禮來公司 (LLY) 2008 Q2 法說會逐字稿

At this time, I would like to welcome everyone to the ImClone Systems 2008 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) It is now my pleasure to turn the floor over to your host, Greg Mayes, ImClone System's Vice President and Interim General Counsel.

Sir, you may begin your conference.

Good morning, everyone, and welcome to ImClone's second quarter 2008 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, Ken Zuerblis, Senior Vice President and Chief Financial Officer, and Eric Rowinsky, Executive Vice President and Chief Medical Officer.

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

Ken will then review our second quarter 2008 financial results, followed by Eric, who will highlight the clinical development of Erbitux and our pipeline antibodies.

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

Although we believe that 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, everyone.

And thank you for joining our call.

We have made important progress over the last several months in achieving our three over-arching goals of accelerating Erbitux sales, advancing our pipeline of novel antibodies and expanding our capabilities and capacity.

During the second quarter, we increased sales of Erbitux and made significant investments in advancing our pipeline as we had previously guided.

With respect to expanding Erbitux sales, we are pleased that global sales of Erbitux have grown significantly year-over-year and that we are seeing the steady sales growth in the United States as we had anticipated.

Second quarter North American net sales for Erbitux were $195.1 million compared to $162.1 million in the second quarter of 2007.

Our second quarter demand base sales of $196 million represent a 21% increase year-over-year and a 3% increase quarter-over-quarter.

This represents our fifth consecutive quarter of increased sales demand in North America.

We are pleased with the positive sales trend of Erbitux in North America and the growing demand that we have achieved through our own increased promotional efforts and the support of our partner, BMS.

Second quarter international sales of Erbitux, driven by our partner, Merck KGaA increased significantly year-over-year.

I would like to highlight a few notable key milestones in 2008, that will help us accelerate Erbitux sales in 2009 and beyond.

Building on our steady sales growth in North America, we are seeking to expand Erbitux's approved label within earlier stage setting in non-small-cell lung cancer.

We expect to file two SBLAs with the FDA in 2008 based on registration quality, earlier stage studies.

We plan to file for first line head-neck cancer by the end of the third quarter based upon the extreme data and we plan to file for first line non-small-cell lung cancer in the fourth quarter based upon the FLEX data.

Turning to compendia listings for Erbitux, the AH FSDI continues to be a recognized compendium.

CMS has now approved three additional national compendia for the list of Medicare anti-cancer treatment options that are recognized for reimbursement purposes, NCCM, DrugDex and clinical pharmacology.

CMS may issue implementation instructions with regard to the three newly recognized compendia in the near future.

Earlier this year, we submitted additional applications for listing in the treatment of compendia likely to be recognized by CMS for cancer drug reimbursement.

In the first quarter, we announced that Erbitux received a high level listing in DrugDex for use in early line colorectal cancer, as well as head and neck cancer.

Two of the four CMS-recognized compendia, DrugDex and clinical pharmacology, have already taken action to list Erbitux in the first line non-small-cell lung cancer setting.

We are waiting the results of our other recent compendia submissions.

We look forward to having Erbitux approved for use and reimbursement in lung cancer.

This is a large market with significant unmet patient need.

With only half of that population eligible to receive (inaudible) and currently only one in five patients actually receiving the biologic.

Moving to our activities to bolster Erbitux sales outside the United States, we achieved a major milestone in our efforts to maximize the global commercialization of Erbitux, with the recent approval we received in Japan for use in treating patients with metastatic colorectal cancer.

With this approval, Erbitux is now approved for use in the world's three largest markets for colorectal cancer therapies.

I would like to remind everyone that the economics between ImClone and our partners Merck KGaA and BMS are different for Japan than the rest of the world, in that the potential upside is much more lucrative for ImClone in Japan than for sales of Erbitux in other countries outside North America.

ImClone receives 25% of the profit loss and additionally we will receive a 4.75% royalty of total net sales in Japan.

This has the potential to be significantly more than the 9.5% royalty we receive on international sales of Erbitux in other countries outside of North America.

Now that we have received marketing authorization in Japan, the price interview will take place over the next few months and product launch is expected shortly thereafter.

We also look forward to further broadening the approved use of Erbitux in Japan to approve earlier stage settings and additional tumor types in the future including head and neck cancer.

We are also planning to expand the approved use of Erbitux in Europe and other countries through the supplemental regulatory filings as we are doing in the U.S.

The supplemental filings for first line head and neck cancer has been submitted to the EMEA by our partner, Merck KGaA in June, and the first line non-small-cell lung cancer EMEA filings is expected in the second half of this year.

Additionally, our partner, Merck KGaA announced yesterday that they received an approval from the European commission for its application to broaden the use of Erbitux also including first line treatment of metastatic colorectal cancer in patients with K-ras wild type tumors.

Another milestone of note in our efforts to expand globally was a recent establishment of our operations in Germany.

This is an important step in furthering our relationships with key opinion leaders and regulatory agencies worldwide for the increasing number of international clinical trials we have underway for both Erbitux and our pipeline antibodies.

To help lead this next phase of Imclone's global expansion, we have hired Bernhard Ehmer, who prior to his most recent position as CEO of Fresenius Biotech, was one of the early and most influential champions of the Erbitux clinical development and international registration effort while he was with Merck KGaA.

We are delighted to have Bernhard on board.

These activities highlight our progress in maximizing the potential of Erbitux by expanding its use in the U.S.

.\and around the world.

However, as we have seen on prior earnings calls, I would like to reiterate that we do not expect the impact of these potential new approvals, indications, and compendia listing in the U.S.

to be seen until 2009 and beyond.

I would like to take a moment to discuss K-ras testing, particularly in the US.

