禮來公司 (LLY) 2007 Q4 法說會逐字稿

Good day everyone, thanks very much for holding.

And welcome to the ImClone Systems earnings conference call.

At this time I would like to turn the conference over to Greg Mayes.

Please go ahead.

Good morning, everyone and welcome to ImClone's fourth quarter and full year 2007 financial results conference call.

I am Greg Mayes, Vice President and Interim General Counsel for the company.

And with me today are John Johnson, ImClone's Chief Executive Officer, Michael Bailey, Senior Vice President of Commercial Operations, Eric Rowinsky, Senior Vice President of Clinical Development and Chief Medical Officer and Peter Borzilleri, Interim Vice President of finance.

John 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.

Peter will conclude with a discussion of our fourth quarter and full year 2007 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 the expectations reflected in these statements are based on reasonable assumptions we cannot give assurance that the expected results will be achieved.

We refer you to our exchange act filings for factors that could impact the company.

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

I will now turn the call over to John.

Good morning.

And thank you for joining our call.

In 2007, ImClone made a great deal of progress in its strategic transition.

From a company with one product that it shares with two large partners, to a company that is becoming more fully integrated, having the ability to grow and take it to the next level.

Our blockbuster ERBITUX is the engine that will fuel this growth.

We will build upon our deep pipeline of novel antibodies, world class R&D capabilities, significant manufacturing capacity and strong financial position to make this happen.

Throughout the year we made many key clinical, commercial, regulatory and legal achievements and as a result have entered 2008 with greatly enhanced strategic and operational flexibility.

With tighter control over how we choose to grow the company in the future.

During the past five months I have been digging deep into our operations and focusing on our plan for the future.

As I highlighted on our last quarterly conference call, we are focused on three clear (inaudible) goals.

Number one, expanding ERBITUX sales.

Number two, accelerating our internal pipeline of novel antibodies and number three, building our capabilities to enable the execution of our strategies.

These three goals form the basis of our recently developed strategic plan, a plan which provides a clear path for ImClone becoming a global, fully integrated, pure play antibody company, a plan that we are already executing against.

Each quarter I would like to review our achievements towards each of these goals and our near term plans in these areas.

To clearly map our progress in strategically moving the company forward and enhancing shareholder value.

With respect to expanding ERBITUX sales, I'm pleased to report that we achieved our third consecutive quarter of increased sales demand.

Michael will provide specific details on the fourth quarter performance of ERBITUX in just a moment, but I would like to highlight a few notable recent achievements and our plans to help us accelerate ERBITUX sales, particularly in future years.

With the FDA approval we received in October, ERBITUX is now the only approved biologic therapy to demonstrate improved overall survival as a single agent in patients with Metastatic Colorectal Cancer.

In our pursuit to continue to expand global commercialization of ERBITUX, during the fourth quarter, we established a co-development and co-commercialization agreement with DMS and Merck KG for Japan.

If approved, ERBITUX would be the only EGFR antibody available in this large market.

Not only have we achieved strong sales growth and demand for ERBITUX, we expect to file two FDLA's in 2008.

We will file for first line head neck cancer in the first half of the year, based upon the extreme data.

And we will file for first line lung cancer in the second half of this year, based upon the FLEX data.

Additionally, we are waiting the survival results from the CRYSTAL study and we plan to file for first line colorectal cancer upon completing those date analysis.

Eric will discuss the details of these studies in just a few moments.

While these activities illustrate our progress in capitalizing on the ERBITUX franchise, by expanding its use in the US and abroad, and we expect steady growth this year, I would like to reiterate that we do not expect the impact of these events to be seen in 2008.

Moving to our second over (inaudible) goal of accelerating our pipeline of novel antibodies, we have been making significant progress in this key component of our long-term growth strategy.

In 2008 we plan to step up our investment in our pipeline which we believe will increase shareholder value over the long-term.

In December, we added to the number of our internal antibodies moving into the Phase II clinical trials with the commencement of patient enrollment in our Phase II study of 1121B in melanoma.

We initiated several new disease directed trials of these novel antibodies, since the start of the second half of 2007 and we anticipate that one of these antibodies, 1121B, will move into Phase III pivotal trials by the end of the first half of 2008.

We expect to move into two other Phase III trials next year.

We intend to fully leverage this pipeline to grow organically and maximize share holder value.

As a result, you can expect our R&D expense line to grow year-over-year.

We continued making progress towards our third goal of building our capabilities.

We received FDA approval of our state-of-the-art BV50 manufacturing facility in August.

During the fourth quarter, we successfully completed the first runs of our pipeline products, 1121B and 11F8 in this facility.

These production runs will be used to support our planned pivotal Phase III trials of these compounds.

We will soon begin building out the second suite of this facility to accommodate additional production of ERBITUX and the balance of our pipeline and we are beginning to plan for the suite three build out.

ImClone has established one of the largest antibody manufacturing capacities in the world and as part of our strategic plan we will be formalizing our global tax strategy in the first half of this year, to accommodate the global growth we expect to see with our robust pipeline.

On the corporate front, another key legal achievement of the year was made during the fourth quarter, the settlement of the (Yada) litigation.

With this settlement, ImClone eliminated the majority of the intellectual property litigation pending against the company.

The risks associated with these litigations as well as what would have been substantial legal fees and costs, to defend against the claims made by (Yada) in numerous countries throughout the world.

Additionally, we are in the final stages of recruiting a Chief Financial Officer and we hope to announce an appointment before the end of the first quarter.

Our many recent achievements in the establishment of a clear path to grow the company have instilled a renewed sense of enthusiasm and energy within ImClone.

Our employees are key contributors to our progress and future success.

I would like to take this opportunity to recognize and thank them for their dedication and hard work.

As we mentioned on our last quarterly earnings call, we are planning to host an R&D day for the financial community in the coming months.

We view this R&D day as a terrific opportunity to discuss our world wide strategy for rapidly advancing pipeline.

We will send out the invite with further details as we finalize the date and time.

We look forward to seeing you at that event.

I would now like to turn the floor over to Michael to provide a review of our commercial operations.

Thank you, John.

Fourth quarter US end market net sales for ERBITUX were $185 million.

Compared to $167.2 million in the fourth quarter of 2006, an increase of 11%.

