Medarex, Inc. Q4 2008 Earnings Call Transcript

Medarex, Inc. (MEDX)

Q4 2008 Earnings Call Transcript

February 25, 2009 at 4:30 pm ET

Executives

Laura Choi - Director of Investor Relations

Howard H. Pien - President, Chief Executive Officer and Director

Christian S. Schade - Senior Vice President, Finance and Administration, CFO

Geoffrey Nichol - Senior Vice President, Product Development

Nils Lonberg - Senior Vice President, Scientific Director

Analysts

Matthew Roden - JPMorgan

Analyst for Sapna Srivastava - Morgan Stanley

Jason Kantor - RBC Capital Markets

Jason Zhang - BMO Capital Markets

Steven Levy with Thomas Weisel Partners

Mark Monane – Needham & Company

Unidentified Analyst

Eun Yang – Jefferies & Company

Presentation

Operator

Good afternoon ladies and gentlemen and welcome to the Medarex 2008 fourth quarter and year end financial results conference call. My name is Emanuel and I will be your conference coordinator today. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of this conference call. (Operator Instructions) As a reminder, this conference call is being recorded for replay purposes.

This time, I would now like to turn the call over to Laura Choi, Director of Investor Relations, please go ahead.

Laura Choi

Hello everyone and thank you for joining us to review our fourth quarter and full year 2008 results. This afternoon I am joining by Howard Pien, our Chairman and Chief Executive Officer and Chris Schade, our Chief Financial Officer. Howard will review our business accomplishments and milestones, and then Chris will take you through our 2008 financial results and provide guidance for 2009. Following their prepared remarks, we will also open up the call for Q&A where we will also be joined by Geoffrey Nichol, Senior Vice President of Product Development as well as Nils Lonberg, Senior Vice President of Research.

But before we begin, let me read through our legal disclosures.

The matters discussed during this conference call may constitute forward-looking statements, including statements about our future plans and prospects, business strategies, product development and opportunities, and financial positions. These statements are estimates based on current expectations and involved risks and uncertainties that could cause them to differ substantially from actual results. Please refer to the important risk factors discussed in our filings with the Securities and Exchange Commission.

All forward-looking statements included in this conference call are based on information available to Medarex only as of today, February 25^th, 2009. We do not assume any obligation to update any information contained in these materials. I would also note that during the call non-GAAP financial measures may be used to provide information pertinent to our ongoing business performance. These measures are reconciled to the GAAP financial measures and are available on Medarex’s website at www.medarex.com in today’s press release.

I will now turn the conference call over to Howard.

Howard Pien

Thank you very much Laura and good afternoon to everyone and thank you for joining us on this call. Year 2008 was an eventful year with significant progress for our Company and with many achievements that place Medarex well positioned for the future.

Our business strategy is driven by our commitment to execution and governed by financial discipline. Against the backdrop of uncertainties and a macro environment, we have been careful in balancing our spend rate with the promises of our abundant opportunities. As Chris will elaborate further when he details the financial year, we exited 2008 with a strong balance sheet. We maintained a burn rate that has been steady over several years while exhibiting great efficiency in advancing programs into later stages and bringing in new candidates into development.

We also strengthen our cash resources with the addition of approximately $150 million by monetizing a part of our equity ownership in Genmab. Our financial strength is the foundation that supports our plans. Our commitment to execution and financial discipline will continue to guide us in business decisions that we make and the strategic opportunities that we pursue.

Year 2008 was also a year of important progress for anybody’s generated from our UltiMAb technology, both for products in our own expanding portfolio as well as for those products under development by our licensing partners; and before we review Medarex’s own pipeline achievements for 2008 it is worth noting the major regulatory milestones made by our licensing partners including perhaps most notably the approval of Centocor, Stelara for the treatment of psoriasis, first in Canada in December and then subsequently launched in Europe early this year.

As the very first antibody generated from the UltiMAb technology platform to receive approval and reach the market. Stelara is a validation of our antibody technology as a powerful platform for generating therapeutics, addressing underserved medical needs. We wait with great anticipation for the approval of Stelara in the US, as we also wait for the regulatory progress in the US and Europe where there is a second antibody in development golimuMAb for the treatment of multiple inflammatory diseases, including rheumatoid arthritis.