Even prior to the K-ras data presentations of ASCO last month, leading oncologists and cancer centers in the U.S.

were using K-ras tests to help determine optimal individual patient treatment regimens and awareness continues to increase.

While it will take sometime to see how broad adoption takes place and reimbursement is addressed, we do not believe that this will negatively impact our long-term prospects in colorectal cancer.

We view K-ras testing is a long-term positive for Erbitux and believe that demonstrating improved outcomes for K-ras wild type colorectal cancer patients, which is equivalent to two-thirds of this large market, will help us broaden our market share and extend duration compared to where we are today.

Concluding our discussion of ImClone's commercial activities, last week we announced a change in the leadership of our commercial organization.

Michael Bailey informed us of his decision to resign from ImClone to accept a senior level commercial position with Synta Pharmaceuticals which located in New England, where Michael's family currently resides.

I have enjoyed working with Michael and I'm sorry to see him leave ImClone at this promising juncture in our stage of growth.

We wish him much success in the next phase of his career.

With Michael's departure, we have appointed Joe DePinto as Vice President Commercial Operations.

Joe has nearly 20 years of experience in pharmaceutical sales, marketing and commercial business strategy for oncology products, most recently at Johnson & Johnson.

He has a solid track record of delivering impressive results for major oncology therapeutic franchises and I believe his skills and expertise will serve us well in our commercial efforts going forward.

Turning to the clinical development area, we've continued to make progress against our second goal of aggressively advancing our proprietary pipeline of receptor-targeted, fully human IGG-1 monoclonal antibodies.

Eric will provide a full update on the clinical development of Erbitux and our unique pipeline in just a moment, but I would like to highlight one development in particular.

We have moved the first of our pipeline antibodies, 1121 B into Phase III clinical development, and the Phase III study of 1121 B in metastatic breast cancer has opened for enrollment.

This is the first ImClone antibody other than Erbitux to be developed and moved into later stage trials, an important strategic milestone for us.

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

In May, we filed with the FDA for a multi-product approval of BB 50 and that application is under review.

We expect a response from the FDA before the end of the year.

We are producing IMCEB 10, the next antibody we plan to move into Phase I clinical studies.

The commissioning and validation of the second suite of BB 50 is currently under way.

We are planning to use this suite to accommodate the expansion of our pipeline.

In summary, we have continued to execute and build on our progress to strategically move the Company forward and enhance shareholder value.

We are encouraged by the continued positive developments with Erbitux and our pipeline.

And we are optimistic about our growth prospects for the long-term.

Finally, I would like to take this opportunity to recognize and thank our employees.

Their contribution to ImClone's progress in advancing cancer treatment options are particularly evident in a significant data on Erbitux and our pipeline, which was presented at the recent ASCO meeting and in the impressive enhancements that we have made in our manufacturing and commercial capabilities.

I would now like to turn the floor over to Ken to discuss the details of our second quarter financial results.

Ken?

Thank you, John, and good morning, everyone.

I would like to spend a few minutes reviewing our second quarter results.

I will focus my comments on our quarter-over-quarter results, as our year-over-year comparisons are clearly outlined in our press release issued this morning.

Total revenue for the second quarter increased 2% to $166.5 million, from $162.6 million reported in the previous quarter due to higher sales of Erbitux.

Royalty revenue grew by 3% to $97.8 million as compared to $95 million for the previous quarter due to continued growth of Erbitux in North America.

Licensees and milestone revenue, which is principally made up of the amortization of the upfront and milestone payments received from Bristol-Myers Squibb was $27.8 million compared to $24.1 million for the previous quarter.

The milestone revenue recorded from BMS is being recognized as revenue based on the level of clinical development spending for Erbitux.

We continue to anticipate that full year 2008 milestone revenue will range between $100 million and $110 million.

Also, there remains approximately $232 million of milestone payments to be recognized as revenue over future periods, which are classified as current and long-term deferred revenue on our June 30, 2008 balance sheet.

Manufacturing revenue, which is driven by the timing of shipments of Erbitux to our partners, BMS and Merck KGaA, was $21.4 million compared to $25.4 million for the previous quarter.

Collaborative agreement reimbursement revenue grew 8% to $19.5 million from $18.1 million in previous quarters, primarily due to increased purchases of Erbitux by Merck KGaA for use in clinical trials.

Total operating expense increased 2% to $122.5 million from $120.1 million in the previous quarter.

R&D expense increased 17% to $55.9 million from $47.7 million the previous quarter.

This increase was principally due to cost of clinical trials, including the production of material for these trials, for additional indications of Erbitux and our proprietary pipeline antibodies.

This increase was driven primarily by the cost related to our planned Phase III trials of 1121 B and 11 F8.

We continue to expect that R&D expense for the full year of 2008 will increase by 25 to 30% over the levels reported in 2007.

This is due to increased investment in our clinical trial development of our proprietary pipeline antibodies, with several compounds moving into Phase III pivotal trials over the next 18 months.

SG&A expense declined by 9% to $22.5 million from $24.8 million the previous quarter, which is 13% of total revenues for the second quarter compared to 15% of total revenues for the first quarter.

This decrease is primarily due to the completion of legal work related to the implementation of terms of the (inaudible) settlement in the first quarter of 2008.

We continue to expect a marginal increase in SG&A as a percentage of total revenue for the full year as we prepare for the launches into first line head and neck and non-small-cell lung.

Royalty expense grew 3% to $24.3 million from the $23.5 million in the previous quarter, which is due to increased sales of Erbitux in the United States and the mix in the rest of the world.

Merck sales of product produced by ImClone have a higher royalty burden than sales of Erbitux produced by Merck's European supplier.