Quarter-over-quarter reported net sales remained unchanged, however, when the impact of stocking is removed, our fourth quarter demand base sales of $180 million represented a 2.3% increase from the $176 million we saw in the third quarter.

We achieved this quarter-over-quarter increase in sales demand despite the historical impact of usage patterns in the fourth quarter attributable to the holiday season.

We are pleased to note this increase in sales demand, which represents the third consecutive quarter of growth for ERBITUX, contributed to full year US net sales of $691.7 million, which was a 6.1% increase over 2006 full year sales of $652.2 million.

Our year-over-year increase in ERBITUX sales is particularly notable given the significant competitive threat that (inaudible) presented as we entered 2007.

We believe our success in 2007 can be attributed to two key factors including, first, the strength of the clinical evidence that has served as the basis for our promotion for ERBITUX.

Of note, the significant body of evidence was expanded during the year to include a survival claim for ERBITUX in refractory colorectal cancer.

And second, ImClone's increased promotional efforts combined with the steady BMS commercial support.

These efforts have allowed us to effectively distinguish ERBITUX from all other anti-EGFR antibody therapies.

Additionally, although not promoted, ERBITUX's leadership in clinical evidence was significantly bolstered during the year through Phase III studies.

These studies demonstrated survival benefits for ERBITUX in first line metastatic head and neck cancer as well as in first line non small cell lung cancer patient,s in a population that was not restricted by histology or limited to good performance status patients.

Moving to how our sales success translates into gains in patient share, in the fourth quarter of 2007, ERBITUX realized it's fourth consecutive quarter over quarter share increase in both the second and the fourth plus line of the colorectal cancer market while remaining stable in the third line sector.

In the head and neck cancer segment we saw roughly a 3% increase in overall patient share during the fourth quarter.

This increase was largely driven by strength in a local regional disease population, coupled with significant increases in share of first line metastatic head and neck patients.

It should be noted that as anticipated, the increase in patient share for the first line was in part offset by a decline in share in the second line platinum refractory head and neck population.

On our last earnings call we discussed our move to a more traditional open distribution model and the initial impact of stocking.

As we previously reported, this change resulted in wholesaler inventory buildup of roughly $9 million for the third quarter.

During the fourth quarter, we realized an additional 5 million of stocking largely attributable to distributors rebalancing their inventory mix of 100 mig versus 200 mig vials.

We estimate that this excess inventory will be utilized during the first quarter of 2008 which may serve to moderate first quarter sales.

However, this may be offset by additional distributors coming on line in the same time period.

Turning to how we intend to bolster ERBITUX sales in the future, we are pursuing a number of initiatives that can potentially begin contributing to the franchise's continued commercial growth over the mid-to long-term.

As mentioned on previous earnings calls, we submitted for Compendia listing for early line use in colorectal and head and neck cancer..

During the fourth quarter, we received positive opinions from drug points for a number of these applications including as combination therapy in metastatic or recurrent squamous cell head and neck cancer, as first line therapy in metastatic colorectal for use in combination of the (inaudible) in 5-FU in folinic acid with no restrictions on AGFR status and in addition, we received the positive opinion for pancreatic cancer.

Although not promoted, these Compendia listings are a testament to the strength of the ERBITUX body of clinical data and our commitment to patient access.

However, it is important to note that CMS does not currently recognize drug points on a national level for reimbursement purposes.

During the first quarter of 2008, CMS will allow these organizations to apply for formal CMS recognition and a decision is expected in the second half of the year.

In other words, we have successfully executed on our plans to maximize patient access to ERBITUX through Compendia listings but broad based government reimbursement for these uses is subject to a final CMS Compendia recognition decision later in the year.

As always, ImClone remains committed to ensuring patient access to this important therapy.

Additionally, we are seeking to expand our FDA approved label through the significant body of positive ERBITUX data from our CRYSTAL, EPIC, FLEX, and extreme studies.

Eric will discuss our time lines for these efforts in just a few moments.

In short, until these additional events occur which will enable reimbursement and allow for sales promotion respectively, we do not anticipate to realize any significant commercial impact from these data.

To conclude, 2007 has been a pivotal year for the commercialization of ERBITUX.

We have established ERBITUX as the standard of care in refractory, colorectal and head and neck cancers.

We have leveraged strong ERBITUX clinical data to defend our markets.

We have maintained a positive sales trend with ImClone's increased promotional efforts and we have entered 2008 prepared to address emerging market dynamics with a significant body of positive ERBITUX clinical data and the best interests of patients in mind.

Overall, we are encouraged by the performance of ERBITUX and optimistic about our prospects for the long-term.

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 everyone.

The fourth quarter was marked by steady progress in our clinical development and registrational activities with ERBITUX as well as steady advancement of our early stage clinical pipeline.

I'll first review our progress with ERBITUX and then I will move on to our pipeline.

With regard to our principal registrational activities related to ERBITUX in 2008, we intend to focus on three new indications.

First, we intend to file an SBLA for the use of ERBITUX in treating patients with recurrent and/or metastatic head and neck cancer based on the extreme trial which demonstrated that ERBITUX plus chemotherapy conferred a profound survival advantage over chemotherapy alone like no other therapy has done over the last several decades.

We look forward to submitting an SBLA in this indication in the first half of 2008, which if approved would be the third approved indication for ERBITUX in head and neck cancer, encompassing the full gambit of therapeutic settings in this cancer type.

That is treatment of locally advanced, first line metastatic and refractory patients.

Although it is difficult to speculate on the actions of the FDA, the robust survival results with ERBITUX in this underserved setting, may warrant a priority review, meaning approval in six months or less.

We expect our second SBLA filing in 2008, to be in first line non small cell lung cancer based largely on the FLEX study.

Our partner, Merck Serono, who sponsored the flex study is currently completing its validation of all secondary end points.

Shortly thereafter, ImClone and Bristol Meyer Squibb, will request a formal pre SBLA meeting to define the precise contents of the application.

We will also be planning to concurrently begin the series of standard activities including meeting with our advisors to assist in rounding out our comprehensive commercial and clinical strategies in non small cell lung cancer going forward.

Including expanding trials, evaluating ERBITUX combined with various relevant chemotherapy and radiotherapy regiments in a range of lung cancer settings.

