I was just wondering why liver was not one of the tumor types that you're looking at for expanded indications for ERBITUX?

We -- we've actually not had in a very small study, a signal that was adequate enough.

And I really think in viewing the results with Tarceva and [Aresta] as single agents, we've also -- I'm not -- I've not really been convinced that there has been a signal that's adequate enough to push forward with in liver cancer, as compared to the contribution with regard to targeting VEGF.

So, I think with ERBITUX we have to prioritize and certainly there are so many other indications that have not been explored adequately that we think there may be adequate signals or good relationships biologically to other diseases, such as head and neck cancer and bladder, which may be similar from a biological perspective, believe it or not, that are probably come to the top of our list right now.

Okay.

And then two other related questions.

On --

Mike, is it okay if we get to the next -- we've got a whole queue of people waiting.

No worries.

Thank you, Mike.

Thank you.

Your next question is coming from Jim Reddoch with FBR.

Good morning.

Thanks.

Yes, how soon could a registration trial in breast cancer start?

I noticed that was on the list, just as you were talking about ones on the list, and what is the evidence that going right into a registration trial in breast cancer is a good investment of Bristol's money or your money?

Thanks.

Well, we would not do that, Jim, unless we really saw an adequate signal in a well-designed signal finding study, and I think that that's the key, designing very highly-efficient, high-quality signal-finding studies.

So, this has to be done first.

We do have signals in the other tumor types.

You should -- a Phase III study has actually -- is just basically about to start with an esophageal cancer by the RTOG.

But other cancers -- at least the cancers on the list with regard to the agreement, what we will do is take a step-wise fashion, obviously.

We're not going to waste money and dive into a resource-intensive Phase III trial without any data.

You can say, well, why have they done that or will they do that with 1121b?

Well, I think we have signals with the compound inherently and with the class of agents .

Okay.

And was there a change in the change of control clause with Bristol in the new agreement versus the old agreement?

No.

Okay.

Thank you.

Thank you.

Your next question is coming from [Pascal Thesman] with ThinkEquity.

Hi, good afternoon.

Thanks for taking the question.

I'm curious, based on Han's question, did you agree that there has been a change in the co-promotion agreement, even though you won't tell us was the what the change is?

I think what we said is we can't talk about it.

I'm sorry, I --

You can't even confirm there's been a change?

Yes, what we can --

Sure, yes.

Hi, this is Dan.

So I think Alex already answered the question.

The terms of the agreement and the amendment with Bristol prevent us from discussing very specific points, so we really -- have really said all we can say on that point, but thank you for the question.

Okay.

And is there a clause in the agreement or can you say if there's a clause if Bristol doesn't end up spending the money that has been advertised, if there's any sort of penalty clause?

There is a commitment from both parties, contractual but more importantly a philosophical commitment from both parties to develop ERBITUX with this -- with this got our pedal to the metal plan aggressive development plan.

All right, thank you.

Thank you.

Thank you.

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

Hi, good afternoon and thank you for taking my question.

Two quick questions for Eric, actually.

Eric, could you remind us what small studies are going on out there that are looking at non-resectable liver mets with ERBITUX and then just a confirmatory questions that we're still -- I'm sorry, that you're still expecting to get the PFS data from [CAIRO 2] in the first quarter of '08?

Okay.

Hi, William and good afternoon.

With regard to CAIRO 2, I think we basically said, again, CAIRO 2 is actually being conducted independently by a European cooperative group and we would anticipate top-line data in the first half of '08.

I don't believe we've had further granularity.

With regard to the resection data and resection studies, actually many trials were started, not due only to the results of CRYSTAL -- certainly the CRYSTAL results being the first randomized trial, which showed this proclivity with regard to ERBITUX and response rate and surgical resection rates in a randomized trial -- but our prior Phase II trials, namely those of our partners -- Merck, namely acrobat and other trials -- showed resection rates in the range of 25% with our zero results; that's resection with full resections.

So trials have begun in Europe and the United States even before the results of CRYSTAL.

There is a cooperative group trial in the United States that's assessed FOLFOX ERBITUX and there are trials in Europe that are non-randomized.

One just got under way -- or about to get under way, which is randomized, FOLFOX Avastin -- I'm sorry, FOLFOX ERBITUX combo versus FOLFOX Avastin and ERBITUX.

And many groups in the United States are interested in starting studies.

The NSABP, the large surgical group in the United States, is probably first and foremost in this regard and interested in looking at another type of chemotherapy, biologic therapy regimen.

So we're going to use these backbones to search for the best way to cite or reduce and obtain resections, but a lot of this is just getting under way.

And so would you expect any -- I mean are there a couple of other smaller studies, some run by cooperative groups, some run by e-Merck that are under way, would we expect further resection data in 2008 or do you expect most of this data is going to be beyond 2008?

I think we might see some data from the European studies in late 2008.

Again, we -- what we want to do is design these studies properly, because there's kind of a [mishmash] of surgical procedures and criteria used.

So I think later 2008, but the manifestations of the current studies -- and there's a lot of enthusiasm amongst investigators, so, I think patient enrollment is projected to be pretty nice, but this is going to be 2009, William.

Okay, great.

Thank you very much.

You're welcome.

Thank you.

Your next question is coming from Brian Rye with Janney Montgomery Scott.

Actually my questions have been answered.

Thank you.

Okay, we'll take one more question, operator.

Thank you.

Your last question is coming from [Kenom Hong] with Citigroup.

Yes, this is actual Kenom Hong sitting in for Yaron Werber.

I had a question regarding Flex and perhaps this is more geared toward Eric.

I was wondering, at least in Europe --b or actually in the U.S., it seems like the chemo backbone that's favored is for the Taxane platin combination, whereas in Flex is cisplatin (inaudible), which is maybe more favored in Europe, presumably due to a cheaper cost.

I was wondering, given positive results from Flex, if you could, Eric, perhaps comment on the marketability and acceptability of this chemo combination in the oncologist community and could you give us an idea of how this combination is currently being used in nonsmall cell lung cancer?

Thank you and good afternoon.

Well, I think there are dominant chemotherapy regimens that evolve in various regions, but I think as you know, there have been a number of trials, including a trial called the mother of all trials.

It was an [ecog] study in 1996 or around that time that showed that all the regimens were basically equivalent.

So -- and I think the FDA is pretty well aware of those results.

So, as I -- as I stated before, I think with regard to the narrowness of the label or the broadness of the label, it largely would depend upon the Flex robustness and so I think we'll just have to wait.

What we would certainly do is more studies to bridge over to various regimens.

So, I think what we have to do first and foremost is just wait for the results of Flex.

Okay, thank you, Eric.

Okay, that concludes our call for today.

Thank you all for joining us.

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

Thanks and have a great day.

Thank you.

Thank you.

And this concludes today's ImClone Systems 2007 second quarter earnings release conference call.

You may now disconnect your lines, and have a pleasant day.