This increased royalty is fully reimbursed by Merck and this offset is recorded as collaborative agreement reimbursement revenue.

Royalty expense for the quarter was 5.7% of total global net sales, which is below our previous provided guidance of mid 6%, primarily due to the mix of North American and international sales.

On annual basis, we now expect royalty expense as a percentage of total global net sales of Erbitux to be in the low 6% range.

For cost of manufacturing revenue in the second quarter, we had a manufacturing margin of 7%.

The increase in manufacturing margin versus the previous quarter of 5% was due to a mix of our manufacturing revenue between BMS and Merck.

Second quarter operating income was $44 million compared to first quarter operating income of $42.5 million.

Interest and other income net consists primarily of interest income offset by interest expense.

Interest income decreased by $2.4 million, or 25% as a result of a decrease in interest rates we receive on our excess cash, cash equivalents, which is principally invested in money market accounts.

Because of our concentration of investments in money market accounts, our interest income will continue to track the Fed funds rate and other similar short-term rates.

The Fed fund's average interest rate for the quarter was down approximately 30% on a quarter-over-quarter basis.

This is something to keep in mind when looking at analyst-published estimates on ImClone going forward.

Interest expense, which relates to our $600 million convertible notes, remained unchanged at $3 million.

During the quarter, we reclassified our $600 million of convertible notes payable through a current liability since the notes have a put provision that can be exercised by the holders in May 2009.

Our net income for the quarter had an effective tax rate of approximately 43.5%, which excludes discreet items and is in line with our previous guidance of 40 to 45% for the remainder of the year, which also excludes discreet items.

However, we continue to expect total net cash payments to be less than $2 million for 2008 due to net operating loss carry-forwards, and R&D tax credits we have.

As mentioned in the press release, during the quarter, we took an additional impairment charge of $1.8 million on two auction rate securities in our portfolio that were effected by the recent downgrades of MBIA and (inaudible).

While our auction rate securities could be effected negatively if the current credit market worsens, it's important to note that the market value of our other auction rate securities in our portfolio increased during the quarter.

This increase results in an unrealized gain that does not flow through our profit and loss statements.

Our financial position remains strong, with roughly $1 billion in cash, cash equivalents, and securities available for sale at June 30, 2008.

We had cash flow from operations of $41.4 million for the quarter ended June 30, 2008, and capital expenditures for the quarter were $5.7 million.

I would now like to turn the floor over to Eric to discuss our clinical pipeline.

Thank you, Ken, and good morning, everyone.

Over the last quarter, there continues to be steady progress related to Erbitux in both clinical and regulatory areas, as well as in accelerating the development of ImClone's clinical pipeline.

First, with regard to regulatory activities pertaining to three planned new indications for Erbitux, our partners, Merck KGaA recently announced the submission of a dossier to the European Agency which supports a first line metastatic and recurring head and neck cancer indication based on the extreme study.

ImClone is also on track to submit an SBLA this quarter to register Erbitux with platinum (inaudible) chemotherapy in the United States and the same indication based on the results of extreme.

Since Erbitux demonstrated a robust improvement in survival, as well as improvements in progression-free survival, response rate and quality of life in this undisturbed patient population, a priority review is expected.

Turning now to non-small-cell lung cancer, after validating top line data from the pivotal FLEX study, we have recently had a pre-SBLA meeting with the FDA.

We were pleased that the principal outcome of the meeting is that the design and results of FLEX are felt to be sufficient to support a first line indication for Erbitux in the treatment of metastatic non-small-cell lung cancer, pending review of the actual data by FDA.

Although the pivotal trial in the submission, FLEX, demonstrated that Erbitux improved survival when added to cys-platinum plus, which may ultimately be the regimen included in the label, we will be seeking a broad platinum-based indication based on consistent improvements in all relevant efficacy parameters, as well as acceptable safety profiles following treatment with Erbitux combined with a range of platinum-based regimens, all of which are viewed as essentially equivalent by the oncology community based on a series of randomized trials over the last two decades.

The FLEX results indicate that Erbitux is the only target agent that improves survival in patients who typify those whom oncologists see in their offices every day.

While debate generally outside the medical community often veers towards comparisons of Erbitux and Avastin, such discussions are moot, since Avastin is indicated in only about 50% of advanced lung cancer patients and a much smaller fraction of patients are actually receiving it.

So in essence, these debates are focusing on the relative merits of these agents in a very small proportion of lung cancer patients, whereas the opportunities for Erbitux appear to be much greater as its efficacy and safety profiles relate to a much broader lung cancer patient population.

Now turning to Erbitux and colorectal cancer, the compelling efficacy of Erbitux treatment in patients with K-ras wild type colon cancer was a highlighted at the recent ASCO meeting, during which time over 80 presentations focused on Erbitux, including two plenary sessions that are generally reserved for results that could potentially modify oncology practice.

Perhaps the most important presentations involved the K-ras-dependent results of the Crystal and OPUS first line studies, which evaluated the use of Erbitux combined with (inaudible) and (inaudible) platinum-based chemotherapy.

In these studies, Erbitux plus chemotherapy conferred a 32 to 45% reduction in the risk of disease progression over chemotherapy alone in patients whose tumors lacked K-ras mutations.

Furthermore, the value of selecting patients for treatments based on K-ras status is illustrated by a greater than two to eight-fold benefit of Erbitux when added to chemotherapy in reducing the risk of disease progression compared to its risk reduction in a patient population that is not segregated by K-ras mutational status.

However, perhaps the most compelling and clinically relevant evidence supporting the value of Erbitux in patients lacking K-ras mutations comes from a recent analysis of the National Cancer Institute of Canada's 017 study, which initially supported an indication for Erbitux monotherapy in refractory patients, irrespective of K-ras status.