To digress for a minute and discuss the FLEX study as well as its implications, ERBITUX is now the only agent in the EGFR inhibitor class that improves survival in the front line lung cancer setting.

In FLEX, survival was significantly increased in patients treated with ERBITUX plus this platinum (inaudible) in chemotherapy compared to those receiving chemotherapy alone.

It is important to recognize that in contrast to the only other clinical trial in advanced lung cancer patients, in which a biological agent, that is Avastin, when added to a platinum containing regiment increased survival, the patients participating in FLEX resembled a typical lung cancer patient population.

Meaning that FLEX included patients with both squamous and non squamous cytologies and patients with good and not so good performance status.

Therefore, the FLEX results will enable physicians to make ERBITUX treatment decisions pertaining to all types of lung cancer patients in a data-driven fashion.

To be more specific, FLEX included patients with ECOG performance status two as well as zero and one.

Which was not the case in the pivotal Avastin trial.

FLEX included patients even if they had prior histories of certain bleeding or cardiovascular disorders which again was not the case in the Avastin pivotal trial.

And finally, FLEX enrolled patients with the squamous cell subtype, which constitutes anywhere from 25% to 35% of all patients, whereas Avastin is not indicated in such patients.

In fact, about half of all advanced lung cancer patients are not considered to be candidates for Avastin.

And were not enrolled onto its pivotal trial.

Largely because they have had either squamous cytology or relevant cardiovascular and bleeding disorders or brain metastasis.

And another modest fraction of patients may not be ideal candidates, largely because it is felt that they just wouldn't tolerate it due to the high incidence of co-morbid diseases in this patients, which physicians likely feel will offset the benefits of adding Avastin to chemotherapy in this setting.

Since the safety profile of ERBITUX is quite different, physicians may be much more likely to treat such patients with ERBITUX.

However, this is not meant to say that ERBITUX will be used strictly as a default biological therapy in patients who are not ideal candidates for Avastin.

Instead, we feel that FLEX results indicate that ERBITUX will be a sound therapeutic option in patients who are both ideal, and not so ideal candidates for Avastin, as well as in patients in whom Avastin is just not indicated.

We also look forward to discussing the FLEX results with the FDA in the near future and we anticipate disclosing our registrational plans following these discussions.

Our third regulatory filing will be in the early stage advanced colorectal cancer setting based on the significant improvement in progression free survival, the primary end point of the CRYSTAL study.

As we discussed in our last earnings call, we intend to enter into a formal pre SBLA dialogue with the FDA following availability of mature survival data for CRYSTAL in the second half of 2008.

It is important to remember that, although overall survival was the secondary end point of CRYSTAL, it may have been confounded by the commercial availability of ERBITUX and its use post study, in patients randomized to the non ERBITUX containing control arm, we feel that this submission of the complete set of data to the FDA represents the most prudent strategy to enable an optimal assessment of the CRYSTAL results, especially in light of the current regulatory environment.

While on the subject of colorectal cancer and certainly a applicable to other malignancies, is the development of predictive biomarkers to determine which patients benefit most from ERBITUX.

ImClone and its partners have been evaluating the predictive value of several biomarkers for many years now.

Last year, we and and many independent investigators began reporting that the mutational status of the tumor oncogene KRAS may identify which patients might benefit the most from ERBITUX mono and combination therapy in the refractory setting.

This work has also been extended to early stage patients receiving ERBITUX in the first line setting.

From a scientific standpoint it makes good sense that colorectal cancers without KRAS mutations, referred to as KRAS wild-type, which constitutes about 60% to 65% of all colorectal cancers, respond particularly well to ERBITUX based treatment, compared to mutated KRAS tumors in which the signaling protein is always in a turned on or tumor growth stimulatory confirmation.

Over the next year, KRAS and other biomarker data from clinical trials of ERBITUX given as monotherapy and as part of combination regimens, will be submitted for presentation at major oncology meetings.

To date, the data with KRAS as a predictive biomarker in refractory colorectal cancer patients receiving ERBITUX have been compelling.

Although the jury may still be out as to whether KRAS mutational status will be as predictive in early stage colorectal cancer patients receiving ERBITUX based combination therapy as it is for refractory patients, emerging data suggests that KRAS may be an important determinant of clinical benefit in early stage disease as well.

Similar to the development of other biomarkers that have been highly useful in identifying optimal candidates for other therapies, such as HER-2 gene amplification for Herceptin, the identification of a highly predictive biomarker for ERBITUX will not only be good for the patients, increasing the likelihood that they would get the most appropriate treatment.

But may also be good for ERBITUX, potentially increasing its utility in the early treatment of colorectal cancer as well as in the later stages and that many patients may receive ERBITUX much earlier in the course of their disease and for longer duration.

Furthermore, it is entirely possible that KRAS and other biomarkers will enable identification of patients with other types of cancers, who may be ideal candidates for ERBITUX treatment.

And we are seeking to identify predictive markers and other tumor types as well.

To wind up discussions on ERBITUX, there is a substantial amount of high value of clinical trial activities with notable progress being made in many areas.

Just to discuss a few with regard to colorectal cancer, two large (agvent) studies, one in the US and the other in Europe, are progressing rapidly and will likely close to accrual in 2008.

We expect the efficacy results of CAIRO II, a northern European Phase III first line study, in which patients receive treatment with Xelox plus Avastin with or without ERBITUX to be available in the first half of 2008.

We remain encouraged by the preliminary safety results of CAIRO II, presented in the fall, which confirmed prior results indicating that ERBITUX is generally well tolerated when combined with both Avastin and chemotherapy and we look forward to presentations of its efficacy results.

With regard to new pivotal efforts, the Radiation Therapy and Oncology Group, better known as RTOG, will begin Phase III pivotal studies of chemo radiation with or without ERBITUX in patients with locally advanced esophageal cancers as well as locally advanced non small cell lung cancer in 2008.

Randomized Phase II signal finding studies have already begun in patients with rectal and gastric cancers and similar studies in bladder and prostate cancers are due to begin in the first half of 2008.

Lastly, I would like to turn to our clinical stage pipeline, currently consisting of five full human IgG-1 antibodies.

During the fourth quarter we made steady progress on advancing all five through various stages of clinical development.