We are proud of how far we have come with translating our UltiMAb technology in producing meaningful and important therapeutics. Another distant future, we hope to see Novartis [imatinib] approved for autoimmune diseases and the Genmab and GSKs Arzerra approved for chronic lymphocytic leukemia.

As antibodies continue to grow as a source of breakthrough medicines for many diseases, we believe that our technology will continue to play a prominent role. All the programs and development by our licensing partners usingthis technology, one UltiMAb antibody has now successfully reached the market, three UltiMAb antibodies await market approval, at least one UltiMAb antibody is now in Phase III trial and over 25 more are in Phase I or Phase II clinical development. As this and other additional programs progress to its commercialization we will continue to benefit from our licensing partnerships through the receipt of milestone payments and royalties.

Medarex has moved beyond our excellent technology platform and has significantly progressed on our own portfolio products. In 2008 was a year in which our development efforts in multiple programs begin to yield fruit with proof-of-concept data. We also steadily strengthened our pipeline with new IND filings.

The most recent positive proof-of-concept study was our Clostridium Difficile Program with a pair of antibodies, known as MDX-066 and MDX-1388 with top line Phase II data unveiled late last year. With our partner, MBL, we are currently in the process of requesting a Pre-Phase III meeting with the FDA to discuss the regulatory pathway forward and concurrently we have been in advanced discussions with the multiple third party companies interested in furthering this program. Since we are now in receipt of several term sheets that look strong and attractive, it is now more likely than not that we will decide to partner out this asset rather than progress to Phase III by ourselves.

Let me also quickly highlight the expected progress of our seven unencumbered products. The first is our antibody to IP10, also known as MDX-1100 with which Phase II trial was initiated last year in rheumatoid arthritis and ulcerative colitis. We expect our independent data monitoring committee to review interim proof-of-concept data from these trials by around mid-year and provide guidance for how we will conclude these studies. Also in development is our CD19 antibody known as MDX-1342 with which we have observed the B-cell depletion in rheumatoid arthritis. We expect to reach pharmacologic proof-of-concept with the ongoing Phase I trial in rheumatoid arthritis in CLL later this year. We are also looking forward to starting a Phase I study with a subcu-dose formulation in rheumatoid arthritis this year.

Our MDX-1401 is a second generation CD30 antibody for Hodgkin’s lymphoma. A Phase I trial is the ongoing following last year’s IND filing. We presented a positive preclinical data at the ASH Conference last year and expect to present interim Phase I data at the AACR Conference this coming April. We remain on track to reach multi-dose pharmacologic proof-of-concept next year.

Our antibody to PD1 also known as MDX-1106 is an ongoing Phase I development for cancer and for hepatitis C. We expect to present complete data from the single dose Phase I oncology trial at this year’s ASCO Conference in June.

Targeting the same signaling pathway is as MDX-1106 is MDX-1105, our PD-L1 antibody, antibody to the ligand of PD1. Enrollment remains on track in the ongoing multi-dose Phase I trial, also in solid tumors with interim Phase I-B data expected in the first half of 2010. Also in clinical development are two antibodies targeting a CD70 for oncology indications, the first is MDX-1411, a naked antibody now under development in multi-dose Phase I trial for renal cancer and for lymphomas. The other candidates targeting CD70 is MDX-1203, our first antibody drug conjugate. The IND was recently accepted by the agency in March. Our milestone for successfully extending the ultimate platform into the increasingly promising realm of antibody drug conjugate, and the enrollment in the Phase I renal cancer trial with this candidate is expected to begin by mid-year.

Let us now update you on ipilimumab. As you recall earlier in 2008 we and our partner Bristol-Myers Squibb had hoped to file for accelerated approval in second line melanoma but it was not meant to be. From the discussions with the FDA, however, it was clear that the path forward will be based on the overall survival data, in first line treatment of melanoma, from the Phase III trial known as study 024.

As you know, patient enrollment in that trial was concluded in the first quarter of 2008. The projection for when the requisite number of mortality events will be reached in order to unblind the data is late 2009. Our enthusiasm for the promise of ipilimumab remains undiminished.

Let me remind you that the initial overall survival data from the broad Phase II second line treatment for melanoma will be presented a last year’s ASPO meeting in late spring and then updated for the ASM Meeting in the fall. The data showed and continued to show a strong trend in a dose response survival groups and also an overall survival benefit of one year survival rate of approximately 50%, which is twice that will be expected of chemotherapy.