At the recent world gastrointestinal cancer congress meeting in Barcelona in June, survival was reported to nearly double, that is from 4.8 months to 9.5 months in K-ras wild type patients, with improvements of similar magnitude in both progression-free survival and response rate.

We believe that the future implications of such a striking clinical benefit most notably a doubling of survival in K-ras wild type patients receiving Erbitux include the elevation of Erbitux in importance as a therapeutic option for patients with colorectal cancer, as well as a heightened awareness on the part of practitioners of K-ras mutational status in all colorectal cancer patients before making treatment decisions, even from the time of diagnosis, similar to the need to know a breast cancer patient's estrogen receptor status immediately after initial breast cancer surgery because treatment decisions of major impact will be based on this biological data.

Although it has only been a short period of time since ASCO, it appears that the oncology community is beginning to embrace K-ras testing and new K-ras diagnostic tests are progressively becoming available.

It is clear that the identification of the -- this highly predictive biomarker for Erbitux will be good for patients, increasing the likelihood that they will receive the most appropriate treatment.

In doing so, Erbitux will likely have greater overall penetration and utility in the treatment of colorectal cancer and patients will likely receive Erbitux much earlier in the course of their disease and for longer duration.

Turning for a minute to lung cancer, ImClone and it's partners are also probing biopsy tissues collected from its lung cancer studies to determine if K-ras and other biomarkers relate to clinical benefit in lung cancer patients receiving Erbitux.

At this juncture, however, it is unclear whether K-ras, which is mutated in a lower percentage of lung cancer patients, in the range of 15 to 20%, compared to approximately 35% in colorectal cancer, relates to the clinical benefit conferred by Erbitux and we hope to present concrete data about how K-ras and other potential biomarkers relate to efficacy in our lung cancer studies in the near future.

With regard to registrational activities involving colorectal cancer, we plan to enter into a formal pre-SBLA dialogue with the FDA following availability of mature survival data from Crystal, which is expected in the second half of this year.

Lastly, with regard to Erbitux and colorectal cancer, the original accrual goals have been reached in two large North American and European action studies, as well as the coin study in the United Kingdom, which presents the unique opportunity evaluate the effects of adding Erbitux to chemotherapy on survival in the first line setting.

Since survival of coin should not be confounded by the post-treatment use of Erbitux in the control arm, as Erbitux is not widely available in the United Kingdom.

The end point of these studies, particularly the primary end point of the action studies are being reformatted respectively based on recent knowledge about K-ras.

For example, it is being proposed that the primary end point of the U.S.

study, disease-free survival, relate only to patients with K-ras wild type cancers and then in all comers as a secondary end point.

With regard to the North American study, ImClone is currently working with the cooperative groups, the FDA, and the diagnostic assay company who resume the study to accrue additional patients because of the modified end point and to respectfully validate a K-ras diagnostic test.

Once the study reopens, we anticipate rapid accrual to completion, as accrual has been brisk over the past year.

To wind up discussions on Erbitux, notable progress has been made in advancing several high value clinical trials as well.

Our partner, Merck KGaA recently initiated patient enrollment onto ex-U.S.

pivotal study of Erbitux called the EXPAND study in patients with previously untreated advanced gastric cancer, which can serve to register Erbitux worldwide.

Now turning to the United States, I would like to highlight several new pivotal trials.

First, the RTOG is nearing final activation of a Phase III trial evaluating the addition of Erbitux to chemoradiation in locally advanced esophageal cancer.

And similarly, a Phase III study in locally advanced or stage 3 non-small-cell lung cancer is nearing activation.

This study is based on the results of the large Phase II study, which was presented at ASCO and not only demonstrated a tolerable safety profile for Erbitux plus chemoradiation, but also showed an impressive 50% two-year survival rate, which the RTOG noted as the best-ever achieved in this setting.

Additionally, accrual in an ongoing Phase III RTOG study evaluating the merits of adding Erbitux to chemoradiation in locally advanced head and neck cancers is almost one year ahead of schedule and the RTOG has elected to increase patient enrollment, thereby prospectively increasing the study's power to discern a smaller, albeit clinically relevant improvement in survival.

Lastly, as part of our efforts to perform high value signal-finding studies of Erbitux in other relevant malignancies, we have initiated accrual onto a randomized Phase II study in bladder cancer during the last quarter.

And accrual has also been brisk in other randomized Phase II signal finding studies, including an evaluation of chemotherapy with or without Erbitux in prostate cancer.

In addition to our progress in registrational and clinical activities related to Erbitux, considerable progress has been made again this quarter in advancing our clinical pipeline, currently consisting of five fully human IGG 1 receptor-blocking antibodies towards global registration.

The first antibody whose progress I would like to highlight is ImClone's 1121 B, which in contrast to other VEGF R2-directed therapeutics binds to and robustly blocks signaling through the receptor.

We have now opened Phase II studies in first line melanoma and liver cancer and refractory kidney cancer, all of which are briskly accruing patients.

And over the next few months, additional Phase II studies will begin in lung, colorectal, prostate and ovarian cancers.

In addition, building on clinical signals exhibited by other VEGF inhibitors that would not be expected to inhibit the VEGF R2 receptor as strongly as 1121 B, as well as our confidence in 1121 B ascertained from results in our early clinical studies, such as robust activity and multiple refractory tumors as a single agent in Phase I trials, we are greatly accelerating 1121 B's development by initiated two global Phase III trials within the year.

That is following Phase I studies in cancers that we feel will be quite amenable to VEGF R2 inhibition.