With regard to IMC 1121B, which in contrast to other VEGFr2 direct to therapeutics, binds to the VEGF-2 receptor and blocks all receptor signaling, a randomized Phase II study in melanoma, our second disease directed trial, the first being kidney cancer, began to accrue patients in the fourth quarter and Phase II trials in lung, colorectal, prostate, ovarian and liver cancers will begin in the first half of 2008.

Also, we are poised to begin two global Phase III pivotal trials of 1121B this year with first being performed by the breast cancer international research group, better known as the BCIRG, and the second in another soon to be disclosed indication with a more abbreviated time line.

Now, turning to IMC-A12, which targets the insulin growth factor like receptor, accrual into ongoing Phase II studies in colorectal and prostate cancer, is strong.

And we intend to initiate a total of eight disease directed studies, several of which are randomized in the first half of 2008.

In addition, the national cancer institute has committed to 11 other studies, and indications that do not overlap with those selected by ImClone, most of which will also open up in the first half of 2008.

Six of them could serve as foundations for future registrational efforts including cooperative group randomized studies in pancreatic, breast, lung and liver cancers.

We feel that these studies should provide a strong foundation of information from which we intend to select top pivotal indications in 2009.

During the last half of 2007, ImClone initiated a Phase II study of our fully human IgG-1 anti EGFR therapeutic IMC-11F8 combined with chemotherapy in colorectal cancer patients in Europe and this 40 patient study is more than halfway accrued.

ImClone has decided to take 11-F8 further into two pivotal indications based on the knowledge ascertained from other EGFR targeted therapeutics to date.

We look forward to disclosing the details of both global Phase III studies which will begin in the first half of 2009.

Lastly, progress continues to be made in our Phase I studies of 18F1 which targets (inaudible) FR-1, expressed by both malignant blood vessels and tumors alike and, IMC-3G3 which targets tumor growth and survival factor PDGFR Alpha and anticipate completing these studies in the next two quarters with disease directed evaluations planned for 2008.

Peter will now discuss the details of our fourth quarter financial results.

Peter?

Thank you, Eric and good morning everyone.

I will briefly highlight our financial results for the fourth quarter and full year 2007, and also provide some expense guidance for 2008.

For the full year 2007, our revenues totaled $590.8 million, with operating income of $51.5 million, net income of $39.8 million and diluted earnings per share of $0.46.

Excluding the impact of the patent litigation charges of $110 million and the partial reinstatement of the company's valuation allowance against our deferred tax assets, non-GAAP pro forma net income for the year would have been $125.9 million or $1.43 per diluted share.

During the quarter, we achieved total revenues of $151.4 million, compared to $132.2 million for the same period last year, an increase of 15%.

This increase is primarily due to the year-over-year sales growth of ERBITUX of 11% in the US, and 48% in the international markets.

Which resulted in higher royalty revenue and manufacturing revenue for the quarter.

For the year, total revenues were $590.8 million, or 13% lower than 2006, primarily due to the catchup effect in 2006 on license fees and milestone revenue associated with the $250 million milestone payment received from VMS in 2006, resulting from the FDA approval of ERBITUX for use in the treatment of head and neck cancer.

Now, a few comments on our operating expense line items.

From our Earnings Release this morning, you will notice that we have combined our clinical and regulatory expenses with Research and Development as is the prevailing practice within the industry.

R&D expenses for the quarter were $51.6 million, 47% higher than the same period in 2006.

This increase is primarily due to stepped up investment in clinical trial activities for both ERBITUX and our pipeline products as mentioned earlier by John and Eric.

In addition, during the quarter we continued to produce pipeline product in our BB50 manufacturing facility rather than ERBITUX, the cost of which are expensed as incurred.

As we progress with our investment in both ERBITUX and our pipeline, R&D expenses will continue to increase in 2008.

Selling, general and administrative expenses were $22.9 million for the quarter, an increase of $6.7 million over the fourth quarter of 2006.

This increase is primarily due to the expansion of our field sales force and higher legal expenses related to the settlement of the (Yada) patent litigation.

For the full year, SG&A expenses were $80.7 million, or approximately 14% of total revenues.

With the full year impact of the expanded sales force in 2008, as well as other planned growth to support our stepped up R&D activities, we expect SG&A expenses as a percent of total revenues to increase marginally this year.

Royalty expenses for the quarter were $16.4 million, or 4.4% of US end market and international sales of ERBITUX, as compared to $17.4 million and 5.9% respectively for the fourth quarter of 2006.

This decrease is due to the settlement of the patent litigation with (Yada) which resulted in a reversal of a portion of royalties previously accrued but unpaid to Sanofi-Aventis, partially offset by the accrual of royalties to (Yada) in accordance with the terms of the settlement agreement.

With the impact of the settlement agreement, royalty expenses for the full year 2007 were 5.3% of US in market and international sales of ERBITUX.

It should be noted that our effective royalty rate can vary from quarter-to-quarter because some of our license agreements are therapy specific and some are country specific.

We are projecting royalty expenses as a percent of US in market and international sales of ERBITUX to be in the mid-6% range for 2008.

The company's effective income tax rate for the full year 2007 was approximately 58%.

Which includes the effect of discrete charges of approximately $18.6 million, primarily related to the reinstatement of a portion of our valuation allowance against our deferred tax assets.

Which had been previously released in the first quarter of 2006.

It should be noted that the recording of this valuation allowance has no effect on our cash taxes.

Total net cash tax payments in 2007 were approximately $3.2 million.

Our financial position remains strong with $1 billion in cash, cash equivalents and securities available for sale at December 31, 2007.

Excluding the $125 million in patent litigation settlement payments during 2007, our cash from operating activities for the year was approximately $128 million.

We used approximately $11 million of cash for capital expenditures during 2007, and planned for increased expenditures in 2008 which will include commencement of the build-out of the second suite of BB50 and other investments in our facilities to support projected growth.

I now turn the floor back to John to conclude our prepared remarks.

Thank you, Peter.

In closing, 2007 was a critical year for ImClone.

We made tremendous progress in our transformation to a fully integrated, multi-product, biotechnology company and we have entered the new year well-positioned to build upon our recent success and capture the many opportunities that lie ahead of us in 2008 and beyond.