We and BMS will continue to collect periodic sweeps of the overall survival data from the Phase II program as we believe that this is the most powerful indicator of clinical benefit for a novel immuno oncology drug beyond that of just looking at durable responses in disease control rates. We expect to provide updated survival data from our melanoma population at this year’s ASCO.

BMS and Medarex are continuing to develop ipilimumab for other indications. A randomized double blind Phase III trial known as study 043 is designed to compare ipilimumab against placebo following radiotherapy in patients that have progressed during or within six months worth of administration of Taxotere and we look to the overall survival rate as the primary input. Enrollment is expected to begin in the second quarter.

In addition of trial to note with IPI is the IPI chemotherapy combination Phase II study in lung cancer known as study 041. Enrollment for over 400 patients with either non-small cells or small cell lung cancer was initiated in the first quarter of 2008. Enrollment in a non-small of small cell lung cancer portion of the study was just recently completed and enrollment in a small cell lung cancer portion of the study is expected to complete later this year.

Just as we are moving ipilimumab beyond melanoma we have moved Medarex beyond our technology. Medarex possesses one of the most promising pipelines of any partner asset for a Company of our size. In 2009, portends a year in which we expect to attain many important milestones, just to quickly recap.

We expect to reach Phase II proof-of-concept for MDX-1100 in ulcerative colitis and rheumatoid arthritis this year. We expect to attain pharmacological proof-of-concept with B-cell depletion with MDX-1342 in rheumatoid arthritis and CLL this year. We expect to present interim MDX-1401 Phase I Hodgkin’s lymphoma data AACR this coming April. We expect to present Phase I oncology data for MDX-1106 at ASCO in June. We expect to initiate a clinical trial with our first antibody drug conjugate this year and we expect to have our pipeline refilled with at least one more new IND filing this year.

The output and the depth of our pipeline provide us with multiple strategic options pointing toward significant commercial markets, and we will strategically pursue partnership opportunities in order to balance the promise of these assets against our significant but not unlimited financial resources, and that in a nut shell is our strategic posture.

At this point, I will turn over the call to Chris to review our numbers.

Christian Schade

Thank you Howard and first I would like to review the 2008 results. For the full year 2008, we reported revenues of approximately $52.3 million at the upper end of our previously discussed revenue guidance of $48 million to $52 million.

Our contract in licensing revenue was slightly higher than 2007 at $36.3 million, and revenue associated with product development reimbursement from partners was lower in 2008 compared to ’07 had approximately $16 million.

Total R&D expense for 2008 of approximately a $194.9 million included $1.5 million of noncash expense related to our ownership in Celldex and $10.6 million of noncash expense associated with stock-based compensation. Excluding these two items, total R&D spent on a non-GAAP basis was $182.8 million while within a range of our original guidance of $175 million to $185 million for the full year.

We have reported G&A expense for 2008 of $44.4 million and excluding $1.7 million of noncash expense attributable to Celldex and $11.5 million of noncash stock-based compensation expense. Our non-GAAP G&A expense of approximately $31.2 million was at the lower end of our guidance for G&A of $31 million to $35 million.

All told, excluding the noncash charges relating to our accounting for Celldex, stock-based compensation, impairment loss on investments in partners, and a gain recorded on the sale of Genmab stock, we reported a non-GAAP net loss of approximately $149.9 million, or approximately $1.17 per share.

As always, it is important to be vigilant over our cash resources while maintaining important productivity in our research and development activities. Back in July, we provided updated cash burn guidance for the full year of 2008 of approximately $12.4 million per month which included approximately $9.5 million per month of operating cash burn associated with continued investment in our pipeline and product opportunities, and approximately $2.9 million per month associated with our net contribution to the ipilimumab program.

The actual cash burn for the full year 2008 was below the original guidance at approximately $12.2 million per month, and consisted of approximately $9.7 million per month of operating cash burn and approximately $2.5 million per month of net cost associated with the IPI.

The operating cash burn rate, excluding ipilimumab of approximately $9.7 million is roughly similar to comparable burn rates for the last four years, and clearly demonstrates the efficiency we have developed throughout the organization to move multiple product candidates from research, to our manufacturing group, into clinical development, and through to clinical proof-of-principle. The $2.5 million per month for ipilimumab is in line with our previous guidance and is largely the same as we spent in 2006 and 2007.

Our year end 2008 headcount decreased to about 490 from 500 in 2007 and that would now at nearly 85% of this workforce is devoted to our R&D activities.