The first Phase III study, which has been granted a special protocol assessment by FDA is an 1,100-patient trial in first line metastatic breast cancer that would be performed by the cancer international research group formerly known as the BCIRG and will begin enrollment this quarter.

The second pivotal trial will evaluate 1121 B in the second line gastric cancer setting, an indication with a much more abbreviated time line.

Furthermore, we plan to initiate additional pivotal trials of 1121 B as soon as possible, if sufficient efficacy signals are observed and are ongoing in planned disease-directed efforts.

Now turning to our fully human IGG 1 anti-EGFR therapeutic, ImClone's 11 F8, ImClone recently completed accrual onto a 44-patient Phase II study of 11 F8 plus chemotherapy in colorectal cancer patients in Europe and presented interim results at ASCO, which included an acceptable safety profile and a 65% objective response rate in patients who were not selected for study participation based on K-ras.

A retrospective analysis of K-ras status is being performed.

ImClone is currently solidifying plans to initiate two global Phase III studies of 11 F8 and colorectal cancer and non-small-cell lung cancer which will prospectively screen the most appropriate patients for treatment based on molecular profiling data, ascertained from clinical trials of other EGFR-directed therapeutics.

We also plan to prospectively validate the screening diagnostic used in the studies and look forward to further disclosing the details of these trials which will start accruing patients in 2009.

Now focusing on our progress with ImClone's A12, which targets the insulin growth factor-like receptor.

We've completed accrual onto our first line prostate cancer study during the past quarter, and ImClone sponsored Phase II studies have been activated thus far in refractory colorectal and head and neck cancer, as well as in soft tissue sarcoma.

Falling right behind these studies are ImClone-sponsored trials in second line prostate, neuro-endocrine, non-small-cell lung cancer and early stage colorectal cancer, all of which will begin in the second half of this year.

We have also been very pleased at the opening of additional National Cancer Institute sponsored trials of A12 in the second quarter, which do not overlap with those sponsored by ImClone.

These include a series of Phase I and Phase II studies in some of the most common solid cancers involving children and young adults, a randomized study in pancreatic cancer, two studies of A12 in liver cancer and a series of Phase I and Phase II studies of A12 combined with the rapid (inaudible) analog.

It should be noted that in addition to ImClone-sponsored studies, at least six to eight ongoing and planned National Cancer Institute trials can serve as foundations for future registrational efforts, including the aforementioned pediatric trials and randomized studies in pancreatic, breast, adrenal, both small and non-small-cell lung cancers and liver cancer, most of which are being performed by the U.S.

cooperative groups.

In addition to these disease-directed activities, ImClone is developing plans for pivotal studies of A12 to begin in the second half of 2009.

Lastly, we anticipate completion in the second half of 2008 of Phase I programs involving 18 F 1, which targets VEGF R1 found on both malignant blood vessels and cancer cells alike, and ImClone's 3G3, which targets the tumor growth factor, platelet drive growth factor alpha and we plan to initiate these disease-directed Phase II studies of both agents in the first half of 2009.

Finally, ImClone is planning to file an IND in the second half of this year for six clinical pipeline candidates, ImClone's EB 10, an IGG 1 human antibody targeting FLT3, which is the most common mutated protein and acute myelogenous leukemia.

We will now open the floor for questions.

Operator?

Thank you.

(OPERATOR INSTRUCTIONS) Our first question comes from Yaron Werber of Citi.

Please go ahead.

Yes, hi.

Good morning.

Thanks for taking my question.

Eric, can you give us a little bit of an update.

In the prepared remarks, you mentioned you've already had the pre-PLA meeting with FDA and you potentially will file for broad label.

I mean how likely is it that assuming approval you will actually get a broad label, assuming that the 099 study let's say is not going to be positive?

And then I have a follow-on.

Yaron, thanks for the question, and good morning.

I think at this point, all of the data, and we certainly are going to strongly make the case for broad label based upon 099's consistently favorable effects of Erbitux on all efficacy parameters, 100 and the other supportive trials, including FLEX, as well as the oncology community's awareness that these regimens are really equivalent and this has actually been confirmed in trials over the last couple years.

And we acknowledge -- however, we acknowledge the fact that FLEX evaluated, and this is our pivotal trials, have always evaluated a single regimen.

So we intend to make that case.

It should be noted that a recent compendia listing, that is Erbitux in DrugDex, listed Erbitux in combination with platinum-containing regimen.

That's certainly an acknowledgement by the medical community of its utility in a broad range of platinum-based regimens.

So I think going forward, we're certainly going to make that case, and I think certainly the results of 099, if positive, would help us make that case.

That is the survival.

And a follow-on question on an F8, can you -- it sounds like you'll start the Phase III studies next year.

Are those going to be in K-ras wild type population and would you contemplate even maybe doing a head to head study against Avastin in (inaudible) patients, given the results of 966.

And maybe just help us understand why not start those studies even this year.

Well, Yaron, I think we'll give further, we'll give further details with regard to the specific populations and whom we will study, but we are really convinced as a company that molecular profiling for EGFR targeting therapeutics is really where we should be going.

And we'll give those information -- those data in the near future.

I think at this point, however, we are, we're seeking scientific advice from various countries around the world.

We certainly have a bit of work to do and we're involved with the initiation of other Phase III trials, for example 1121 B.

So we are really zooming towards 2009 with 11 F8 and I think we'll discuss the details of those trials perhaps on the next one to two earnings calls in the near future.

Great, thank you.

Thank you.

Our next question comes from Eric Smith of Coleman and Company.

Please go ahead.

Thanks for taking my question.

On the K-ras side, I guess another question for Eric.

You mentioned in the prepared remarks that you think it's somewhat still early on the adaptation curve in terms of the cancer community.