I look forward to reporting on our continued progress over the coming quarters.

We thank you for joining our call today and would now like to open the floor to questions.

Thanks very much.

(OPERATOR INSTRUCTIONS) First up from Stanford group we have a question from Han Li.

Yes, good morning.

Just two quick questions.

Thanks for taking them.

For Eric, you mentioned earlier this month that ERBITUX is multiple first line colorectal studies, besides the CRYSTAL study and COIN is one of the studies we may see survival data.

Can you tell us a little bit more about the COIN study and when should we expect the survival data?

Hi, Han, good morning.

That's a great question.

I think maybe I should just begin by discussing COIN.

COIN is a study of -- it's essentially a three arm study but the most notable aspect of the study is the -- is its evaluation of the merits of ERBITUX in combination with FOLFOX.

So, one arm -- two arms are evaluating FOLFOX plus or minus ERBITUX.

The study is actually being performed by the MRC in the U.K.

And it's accruing very, very rapidly and we would anticipate that accrual would likely complete very early in 2008.

The very important aspect of this trial is the fact that since ERBITUX is not utilized commercially in the U.K.

and the study is restricted primarily to the U.K., it really presents an opportunity to evaluate ERBITUX's effect on survival.

And in contrast to other studies in which the drug is available commercially and could confound a survival advantage or could lessen it -- the way it would look in a pure sense like in the COIN study.

So we would anticipate data -- it largely -- it reflects the accrual, we would expect data in -- late 2009, 2010.

I see.

Along the same lines on the first line colorectal, can you comment on your -- Compendia's listing strategy and where you are with the different listings?

Han Li, this is Michael Bailey.

As mentioned, we have applied to drug points and got a positive response from them.

But again, it's important to note that CMS, which covers our national public payers, is not recognizing drug points at this time.

We expect them to make a decision on who they're going to recognize, be it drug points or NCCN in the second half of the year.

Thank you.

Moving on to our next question, this is Maged Shenouda at UBS.

Sure, hi.

Thanks for taking my question.

First question is for Eric.

Eric, you said that based on FLEX you would expect ERBITUX to compete directly with Avastin, not as a default therapy.

Just, you know, can you give us some parameters around -- or some benchmarking as to, you know, the kind of results that would allow it to compete directly with Avastin and not as a default therapy.

I think -- hello, good morning.

I think that I don't want to -- until we can actually present the results in their entirety and we could actually describe the current use of Avastin, which patient populations are currently receiving the drug, I think it would be best to wait until that time and we can further define what competitive means.

But we think that in that patient population, physicians are going to look at ERBITUX and they're going to see that it's going to be a rational choice for all patient populations with this disease.

Okay, and then just if I could, one other question, commercial question.

On the growth in Europe, the ERBITUX growth in Europe versus the U.S., maybe you could just elaborate on why you're seeing such significantly better growth in Europe rather than the U.S.

Yeah, I think this is a very good question.

From the perspective -- a couple perspectives.

One is clearly there's differential market dynamics.

Avastin use and overall perspective is different in Europe.

And you know, we cannot, kind of write off the fact that Panitumumab only recently got approved as monotherapy in a restricted population.

So, they have different dynamics in Europe than we do in the U.S.

Okay.

Thank you.

Next up we'll take a question from Jim Raddick at Friedman BIllings Ramsey.

Good morning.

Thanks for taking the question.

Regarding your penetrations, I think you had said that you did see growth in fourth line colon cancer but not in the third line, can you make any comments on the second line or the first line?

And is it also fair to say that in fourth line the growth may have been, at least in part, taking share back from what was lost to (inaudible) last year?

And then I have one more quick FLEX question.

Thanks.

Sure, Jim.

Your observations are absolutely correct.

If you looked at fourth line for Panitumumab, they've lost quite a bit of share there.

We did see some slight increases in second line and I think this is going to be one of our core areas for growth and focus for the next year as we move from the more highly refractory to the earlier lines of therapy.

And where are you in second line now?

Second line, we're roughly in the 15% percentage rate.

And what about first line?

First line is --

Off protocol.

Pardon me?

Not on protocol.

Okay.

From our understanding of the third party audit data, first line is pretty steady and little less than 5%.

Okay.

And real quick on FLEX, Eric, what's the baseline that we should expect from (inaudible), because it typically seems that it lacks carbo tax by about a month in terms of baselines, and it sounds like your patient population may even be a little later stage or more advanced or worse performance status than the typical front line lung cancer patient population.

Thanks.

Little later stage or more advanced or worse performance status than typical front line lung cancer patient population.

So, Jim, without -- obviously, I can't disclose at this point the -- how the -- what the baseline is, but I will tell you that when you look at the data, obviously you really need to evaluate how the comparative regimen does, compared to other comparator regimens that have suffice in a pivotal study for approval and for practitioner's use.

So, I will tell you that it contends very well.

Okay.

And is it going to come out before ASCO or is ASCO the date?

At this juncture our plans are to release the data at ASCO.

Will it be in the abstract -- the details in the abstract or at the conference?

I think at this point I'd rather just -- we'll just wait until the abstract comes out.

Okay, thanks very much.

Next we'll go to Mike King, Rodman & Renshaw.

Thanks for taking my question and congrats on a good quarter.

I apologize for any background noise.

Couple of questions, maybe to follow up Jim's question on FLEX.

Eric, in the Lucas study (inaudible) gave us 7.3, and I think it was about a one month gain in overall survivals, just wondering if you think Lucas was representative of what (inaudible) can do in the real world and will Lucas be a supportive trial or will it not be part of a registration package?

Hey, Michael.

I will -- obviously, it was a randomized trial performed by the companies and it's important that we as well as our partners, Merck, include the Lucas study in the dossier, as it will -- as the dossier that will be submitted to the agencies will include other trials and other experiences performed under the company's IND's.

With regard to the Lucas study and with regard to -- and I think you're asking really the same question as Jim and I won't disclose any particular information prior to the presentation at the ASCO meetings or in the abstract -- or in the abstract itself, but I will say that it's important to look at that comparator and obviously -- going from a Phase II to a Phase III study one would expect even dilution of that comparators ultimate clinical benefit but you also have to think about over the years, we've had the availability of new second line therapies -- new third line therapies that can impact upon survival.