Finally, we ended 2008 with approximately $354 million in cash, cash equivalents and marketable securities in addition the combined value of our equity interest in Genmab and Celldex was approximately $126.7 million as of December 31^st, 2008.

Now let me turn to the 2009 guidance. We are clearly very pleased with our 2008 financial results in a progress of our maturing critical pipeline. The goal for 2009 will be to continue to invest in our exciting research pipeline and support clinical development of multiple proprietary programs including ipilimumab.

As in previous years, we will provide guidance on a net cash burn. We expect the amount net of any noncash adjustments necessary to support our robust and maturing critical pipeline for 2009 and excluding the costs for ipilimumab to be approximately $9.8 million per month.

This ex-IPI operating cash burn is approximately the same as our average burn rates for the past few years, and represents our consistent execution in financial discipline when investing at our research and development efforts. We have been focused on advancing our Phase II with Phase I pipeline to currently include 11 strategic product assets beyond the ipilimumab program.

In addition to supporting this pipeline, we currently expect to spend an additional $2.6 million per month in cash burn on the continued development of the IPI. In total, annual cash burn for 2009 is expected to be about $12.4 million per month or approximately $149 million for the full year.

The components of this cash burn in 2009 are as follows. We expect total revenues for ’09 to be between $48 million to $53 million; total R&D expense to be between $175 million to $185 million; G&A expense to be between $30 million to $35 million; net interest income of $6 million; CapEx to be approximately $8 million; and depreciation amortization of approximately $13 million.

These estimates do not include our noncash charges associated with the accounting for our ownership in Celldex nor do they include noncash stock-based compensation expense under FAS 123(R) which we currently expect to be approximately $19 million to $23 million.

Finally, we currently expect headcount in 2009 to remain unchanged from 2008 at around 490.

At this point, I would like to begin the Q&A part of the call and I would remind the listeners that we are joined by Geoffrey Nichol, Head of Product Development and Nils Lonberg, the Head of Research.

So, with that, Operator, I will turn it over to you.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from the line of Matthew Roden - JPMorgan.

Matthew Roden - JPMorgan

First the question on MDX-1100, could you talk a little about the DSMB interim analysis mid-year, would we expect to hear anything about the specific data there? Would that be top line release or is there any chance of full data at medical conference this year?

Geoffrey Nichol

Yes, Geoffrey Nichol here. The first here is these approved concept studies, one on rheumatoid and one on ulcerative colitis. We structured this so that we would have an interim analysis of a patient who abruptly half the patient in each study, with a couple of options from that. One is to actually expand the studies at the interim data is very promising to dose ranging in which case we would tell you that or to just simply wait the conclusion of the studies which will happen in mid to second half of the year. The third option is that the studies may well need to enroll a few more patients based on an assessment of the conditional power of the interim.

Many of these Phase II-A studies have been problematic because the placebo rate has been misassessed or whatever. So, we have had the DSMB gives us some advice on that. So, the earliest you could hear might be towards mid of the year and certainly by the end of the year.

Howard Pien

Our goal, Geoff, would be to put out as much data as we can in order to announce that perhaps if we reach proof-of-concept and also to preserve the ability to submit data to a scientific conference, but when it is available, we will make it available.

Matthew Roden - JPMorgan

Okay, and then just quick follow up on that. If the data are encouraging in support of further development, should we assume that you would explore strategic options for the asset following the Phase II data or is there any discussion at all of carrying internally for the development?

Howard Pien

I think the answer there is, see, all of the above. Clearly, we will look at the data if there are interested partners, we will clearly discuss with them the opportunities to move forward and then we will also look into clearly doing it ourselves. So, as in every decision we make on the proof-of-concept study they are data dependent, and so receiving positive data will of course there are several partnerships in the program and the maturity of the data and we got that and we will make some decisions on a go-forward basis.

Operator

Your next question comes from the line of Sapna Srivastava - Morgan Stanley.

Analyst for Sapna Srivastava - Morgan Stanley

Hi, it is Dave calling in for Sapna. Just curious how you are thinking about the development for the PD1 and PD1 ligand, are you planning on going into Phase II before you start getting some of the outcomes data for the CTLA-4 program and if you are, can you talk about any of the things that you have learned from the CTLA-4 program that you think will help guide the development of PD1 and PD1 ligand?