Do you have even an estimate of what penetration of K-ras testing might be in colorectal cancer today?

I'm going to actually let John take a stab at that question.

So let's just talk about, a little bit about the K-ras situation following ASCO.

From a macro view, going into ASCO, the overall testing was probably less than 5% of physicians tested some of their patients.

Coming out of ASCO now and according to our market research, we see that occuring in about 20% of the physicians.

That said, they are not testing all of their patients, but what we are very encouraged by is the fact that they are doing this testing real early in the disease.

So as they diagnose patients, they are testing and finding that status out early, which is consistent with our belief that long-term that this is in that positive for Erbitux.

As it relates to awareness, similar to what some of the analyst community have done in their own research, we have seen the awareness issue of K-ras rocket up into the mid-high 90s in terms of oncologists in the U.S.

and we believe that we will see the actual testing continue to increase.

Keep in mind that there will be some reimbursement and potential availability issues in some areas, but that will get worked out over the next 12 months.

Okay, and given that testing has done from less than than 5% pre-ASCO to maybe 20% or so of physicians today, have you seen in your weekly or monthly runs of Erbitux sales any significant near-term negative impact on your share in colorectal cancer or your dollar sales in colorectal cancer?

We have not.

Okay, and then another question for Eric back to the FDA discussions on the FLEX study, I just want to make sure that you seem to have gotten confirmation from the FDA that some of the issues that some have talked about with regard to filability of these data don't seem to be a concern.

So specifically I'm thinking about the lack of a need for survival data from BMS 099, the fact that progression-free survival in FLEX was not positive.

Is there anything that's come up with regard to those discussions that should give us pause for concern that you're not going to go ahead?

What I've said in my prepared remarks, that the FDA recognize the design and results of FLEX and we really need to emphasize that FLEX is the pivotal trial and that overall survival is the main principle end point that the FDA recognizes for the approval of lung cancer drugs in the first line setting.

And based upon the preliminary assessment of design of FLEX and also results of FLEX, we are really gung ho with regard to submitting this file to the FDA.

Of course they have to review the data.

Okay, thanks.

And last question, on 11 FE, is it your belief that ImClone owns 100% of that molecule, or do you think that Bristol has some rights?

We believe that we fully own the molecule.

Thank you.

Thank you.

Our next question comes from Han Li of Stanford Group.

Please go ahead.

Good morning.

My question is for Eric on the FLEX statistical analysis, you mentioned at ASCO analyst meeting that FLEX is using a stratified long rank analysis.

This is versus the end-adjusted long rank analysis commonly used.

Can you give us some color on the difference between the two methods and potential impact on P value?

Hi, Han Li.

Boy, as a clinician, not a statistician, I'll take a stab at that.

I think it's really important also to acknowledge -- and I think as you look at trials like FLEX, it's actually well known that the gold standard in the evaluation and the analysis of such studies is timed to event curves and actually the most conservative and rigorous as well as the primary analysis recognized by the agency and other agencies submission of such data and analysis of such data is the stratified log rank test, which accounts for the stratification factors used.

And that -- and the stratification factors used in the FLEX study were (inaudible) one versus two and stage.

And really, we stratified by those and therefore the log rank test, which is a stratified log rank test is really the gold standard.

We will do -- and it's very conventional to do this in the sensitivity analysis, to gauge the effects of both groups without adjustments in the log rank test, that is an unadjusted test.

But this is in the sensitivity analysis.

So this is a conventional, rigorous, valid approach.

This was prospectively defined and I don't think really there are other approaches to utilize, so we really feel good about this.

Thank you.

Our next question comes from May-kin Ho of Goldman Sachs.

Please go ahead.

Following on the questions about K-ras, can you talk about the European situation?

You mentioned in the U.S.

about 20% of physicians are testing it.

What do you think about Europe at this point and are almost all the patients being treated now the wild type patients?

And then you also mentioned that even though 20% of the physicians testing is not on all patients, how do they decide which patients to test on and how many tests are available now?

I know that you had some discussion at ASCO, but are there more tests now?

Okay.

Let me try to get through these May-kin.

It's John.

First, in Europe, I don't know the exact disposition by country or region.

You would need to get that from Merck KGaA.

I do know that it is north of what we've seen in the U.S., primarily because you now have it within their label.

So you would need to get that specific data from them.

As it relates to how do they decide in how many of their patients are they actually testing at this point, we're not able to discern that through the market research that's been done now.

As you can imagine, we're on top of this issue.

We have a number of waves of market research, and as we get more visibility into that, we'll be happy to give it to you.

What we have got the sense of, though, is that it really is upon diagnosis.

It's not so much once a patient has progressed in the treatment.

It's in the earlier stage at this point.

And -- I'm sorry, I didn't get your last one.

Number of tests available at this point in the call.

Hi, May-kin.

I think that I used to be able to list the number of laboratories and the different types of tests, but now when I think you looked over the last couple of months, there's certainly been a lot of press releases of new testing available as well as new laboratories actually offering these tests.

I think one of the most -- the tests actually are two types, one is PCR, amplified testing, and the other one is actually based on sequencing, and there are a number of tests now, the DSX platform, PCR-based platform is actually I think utilized most commonly in laboratories such as Genzyme, LabCorp are providing these tests, but I think if you did an internet search, there's a whole list of different tests that are now being available.

So we're just basically seeing an explosion in the availability of these tests and in the laboratories that are testing.

When do you think reimbursement would be available?

That, that's hard to say.

You have some reimbursement under a miscellaneous code today, which is probably about half of the cost of the test.

I, I don't want to speculate on exactly when that will be broadly done.