I will say, again, that when you judge the study, you'll have to judge the -- how the comparator did and we feel pretty good about it.

Anything further, Mr.

King?

Sorry about that.

Just to understand the clinical scenario better, Eric, squamous cells histology typically does worse, correct?

Then (inaudible)?

I think it varies, it really varies, but I would say that in most of the larger trials, it does a little bit worse.

Okay.

And the FLEX study was -- the preponderance was Europe or what would you -- geographically, what was the distribution like?

Outside of the United States.

Okay.

And squamous histology is more common ex US than US, correct?

I think you are right about that.

In the United States actually, squamous histology varies -- it probably varies from 20% to 30%.

Veering in the lower 20's, the rest of the world, anywhere from 25% to 35% and maybe secondary to filtration cigarettes.

Okay.

And then to turn to colorectal, can you discuss, let's say the outcome of the CRYSTAL study is positive.

There's a statistically significant benefit in survival, again as part of the dossier you're going to have to submit BMS099 and I'm just wondering how the FDA is going to look at that data in comparison to the CRYSTAL results.

Michael, are you referring to the FLEX results or the CRYSTAL results?

I'm sorry.

No, CRYSTAL.

Did I say FLEX?

I meant CRYSTAL.

CRYSTAL is the colon study and 099 is the lung study, so.

I'm sorry.

You may be referring to lung.

Yes, sorry.

I'm confusing my --

You know the one thing about the FDA is the FDA really does focus on design.

They really are -- I think the FDA really sees beyond the superficial that I think many of us often see.

And 099, the devil is in the details.

First of all that study was not a pivotal trial.

It was focused on progression free survival.

End points were changed during the study.

And there was a loss of events in both arms of the trials when investigator interpretation of the events really was then seen by an IRC and when you lose the number of events in both arms, you lose the statistical power of the ultimate analysis.

And I think the FDA will clearly see this.

One potential reason for the loss of events were that physicians, largely in the first part of the study, had reached the point of best response.

Patients were taken off trial for many reasons, including being placed on the new drug that came out at that time, Avastin, in both of the arms.

So, I think the FDA will see 099 for what it truly is.

In addition, one has to look at 099 response rate with regard to the IRC, review of response which was the initial end point of the trial favored ERBITUX.

Investigator Reed of progression free survival favored ERBITUX as well.

So, I think the agency will see 099.

They'll see 100, which was GEM Sys or GEM Carbo , plus or minus ERBITUX, where everything, all the indices favored ERBITUX and that trial was purely a response rate trial.

There were no modifications during that trial.

That will also be submitted to the agency.

But the pivotal study is

Right.

Thanks for that thorough answer.

And then finally, and I apologize for hogging the time, but just wanting to know what the company's planning is to capitalize commercially on this very exciting KRAS data that has recently created a lot of interest in the clinical community.

Thank you.

Yeah, Mike, thanks for the question.

I think first and foremost, the data that we have has been in an unselected population and has been a significant benefit for ERBITUX.

I'm sure you're alluding to a lot of the data that has been recently presented and/or published and the Phase II data that suggests that there is significant enhancement in ERBITUX activity in a wild type population.

Looking forward we certainly think that this can make us more competitive in the first line setting.

However, with that said, there are several challenges that we have to overcome in the near term, not least of which is just availability of good, consistent testing, reimbursement for that testing, as well as more robust data.

I mean, we've got a couple of Phase II studies in combination, Panitumumab has presented monotherapy data and recently presented some combination data that at least on first blush was not very compelling.

So, I think it's going to be important to look at -- retrospectively some of the more robust Phase III studies as well as prospectively in selecting patients up front.

Now from Citi we have a question from Yaron Werber.

Yes , hello, thanks for taking my question.

I wanted to start maybe with two quick clinical question and then ask a financial question.

The first question in the FLEX study, and sorry just to continue on that line of questioning, can you give us a sense -- in that study, patients had to have been EGFR positive to actually enroll, what percentage of patients are EGFR positive in (not) small

Hello Yaron, its Eric.

If you look in the literature in any of the diseases, I think you're going to really see a low side as far as the numbers that are often given.

Colon as well as lung with regard to EGFR positive -- positivity.

And we'll disclose the actual data when the FLEX study is presented.

But, I will say that, remember the DECO test has changed over the years as far as what constitutes positivity.

Now it's any positivity.

It's any immunostaining, not plus one, plus two, et cetera.

So, obviously that would really increase the boundaries here.

So, if you're wondering about dilution of the patient population, et cetera, how applicable are the FLEX results, obviously you'll ultimately have to see the data, but if you look at colon now you're seeing something in the range of 80% to 90% of patients staining positive.

If you look in the literature you'll have a range of anywhere from 35% to 75%.

I think the same thing holds true in lung cancer.

By in large our feeling about immunostaining and we're doing the studies in colon cancer now, are that immunostaining is basically a poor way to assess the true biological relevance of EGFR that you can have a totally negative tumor in every way, shape or form, this is in colon cancer and I think the same will apply to lung cancer and that tumor actually transmits signals the same way as the other tumors that have a lot of EGFR.

So, I think you're going to see that when we look with more sensitive tests, EGFR immunostains is going to be quite high.

Okay, in the study there was no requirement to be plus one or plus two, any immunostaining was good.

It was any EGFR immunostaining.

Okay, and in the -- what is your -- I don't know if you can comment.

In the CAIRO II study we've seen plenty of interim analyses in general testing ERBITUX in combination with Avastin at first line and the combination has been found, so far, to be safe, so its suggested that CAIRO II should not have any safety problems.

The -- as ASCO GI there was a -- admittedly a very small study, 20 patients from Duke -- single arm, single center, testing Avastin with ERBITUX with Xelox.

And it showed -- again admittedly there's no control, but it showed a PFS of about 10.4 and an overall response of about 46%.

So, pretty much in line with what Avastin might show you by itself.

So, any thoughts as to what is -- how does that bode for CAIRO II and then just a quick follow-on -- on a financial question after that.

Yes, remember, CAIRO II is a randomized trial.

I think what happens at Duke University or any university, is when there are so many trials available for patients who gets on one trial versus another, this wasn't a randomized trial.