Geoffrey Nichol

Yes. Dave, it is Geoff Nichol. That is kind of a big question. PD1 is similar checkpoint target at CTLA-4 and also synergizers with it and clearly therefore what we have learned from the CTLA-4 program in general terms that activity cannot clearly be seen the first week of month, but in some patients that may take a little longer, but patients can progress initially and then show subsequent activity of the drug and also some of the bioMAb type data that we have been evaluating along with BMS with CTLA-4, things that we will be looking at very closely with the PD1 and PD-L1 programs. I cannot really speak to the impact of CTLA-4 data on going forward with the PD1 program. We are seeing them at the moment as being pretty much independent programs with there own outcome assessments and that would be pretty much what I have said at this point.

Analyst for Sapna Srivastava - Morgan Stanley

Okay, and just quickly, I mean, do you think that the way you look at response rates, I know there has been sort of an evolving discussion about how to think about response rates with immunotherapy. I mean are you going to try to apply any of these sort of new concepts to the development of those programs or do you think you will stick with some of the more common, like resistor who criteria that may not sort of fit these drugs as well?

Howard Pien

We will be looking at it both ways, Dave, and that is what we did with IPI and that is what we will do with these programs but we will certainly be looking both ways at this.

Analyst for Sapna Srivastava - Morgan Stanley

Thank you.

Nils Lonberg

The big picture on these programs as far as PD1, of course we are developing it. First, for monotherapy, which is our ongoing Phase I trial and then we will look at combination of PD1 in conjunction with CTLA-4 which requires, Geoff correct me, which requires a different IND and we are in the process of preparing for the combination IND. So, that program, we hope to start the combination program this year. The PD-L1 is clearly a year, they are about behind PD1, and so our hope in the course of 2009 is actually to have that enough Phase 1 on patients and PDL-1 to begin to assets how this that we may be able to distinguish PDL-1 from PD-1. So it turns out they are really three R’s to the fire with these two programs. There is [40:24] therapy for PD-1, there is the combination for PD-1 and CTRA-4 and then there is the distinction that we hope to make between PDL-1 versus PD-1.

Operator

Your next question comes from the line of Jason Kantor - RBC Capital Markets

Jason Kantor - RBC Capital Markets

You mentioned for the CDIF program that you are entertaining multiple term sheet I am wondering if you can give us a sense of what you will be looking for in a partner? What range of terms or responsibilities you might be looking at there and I guess a broader question, what is the threshold for you to consider keeping a program for full development at Medarex?

Howard H. Pien

We probably should not change the outcome of any of these discussions by telling you very precisely what it is that we are looking for. Suffice it to say that we have a thorough set of homework that we have done to do market research and do sales forecast and then of course we are going through the analytical process of figuring out how much we would likely have to spend on our own for successful Phase III program and then we do the standard probability adjustment to arrive at a net principal value associated with the decision of doing this program on our own in conjunction with our partner NBL.

And we stock that against the various term sheets that we have seen and make an assessment as to the minimum amount of the value that we would expect to see in such deals and I am not going to be able to characterized it anymore that what we did before which is to say that we have notable term sheets. It looks strong and they look attractive and therefore we are now in the process of conducting further discussions and it looks more likely than not as we said before and because of the strength and the quality of this term sheets that we would end up making the decision what if the negotiation completes on course in a way that we currently envision that it would be more likely than not at this asset we go to a third party.

Jason Kantor - RBC Capital Markets

Now would you have to retain any aspect of commercialization rights or these types of things?

Howard H. Pien

It is not the current framework of the discussion that we think of commercialization right. We look at this assets with a great deal of attachment that the attachment does not extend beyond our calculation in our strategic analysis that have much we should focus versus diversify our therapeutic area interest as it is. We have a multitude of assets in our pipeline and as it is we have already therapeutic area interest into important and challenging and exciting therapeutic areas namely on Oncology and all the immune disease and the idea that we would cover yet a third area in infectious disease maybe would just a little too far a stretch. So it has nothing to do with our assessment of the commercial product prospect of this candidate but it has everything to do with trying to impose some degree of discipline because we do not want to have a reach that is in excess of our grasp. So if indeed the value of the deal as we finish negotiation is in excess of how much it will be for our self then we will let it go.

Operator

Your next question comes from the line of Jason Zhang - BMO Capital Markets

Jason Zhang - BMO Capital Markets

You mentioned once in a while [043] if I am not, so that is a [47:18], right?