We are supporting those patients that are getting the tests through a foundation that has been set up.

We're supporting this in a number of different ways.

I don't want to get into all of our different strategies and tactics.

This is clearly something we're embracing and not resisting.

Thank you.

Our next question comes from Maged Shenouda of UBS.

Please go ahead.

Hi.

Thanks for taking my question.

You're making great progress on your pipeline products.

The flip side of this obviously is a surge in R&D spend.

Are you considering partnering your products any time soon?

We have always had that as a consideration.

Clearly, we are in a very strong position right now with our pipeline.

As Eric has mentioned, we are moving rapidly towards next year, having three products in multiple different types of Phase III trials, so we're open to those kind of arrangements.

We have at this point opted to go it alone, but it's something that will always be part of the strategic considerations that the board will review.

And then just a quick follow-up on the MS 099, any update on the timing there, survival?

Right, right now we have not (inaudible) events that is in the secondary end point and again, CMS 099 was not a pivotal trial.

It was a PFS-driven trial.

Secondary end point survival is not very well powered actually to demonstrate a clinically relevant difference in survival.

But we're waiting for maturity of events, and I -- we expect that we will reach the timing (inaudible) events in the second half of this year.

Thank you.

Thank you.

Our next question comes from Geoffrey Meacham with JPMorgan.

Please go ahead.

Hi, guys.

This is Terry filling in for Geoff today.

Thanks for taking the question.

In your initial discussions with FDA, have they given any indication that they will require K-ras data to be included for the lung cancer filing?

No, not at all.

In fact, I would not anticipate that the FDA would require that whatsoever.

Usually when they are prospectively defined exploratory tests in the study, we would generally submit that as part of our study report, but definitely not for K-ras in lung cancer at this point.

And we don't plan on submitting it, unless, unless we'll -- we're doing the analysis and certainly if intriguing data really becomes apparent, we will always discuss this with FDA as far as the path forward.

And we plan to do that.

But in lung cancer K-ras, the instance of K-ras mutation, we're talking about 15 to 20%.

It's really unclear at this point whether or not K-ras is going to really confer directionality with regard to the clinical benefit of the agent.

Lung cancer and colon cancer are very different diseases.

You have to -- there's certainly going to be parameters that pop up and biomarkers that pop up in lung cancer, but -- and we're going to be looking strongly for those parameters.

But the answer to your question is, no, we will not be submitting K-ras data to the FDA.

Okay.

And just a quick follow-up, just on the pharmaco-economic issues that were raised during the discussion at ASCO, I'm just wondering what the sort of initial strategy is to address some of those concerns as you prepare for a lung cancer launch.

As we look at it right now, given what we have seen in the market with utilization, we don't believe that there would be any major change in our current pricing.

Pricing is the responsibility of BMS, however, in our relationship.

Thank you.

Our next question comes from Howard Liang of Leerink Swann.

Please go ahead.

Thank you very much.

If I could ask a commercial question on non-small-cell lung cancer, you talk about the compendium listings.

Should we expect to see commercial pick-up from those or shall we wait for approval?

Great question.

This is John.

Let me give you a little bit of an overview on this.

If you look broadly at this patient population, you're going to see about 50% being private and 50% being public pay.

Let's talk a little bit about what's going on in the private pay area first.

Following ASCO, we have found that the majority are going through a prior authorization process with regards to physicians that call in with their lung cancer patients.

They are reviewing these patients on a case-by-case basis for coverage.

Today through our reimbursement services program, we are only aware of one claim which has been rejected at this point, and that is now being appealed.

On the public pay side, as I said in my prepared remarks, CMS has just announced a compendia that were recognized.

It's kind of a unique year.

Two of the four now cover Erbitux, but I think -- and I should mention, two, the other two are being under review.

That was in my remarks.

I should recognize that what's really important is when the local coverage decisions occur by the Medicare carriers.

We may see some instructions given to them by CMS, but I think what would really change the uptake is if you begun to see local coverage decisions being implemented, because today it needs to go through an appeal process on the public pay side.

And what were those local decisions be made, I guess the treatment recommendations being made?

Those evaluations are ongoing and I don't want to speculate on when they might occur, which is why we've taken a little bit more conservative view at this point.

Thank you.

Our next question comes from Katherine Kim of Banc of America.

Please go ahead.

Yes, hi.

Can you hear me?

Yes, we can, Katherine.

Okay.

Just a follow-up, so basically on the compendia listing for CMS recognition, so what percentage of, I guess I'm trying to figure out what percentage you utilize the two that basically are now covered versus the two that are not.

Is there any material difference between the different compendias?

Well I think, Katherine, like I said in my last remarks, it is a very unique year in that you just have these four be recognized, the three additional ones be recognized.

And so to try to get any sense of which carrier is leaning on which, when we haven't seen any local coverage decisions across the board as it relates to this, would just be speculation.

So we'll stay away from that.

But as you can imagine, this is something that both ourselves and our partners at BMS are on top of.

We are certainly going to support the carriers with any data that they might request and as we see this play out, we'll be happy to provide an update in future calls.

And I guess I would also say, Katherine, that a carrier does have the choice to use any of the four, but we just don't have any update at this point in time.

Thank you.

Our next question comes from Steve Harr of Morgan Stanley.

Please go ahead.

Couple questions.

First, what are your current -- what's your estimate of either current market share or actually current sales in non-small-cell lung cancer?

It's very small at this point in time.

Rough -- yes, I would say roughly 2%.

2% of sales or 2% market share?

Both.

Okay.

On the 11 F8 question, you said that it's your view that you own the rights.

What's Bristol-Myers' view on this?

You would have to ask them.

Okay.

So that hasn't been clearly delineated?