You know, there's a wide variability in these end points in various patient populations.

The whole thing about CAIRO II, it's a large, randomized trial and we'll see the differences emerge.

So, you know you're right about that.

But I think we can point out other trials and you'll see a PFS difference -- you know substantially different.

These are small, 30 patient studies.

So, I wouldn't give much credence to it.

Okay.

And then just a question, and I apologize if I missed it.

But, can you give us a little bit of a sense as to what you are expecting from R&D spending this year and also collaborative agreement revenues and licensees and milestone payments.

On the R&D side -- Yaron, it's John, I think you can expect our R&D expenses to increase by about 25% to 30% this year.

And that's including -- so just to clarify, you're now reporting on the -- your both including R&D and clinical and regulatory costs on the same line.

Yes, that's correct.

So, we should look at Q4 '07 as a good run rate, and then increase it 25% to 30%?

Correct.

As John said, for the combined -- the R&D line which now includes clinical and regulatory -- this is Peter, Yaron, 25% to 30% for next year is what we're anticipating at this point.

On license fee and milestone revenue, the impact of the BMS amendment, as we've said in the prior quarters' call, did extend the recognition of that revenue because of the clinical spend program being extended with more dollars out in the later years.

But at this point we're really not in a position to give revenue guidance, so we will likely be doing that later in the year.

Can you give us maybe a sense as to how long has been extended and how much is actually left to recognize from the original payment?

Well, what is left to recognize is what's on the balance sheet.

You know, the current and long-term portion.

So, that's what is left to recognize.

And of course what is reflected as the current portion gives you an indication of the timing of -- in terms of what's being expected for next year, actually.

Okay.

Great.

Thank you.

We have a question now from Caroline Stuart, Piper Jaffray.

Hi, thanks.

Most of my questions have been answered but I have a follow-up.

I thought I had heard you say on the prepared comments that, as part of the Compendia listing submission, that one of them was for pancreatic.

And I thought that that data was negative.

So, could you confirm that?

And then if that was true, on what basis is that?

Yeah, you're absolutely right, Caroline on your observation, that was a negative study.

You know, I think they look at the full body of data including Phase II studies as well as the Phase III that you referred to that was a failure.

So you know, as far as how they make their decisions, I can't really comment on the specifics, but I'm sure they're looking at all the data.

Okay.

And then on the chemo, Avastin, ERBITUX combination studies, so CAIRO II and the CALGB 80405 studies, obviously we saw I guess the preliminary safety data for CAIRO II back in the fall but the 80405 study is a larger study.

Just wondering, I know it's not yours, but is there any sense of, since that's I think a 2200 patient study, about how far along that is in terms of patient accrual and when we might actually see data from that and was there any kind of -- do you know of any modification to that to take into account any potential safety concerns, just because of pace?

Oh, hi, Caroline.

The CLGB study, you know, these studies in North America are slow.

Like if you compare the study to COIN and CAIRO II, the European accrual is so much faster.

So, the CLGB study is behind.

I think from a study standpoint, one has to even consider the post treatment potential confounding effects of Avastin and ERBITUX being available.

That study is accruing.

When pace safety data alert came out, we did look at all of our trials that really had both biologics as well as -- and chemotherapy in the first line setting and in other lines.

We didn't see a safety signal.

We were quite happy about the results of CAIRO II in its lack of anything near what pace had actually presented in terms of safety.

CLGB also did an informal check and we were on the phone with the NCI at that time and there really was nothing that presented as a safety signal in that study.

The study is accruing.

It's steadily accruing.

We're in fact considering and are nearing bringing some sites from Canada along to augment accrual.

But as I mentioned earlier in the first question, I think posed by Han Li, the COIN study has really presented itself as a study that's really accruing very quickly and with that survival -- the potential to look at survival now in an untainted way, it becomes a very prominent study in our minds.

Okay.

Thank you very much.

From Morgan Stanley, this is Steve Harr.

Okay, I have a couple of question.

First, related to lung.

Eric, what's your general sense of the percentage of patients in the real world that would have a biopsy in lung cancer to establish whether or not they're EGFR receptor positive at the time of initiation of therapy?

Yes, that's a great question, Steve.

Obviously, it's not -- it's much less than colon cancer.

So, I think a lot will depend upon what we ultimately see as EGFR positive in that trial, how many patients were screened out of that study, meaning what's the real EGFR positive incidence in the patient population.

But it is much less, I mean.

The fact is that patients are fine (inaudible) performed, needle biopsies, so the tissue quantity as compared to a colon resection where you're just getting a large tumor, it's different.

So, this does present somewhat of a logistical problem if EGFR -- if EGFR testing is required and is in the ultimate label.

But I think we've seen a situation in colon cancer where EGFR testing is just not really a relevant phenomenon at the present time and doesn't really -- it's not being performed as much as it used to be.

Well, part of that is because you have data to support that's not necessarily though, right?

Whereas in lung you may not have comparable data because your trial enrolled EGFR receptor positive patients only.

Yes, the FLEX trial did but we do have other trials such as study 100, granted not a very large study but one in which there was a three month survival advantage seen in the patients (inaudible) receiving ERBITUX, response rate difference and that study did not -- was not really a study that accrued based on EGFR.

The other thing, I do think the FDA is quite aware of the biological significance of EGFR at the present time.

So, you know, your implications and concerns are right on and we share those concerns but I think data has emerged about EGFR and immunostaining and the poor aspects of this test and its predictive value.

And then what about -- what do you expect your label to look like in respect to the background chemotherapy and lung cancer and what do you think the implications are of that?

Well, I think right now I don't want to speculate on what the FDA will basically veer into.

These processes are very long.

You submit an application.

The application is reviewed and then you get into labeling discussions at the end of the -- at the end.

And the FDA, you know, obviously it could be restricted to one particular regimen or it could be platinum containing.

I think out in the community, what physicians know and they know this quite well in lung cancer, when you're dealing with new therapies in conjunction with a platinum, it does not make a difference.

Any of the relevant clinical benefit parameters are the same.

And I think that every physician in Europe and the United States is quite aware of that and I think third party payers are also aware of it.

So, I don't really think that the labeling is going to be much of an issue with regard to what ultimately happens in practice.

(Inaudible).