Howard H. Pien

That is right.

Jason Zhang - BMO Capital Markets

Okay so you are going to start enrolment in the second quarter this year. Can you tell us how many patients will be in that trial?

Howard H. Pien

We are still forming up that discussion with the agency. Preliminary estimate would be that as more of a hundred patients but that decision has not been discussed.

Jason Zhang - BMO Capital Markets

So I will be just EPE versus placebo in patient after radio therapy?

Howard H. Pien

Yes, Jason, the color design is to have a background of radio therapy.

Jason Zhang - BMO Capital Markets

Also is that in combination with…

Howard H. Pien

Yes and then EPE randomized Placebo on top of that.

Jason Zhang - BMO Capital Markets

Okay that is very good and then the status of 041, you said the non small cell lung cancer portion will probably complete enrolment late this year. Can you remind us the primary end point of this one and how is it going to be assessed, based on what if you do decide to go forward?

Howard H. Pien

Yes the primary end point is progression free survival and then we will also obviously be following patients for over all survival but Phase II read out will be based on progression free survival in the first instance.

Jason Zhang - BMO Capital Markets

Okay and then just quickly, I guess the $11, 000 you said you will have a proof of concept read out in term. Do you have a pre set hurdle of how much the response rate have to be higher than placebo to be regarded as a proof of concept.

Howard H. Pien

I am not going to share the precise detail but what we did is we clearly looked at what was out there in the market place. What the kind of ACR-20, 50, and 70 response rates needed to be. For example in rheumatoid arthritis it will be combined score assessment in ultra colitis. We also looked at the kind of range of potential placebo rates that we would see and designed our studies to achieved over the level that we thought would be successful on the market place and would be then statistically distinguishable from the placebo rights. So that is probably the approach that we took and certainly when we reveal the data at a scientific meeting you will be able to see the background to that statistical analysis

Jason Zhang - BMO Capital Markets

So you have a have about a 100 patient for the entire file or are the100 patients for each indication. I know you have…

Howard H. Pien

It is approximately 100 patients in the ultra colitis trial and about 70 patients in the rheumatoid arthritis trial but as you know and as commonly being observed in these studies, people often kick them selves for stopping studies too early and when the placebo right is somewhat higher for example than they have expected when they additionally designed the study so that is what some of this interims come in to protect us from that possibility to insure that the file we have projected when we started the study is likely to be preserve at the end.

Jason Zhang - BMO Capital Markets

And for each indication is that 1 to 1 randomization or it is actually..

Howard H. Pien

Yes its 1 to 1

Operator

Your next question comes from the line of Steven Levy with Thomas Weisel Partners

Steven Levy with Thomas Weisel Partners

I have a question with respect to the updated overall survival data from the Phase II program, was there anything in the baseline characteristics of those patients that you guys have been able to go back in to kind of pick through whether be a performance status or I guess LDH levels or mode of previous therapy that make you guys stands out?

Howard H. Pien

In the 024 study itself, it sounds in Phase II we have a looked at that. We appear to have activity almost irrespective stage and TNF, LDH status and the overall survival of patient in the Phase II clearly parallel that of features noted to affect overall survival in melanoma. We are obviously following as many as the patient as we can to collect much bio marker data as we can and we also have additional studies that we are following patient characteristics and look for bio marker data. So that as far as what we are doing and we have presented biomarker data in the past [Inaudible] and we will continue to update you when we get additional data.

[Steven Wyley with Thomas Weisel Partners]

And then I am just thinking about the drug strategy in terms of partnering. Are you guys going to be willing to supply the linker and the pro-drug to the potential partners who come in with external antibodies and I guess would we see terms that are similar to what we see with the UltiMAb technology now?

Howard H. Pien

Yes, we would not able be to provide a technology platform to potential partners. Our goal would be to bring in commercial partners and to share both our pipeline. We have a pipeline of this potential products which we are looking to develop in the future as well as perhaps provide the technology to other partners who might bring similar to such targets to the table and we can share our technology and also share development commercialization with that partner. So initially that would be our goal when looking integrating partners into this technology.

Operator

Your next question comes from the line of Mark Monane - Needham

Mark Monane – Needham & Company

On the front line trial phase in melanoma with ipilimumab, you can update us on the discussions with the FDA and also I think the scheduled interim look was expected. Do you have any follow up for us please?