We believe that we own the rights.

Okay.

Then last question on Japan, the 25% profit split, I didn't get the royalty.

Is that royalty go to -- do you have any offsetting royalties you need to pay that offset the portion of 4.75%?

Steve, there are some royalties.

I would characterize them as low single digit.

Great, thank you very much.

Thank you.

Our next question comes from Stephen Willey of Thomas Weisel Partners.

Please go ahead.

Yes, hi, good morning.

Just a quick question.

If you could maybe give us an update on where we are in terms of second line colon, especially with respect to the Epic data.

I assume this has been submitted in addition to the Crystal for the compendia?

We actually have compendia listing in DrugDex.

We've announced that in the past for earlier lines of therapy, which really covers second line therapy.

At this point, our plans are with regard to the regulatory arena, as stated in the prepared remarks to submit Crystal, buttressed by a variety of other studies including Epic in that submission and of course Crystal being the pivotal trial with a progression-free survival end point that we've met, we're basically waiting for the full package that is the survival end point and we'll submit that from a regulatory standpoint.

We've also submitted applications to a variety of other compendia with respect to colon cancer, early colorectal cancer data that includes patient population that are K-ras-dependent and general based on the study.

And has there been any update on when we might see FLEX publication?

We are in the process, or I should say our partners Merck KGaA leading those efforts getting that publication developed and they are going to be submitting as quickly as possible.

But I can't give you any more definition with regard to those dates.

Great, thanks.

Thank you.

Our next question comes from Brian Rye of Janney Montgomery.

Please go ahead.

Good morning, guys, and thanks for taking my question.

Just one at this point.

I'm sort of curious, post-ASCO, now that you've had a couple of months to review some of the data, what your thoughts are on I guess the concept of maintenance therapy after the first line therapy in lung cancer.

Obviously in the wake of the (inaudible) data also waiting on data, pivotal data from I guess a (inaudible) study, then oral EGFR inhibitor and given that I guess Tom lynch, who was the discussant following the FLEX presentation in this last concluding slot specifically mentioned the possibility of Erbitux being I guess used in the maintenance setting following its use in combination with chemotherapy.

Is that something that ImClone would want to try and take advantage of, either with additional clinical studies or sort of take a wait and see approach?

I guess I'm sort of curious about your thoughts about the concept more than anything else.

Brian, that's a great question.

You're right.

I believe the medical community is really embracing the recent data from the (inaudible) data and other biologics, for example (inaudible) and you should note that the FLEX trial did include maintenance, or we should say post six cycles of therapy, Erbitux.

And I think the community is really taking this, they are really taking the upper hand and utilizing this maintenance chemotherapy prior to data being available.

But we are going to be looking at FLEX with regard to the utility of that maintenance space and 099 also had a maintenance space and will ImClone be doing other studies?

Certainly.

That is a high priority.

And we are going to really be concurrent with the medical community's interest and the intriguing data of other companies really embarking in that direction.

Okay, thanks, Eric.

We're coming to the top of the hour, so we'll be able to take just two more questions.

Thank you.

Our next question is from Yaron Werber of Citi.

Please go ahead.

I just had a quick question, just a housekeeping question, Bristol reported slightly lower sales than what you are reporting in the U.S.

Can you give us the difference, is it due to Canada?

I would imagine it would be due to Canada because we report all of North American sales.

And we also have Guam and Puerto Rico in ours as well.

Thank you.

Our final question comes from Howard Liang of Leerink Swann.

Please go ahead.

Thank you very much.

Just on the design of the trials of 1121 B, I would assume the breast cancer trials primary end point would be progression-free survival and also can you talk about rationale for gastric cancer?

Thanks.

Hi, Howard.

The breast cancer study we've disclosed that and I'll talk about that, progression-free survival is the primary end point.

We've come to an agreement with the FDA in the form of a special protocol assessment that focuses on that end point.

And that end point is -- as you know, is a tricky end point and in order to have your trial focused on progression-free survival, it really has to be designed the right way.

And the right way meaning a placebo-controlled trial or a trial that evaluates progression-free survival similarly or identically in both arms of that trial.

So our study is basically (inaudible) plus 1121 B versus (inaudible) and placebo and we anticipate that that trial will put the first patient on this quarter.

In addition, with regard to your question on gastric cancer, I would like to leave the details of that study for another -- maybe a subsequent earnings call.

But nevertheless, the rational for that study is multi-fold.

Number one, there really have been intriguing data with regard to other VEGF R2 inhibitors in patients with gastric cancer, including those inhibitors that target the receptor and those inhibitors that target the (inaudible) itself.

Gastric cancer, there's a lot of data on gastric cancer and the biology really indicates that the VEGF access is really turned on substantially, maybe even more than most other tumors.

And number three, we have preliminary data from our early Phase I trials with several patients having clinical benefit, including objective clinical benefit in terms of major responses.

So we feel that this is certainly one way of accelerating 1121 B's development and these patients are also relatively fragile and we think 1121 B safety profile is going to be quite compatible to this indication and the types of patients there.

Well, I would like to thank everybody for joining our call today.

It certainly was a solid quarter for ImClone, with Erbitux.

We're coming off of a great ASCO, where a lot of very important data was brought forward to benefit cancer patients that are struggling with this difficult disease.

And we were especially pleased as well with the progress of our pipeline and how that has moved along and now taking our first monoclonal antibody other than Erbitux into Phase III and certainly two more antibodies getting ready to go into Phase III.

So thank you for your time.

We look forward to updating you on our progress next quarter.

Have a great afternoon.

Thank you.

This concludes today's ImClone Systems 2008 second quarter earnings release conference call.

You may now disconnect, and have a great day.