And then one on the colorectal cancer side, what's you're general impression of the necessity to have a survival benefit in CRYSTAL for you to get the label?

Well, I think as you know, PFS was the primarily end point of the trial.

Like the (inaudible) there's going to be a substantial possibility of confoundation of the survival end point.

That's why the COIN study is quite important.

I think the FDA will understand this.

I think that what happened with regard to the ECOG, Avastin trial is the FDA focused on PFS versus survival I think the interpretation there is often very -- is somewhat superficial.

There were more things that were going on in that ECOG -- the ODAC reads -- or the ODAC -- what happened at the last ODAC meeting.

Meaning, in colon cancer, patients are symptomatic.

Breast cancer first line is a lot of asymptomatic patients.

So, PFS takes on a very different importance in terms of the importance of an end point.

With regard to whether or not we'll need survival, I can't answer that.

I don't really think we'll need to have statistically significant augmentation of survival but I think that it would be really foolish to submit the application without survival, you know, based upon prior products that have gone in front of ODAC such as Sature Platinum and Dendrions product recently.

So, I think it's in our best interest to be very transparent with the agency and submit all the data.

Do we need to have survival statistically significant?

It wasn't a primary end point of the trial.

I don't really think -- I think we have to have definitely no deleterious effects there.

Okay.

Next we'll hear from May-Kin Ho at Goldman Sachs.

Hello.

I was wondering about the KRAS question.

Now with the European approval of P-MAP, based on wild-type KRAS, do you think they would require that also for other indications that you're filing in Europe, for example first line colorectal?

May-Kin, hi, this is Eric.

I think that the -- I can't comment on what's going on with regard to the regulatory interactions between Merck and the EMEA at the present time.

So, I really -- I can't really speculate on those, on that question.

Obviously, KRAS is in everyone's mind.

And, you know, it's something that we are certainly going to be considering in all of our strategies, both clinical and commercial going forward.

Again, it will be -- if it is submitted, you know, we have to think of the fact that it would likely be a retrospective analysis.

Currently, yes they are.

And in your filings with the FDA this year, would you be incorporating the data on KRAS in the packages?

At this point, we are going forward as the study was performed, that is, the way the primary end point was actually evaluated in all patients.

So, that is our -- actually intention at the present time.

However, ImClone and its partners, BMS and Merck, are trying to perform analysis of all of our patients in our trials.

Obviously, the KRAS situation is very important to us.

Because I think it will channel ERBITUX more effectively more appropriately for patients, I think it will be better for the products.

So, we are going forward obtaining the data from all of our trials and we'll be presenting these data to the agency through a variety of routes, including a voluntary genomic's data submission which is a parallel path.

It's not a path that is a review path.

It's a path that enables the agency to look at data and to comment on data and to comment with regard to how best to utilize the data going forward.

It's a very valuable path for us and we intend to use it very quickly.

In addition, we are trying to get our data together for submission for presentations in our first line studies, potentially at ASCO.

And last question is for Michael.

As many of these new indications would not be approved this year, yet, and with the Compendia listing we have the wait for CMS in the second half of the year.

Can you comment on the drivers for growth this year for ERBITUX, what are we looking at in terms of duration at this point and what is your market share in third line colorectal?

A lot of questions there, May Kin.

Let me make sure that I get to a all of them.

So, I will start with the last one first.

So, market share in third line is roughly 30%.

And your questions to the drivers for growth, I think that first of all we've got an increased promotional effort and they've been in the field and active for about six months and we expect them -- fully expect them to have a positive impact overall in our indicated populations.

You know the KRAS story is still somewhat of a question.

I think it will depend on continued emerging data and the availability of KRAS testing.

But I think at the end of the day, it's kind of sticking to our knitting and making sure that people are very clear on the valuable benefits that ERBITUX provides to patients.

What is duration of therapy at this point?

I'm sorry.

The last question around duration of the therapy, obviously varies by different lines of therapy.

I don't know if you have a specific line of therapy or tumor type that you're interested.

No, mainly it's colorectal third line and second line.

Yeah, in your colorectal markets in the second line is a little higher than the third line and they all kind of border around 8 to 10 weeks of therapy.

Okay.

Thank you.

We have a question now from Eric Schmidt, Cowen and Company.

Thanks just a few housekeeping questions for Peter, I think.

Could you provide us an estimate for ERBITUX's profitability for the full year as you did at midpoint of the year?

No, we're not -- we're not able to provide that at this time, Eric.

Okay.

And then on the ex US royalties to -- for ERBITUX (inaudible) the settlement, where are we there in terms of European (inaudible) impact on your royalty expense line?

When it comes to royalty expense, what is important to note is that it can fluctuate quarter-to-quarter, based on the various license agreements that we have because some are therapy specific and some are country specific.

So, that's why we gave some guidance there that for next year we can expect something in the mid-6% range as a percent of total end market and international ERBITUX sales.

I'm sorry, was that U.S?

Or is that total worldwide sales?

That's worldwide.

Okay.

You're going to focus roughly 6% royalty on worldwide sales?

Mid-6% range is what we said in the prepared remarks.

Okay and then what percent of the ex US royalties are going to be reimbursed?

I mean, we have not -- well, I guess we have said 1%, I'm sorry, in the past and I was going to say that when it comes to ex US as well, if there are sales that Merck makes from product that we sold them, we get 100% reimbursed for those royalties.

Okay.

And last question, can you estimate -- and I am adding this to the side and I apologize, can you estimate the effective tax rate for '08?

We're not in a position at this point, Eric, to provide that.

Okay.

Thank you.

Eric, I think it fair to say that our net cash tax rate has been very low, year-over-year, and obviously thats just given the history of investment that the company has had.

So, with that having been said, I would like to thank everyone for joining our call today.

2007 was a critical year for ImClone.

We made some really important strategic advances and there's no question in my mind whatsoever that 2008 is just going to be an even more exciting year.

We know that there's going to be some very important new trials started, some very important data released and we look forward to accelerating our pipeline and expanding the use of ERBITUX around the world.

So, thanks again.

And if you have any further questions, please feel free to contact our Corporation Communications department, at 646-638-5058.

Thank you very much and have a great day.

Once again, ladies and gentlemen, that will conclude today's conference call.

Have a good day.