Geoffrey Nichol

Mark this is Geoffrey. Let me give you some follow-up. On the crucial question of this what you called schedule interim look, it is not actually interim look at all and I need to re-emphasize that. What we are doing we are actually following the run rate of patient mortality in the study in a blinded fashion. With a view of trying to forecast for you and other analysts when we think we will hit the target number and what we said during this quarter BMS spending extra resources to bring all of that run rate data up to date to chase down every patient who may not be ideally right up to date with follow up to insure that we have very clearly up to date set of data this quarter to re-forecast when we think we will hit that target and that is what we refer to when we talked about this reforecast but it is still blinded. This is not an interim analysis.

Mark Monane – Needham & Company

So when you look we will now as well or this s for internal use only? How would you describe the scenario?

Howard H. Pien

Well our current expectation are , Mark, that the data will be un blinded in the fourth quarter of this year and then sooner after we will be able to present a tough line data set. Now and of course of BMS analysis if those time line should change we are going to let you know.

Mark Monane – Needham & Company

And how about the FDA discussion on the primary outcome of survival is there any update or is that something cooking and we should end, what is the size of that?

Howard H. Pien

There is no update. We told you what the course of the discussion had been. We are one of the agencies expecting that we would get clarity on whether or not we should file for the second line treatment on an accelerated approval basis. The agency said , well no but what they want to see, as we said, was the overall survival data and we told them that we have Phase III study and the agency said that they of course they knew that and this was Phase III study and then we should proceed with the Phase III study and we said that we will switch to primary and secondary templates for looking at the result of the study between [provision] free versus overall survival and they said that they would agree with that and that is pretty much the last update that we have.

Mark Monane – Needham & Company

And it sounds like Howard, that would probably it until the end, is that a fair statement?

Howard H. Pien

Yes

.

Mark Monane – Needham & Company

And then on the prostate cancer trial, I noticed if I heard you correctly that you are going to give the drug in the ipilumumab to patents who failed ailed Taxotere therapy but I also noticed on the lung cancer trial there is a ipilumumab plus on that Taxotere in a concurrent fashion maybe you can help us think about what evidence you have, what data you have about using the drugs in combination or using them I guess at a normal fracture rotation especially sine Taxotere it seems to be the standard of care right in prostate cancer.

Howard H. Pien

It depends a lot on the indication, on the amount of medical need, and we have the option with ipilumumab because of its complimentary mechanism and action and because several modalities like chemotherapy or radiotherapy in pre-clinical studies have enhanced the immunological effect of EP-2 to run combination studies with a range of agents. So in prostate, in what you may call the second line setting whether it is still a great deal of unmet medical need in patients who simply do not do well on the Taxotere. We have chosen to go with the combination with radiotherapy. In lung cancer, I think despite the actual advent of chemotherapy there is really not a huge benefit to chemotherapy in these setting so we decided to go in a phase II setting with the add on approach to chemotherapy.

Operator

Your next question comes from the line of Unidentified Analyst

Unidentified Analyst

You have a sizeable unfunded asset that is now growing in stages of development, so as the time goes on I think the cash requirements to maintain this product developing at a good pace will increase. Balance in debt against your cash on the balance sheet and you have taking genMab, [so that] plus anticipated incoming on royalty payment. Have you worked out the out year financial requirement that is two, three years down the road when you have several Phase III programs and your current financial situation came to handle it? What I am driving at, as you have seen last year, when the market condition’s down and it turns out and the companies with good pipeline portfolio but it short down the cash on the balance sheet their stock became very disastrous, in having a nosedive. So have you figured out certain way, you have long range planning that you can handle this kind of a market condition and are anticipating using more partnerships to fill this gap How urgent do you think you need to get those partnerships down and also how much do you have financial planning is based on the success of EPE?

Geoffrey Nichol

Let me start with that Alex and I am sure Howard will want to join as well. First of all, as I said it in the prepared remarks earlier, our run rate for the operational cash burn which has been largely the same largely the same for 2009 will be about five years. So I take exception to your comment that each year goes by, there is an exponential growth to our run rate. We manage the Company through the proof of concept and once we get the clinical data we make decisions. So your assumption then that our run rate will be then go higher necessarily because we have multiple Phase III programd I think it ignores the opportunity for clinical failure which obviously we hope does not happened but certainly it is a possibility. And also the ability to bring in partners to these programs to subsidize development or in effect perhaps to out-licenses and to remove entirely the related burn rate on our financial statements.

So we clearly weigh that with what is going in the capital markets , what is the success of our pipeline at any given time and also the appetite as it were from third party, big pharmaceutical partners in the assets that we have in development and so we try to balance all those at the same time without relying on the capital markets to fund development but we also look to take the Company and each of these programs to one hurdle point which is our proof of concepts studied and then make decision based on real data. Howard?

Howard H. Pien

I will be saying pretty much the same thing in a slightly different way. The source of cash was not just what is on the balance sheet and how we monetized it and whether or not we have additional financing opportunities, but also that we have this royalty stream that will come from the partnerships that are already in place and we said to you earlier in our prepared remarks the abundance of opportunities that are going to start to produce our royalty streams. And then of course there are the partnership opportunities such as that of the potential [61:40] opportunity where if we actually do it we will completely shut off that where we are going forward, in addition to producing milestones and relative streams.

Geoffrey Nichol

So those are the three ways if thinking about the sources of cash to match the ambition and aspirations that we have. On the ambition and the aspiration side, I just want to make a distinction between that which is our strategy versus that which is what we are aiming for over the long run. Of course we would aim in the long run to be a fully integrated Company which will have necessitated our going to Phase III and then eventually taking them to the market place

But I think we have also have been very clear at least for a year now at what is that our aspiration that is now our short term plan. And our short term plan is with the operating assumption that EPE is going to come out positive sometime end of this year beginning next year. And that would of course give us the opportunity, to give us the frontline to support the abundance of the Phase I and Phase II pipeline that we already we have and support our research capability of continuing to replenish our pipeline to the tune of 1 to 2 R&Ds per year.

Suffice it to say that it is about operating assumptions and true, it will call for a re-evaluation as to whether or not the strategy is viable and also the evaluation as to therefore where we will be reducing our investment. We will be reducing our investment and research or we will be reducing our investment in the number of candidates that we will be actively be developing on our own. Be at the number of any kind of assets in our pipeline.

It would certainly impinge on our ability to go into a Phase III clinical trial but for the moment I think there is ample evidence to suggest that we are cautious and we are sanguined at the same time, in evaluating what are our opportunities are to continue the freedom and we reduced that to the simple statement that we are now proof of concept Company.

What I means, is we are taking as many assets as quickly as possible to a stage that allows us to look at what we regard as the impression point of value so that we can make the strategic decision as to whether or not we are going to Phase III on our own or we partner them out. It is certainly our preference is that at the asset is in oncology or in immune disease it would be the mark of partnership model, will be the EPE model or the model were we still have opportunities of gaining back by a tuning up mechanism of the commercialized.

But it turns out that we have opportunities that in Phase I and Phase II that come to proof of concept and they pull outside of our oncology and all the immune disease it is likely that the [65:12] way of proceeding it as where it would end up. So we are going to be very cautious and we are going to be focusing our execution with our eyes firmly on what resources that we have vis-à-vis what are the promises of the assets and how far we should take them to a point of reflection of the perceived value.

Laura Choi

Operator we only have time for one more question.

Operator

Your last question comes from the line of Eun Yang - Jefferies

Eun Yang – Jefferies & Company

Your revenue guidance for ’09, $48 million to $53 million, does that include any type of a royalty revenue from partners such as in Novartis [or J&J]?

Christian Schade

It does include based on the estimate that we can make of a small amount of royalty based revenue from the Centocor products, yes.

Laura Choi

Operator, and thanks everyone for your questions. Let me now turn the call back over to Howard for some final remarks.

Howard Pien

Okay. It is a short concluding remark. I just want to say that we remain two months into this New Year, tremendously optimistic about our future. Our near term and our long term growth and value prospects continue to be fueled by our very strong pipeline and our ability to leverage each of our programs and harness each of the business and strategic opportunity, and some of the questions that we got allowed us to give you a little bit more detail on how that we are thinking about the ways that we will harness the business and strategic opportunities. So, we thank those questions, the people who asked those questions.

We remain confident in our ability to advance our science and to develop innovative medicines which could save lives and that ultimately is the aspiration that we have as a collection of 480 or so people working diligently in this jewel of a Company called Medarex. So, thank you all for joining us on today’s call and please have a very, very nice day.

Operator

Ladies and gentlemen, this concludes our conference call for today. Thank you all for your participation. All parties may now disconnect.

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