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ImClone Systems Inc. (IMCL)

Q3 2007 Earnings Call

October 25, 2007, 11:00 AM ET

Executives

John H. Johnson - CEO

Michael P. Bailey - Sr. VP of Commercial Operations

Eric K. Rowinsky - Sr. VP Of Clinical Development and Chief Medical Officer

Peter R.Borzilleri - Interim VP of Finance

Daniel J. O'Connor - General Counsel, Secretary

Richard Crowley - Sr. VP of Biopharmaceutical Operations

Analysts

May-Kin Ho - Goldman Sachs

Gene Mack - HSBC Securities

Michael King - Rodman & Renshaw

Han Li - Stanford Group Company

Eric Schmidt - Cowen and Company

Eric Ende - Merrill Lynch

James Reddoch - Friedman, Billings, Ramsey & Co

Presentation

Unidentified Company Representative

…IMClone’s Chief Executive Officer, Michael Bailey, Senior Vice President of Commercial Operations, Eric Rowinsky, Senior Vice President of Clinical Development and Chief Medical Officer, Peter Borzilleri, Interim Vice President of Finance and Richard Crowley, Senior Vice President of Biopharmaceutical Operations. John will begin today’s call with a top level review of our most recent achievements. Michael will then discuss the commercial aspects of ERBITUX followed by Eric, who will highlight the clinical development of ERBITUX in the pipeline antibody. Peter will conclude with a discussion of our third quarter financial results.

On a legal note, I must remind everyone that certain information discussed in this call may constitute forward-looking statements, within the meaning of the federal security laws. Although we believe that the expectations reflected in these statements are based upon reasonable assumptions, we cannot give assurance that the spectrum results would be achieved. We refer you to our exchange 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 Reform Act of 1995 and assumes no obligation to update or supplement such statements.

I'll now turn the call over to John Johnson, our new CEO. John.

John H. Johnson – Chief Executive Officer

Good morning, and thank you for joining our call. It is a pleasure to speak to you today as ImClone’s Chief Executive Officer. It is truly an exciting time at ImClone and I look forward to sharing our progress today.

As we look forward there is a renewed sense of enthusiasm and energy at ImClone. While we have challenges and significant work ahead of us, looking back, what a difference a year makes. A year ago the company was facing a very uncertain future, and experiencing significant leadership challenges and a strategic direction not clearly charted was subject to public questioning and criticism. A new cancer therapy entered the market in the third quarter of 2006

posing a significant competitive threat. These problems were compounded by a weakened partnership with Bristol-Myers Squibb, an interesting pipeline that was not advancing as rapidly as it should in patent litigation. In short, ImClone was facing serious issues.

A year ago, coincidentally to the day, Carl Icahn was appointed as our Chairman. This event marked the beginning of a new era for ImClone. Carl, shortly thereafter appointed Alex Denner and Richard Mulligan to the executive committee to run ImClone during the CEO search. Over the course of the last year, we have made steady progress in addressing not only the issues I just highlighted, but numerous others. A top priority for the Board and the Executive Committee was to improve our relationship with Bristol-Myers Squibb, in a way that would be more beneficial to ImClone and maximize technology potential of ERBITUX. We successfully achieved that with technology amendment of our existing agreement with BMS, which significantly expands BMS's investment in and commitment to ERBITUX, while providing for the continued exploration of ERBITUX in the tumor types which have not been adequately investigated.

Commercially, we have effectively defended our key strategic markets for ERBITUX over the past year while taking action to capture new markets and the additional indications for the product. In parallel we began to vigorously advance our deep clinical and preclinical pipeline of promising unique IgG1 antibody. Our recent litigation settlement with MIT and Repligen was a key achievement towards our efforts to address, effectively address business risk.

The significant progress ImClone has made in just the last year alone has demonstrated our ability to execute and move the company forward. In short, ImClone is now in a vastly improved position for future growth, and I would like to thank ImClone’s new Board, and especially Richard Mulligan and Alex Denner for their significant contribution as members of the executive committee as well as for their support and mentorship in making my transition as CEO a seamless one. Today we are building on that momentum and moving rapidly ahead as a nimble, fully integrated global biopharmaceutical company.

We have credit three overarching goals. Number one, accelerate ERBITUX sales. Number two, accelerate our internal pipeline of novel antibodies. And number three, build on our capabilities to enable execution of our strategies. Let me speak to each of these areas.

With respect to accelerating ERBITUX sales, we achieved strong sequential sales growth. Michael will provide more detail on the third quarter performance of ERBITUX in just a moment, but I would like to highlight four key accomplishments that will help us accelerate ERBITUX sales, going forward.

First, though our recent amended BMS agreement, we now have clear path and firm neutral commitment to evaluate additional indications for ERBITUX with the end goal of registrational opportunities being paramount.

The second driver, which is our key to establish ERBITUX franchise in colorectal cancer, will be the FDA approval we received earlier this month. ERBITUX is now the only approved biologic therapy to demonstrate improved overall survival as a single agent in patience with metastatic colorectal cancer.

The third area that l would like to highlight is very exciting news related to the FLEX study results, where ERBITUX showed an improved survival in patients with advanced non-small cell lung cancer. These are important results and there have been few treatment advances for lung cancer in recent years. This is a very large market with significant unmet need, which has significant patient populations that are not currently served by targeted biologic therapy. Eric will discuss these results in a bit more detail in a few moments as part of his full update on the several ERBITUX and other clinical trials we have ongoing.

Finally, we continued to pursue global expansion with ERBITUX, and recently announced that we established a code development and code commercialization agreement with BMS and Merck in Japan. If approved in Japan, ERBITUX would be the only EGFR antibody available in this large market.

Moving to our second overarching goal of accelerating our pipeline of novel antibodies, we made significant progress in this key component of our long term growth strategy. We moved three of our internal antibodies in the Phase II clinical trials. We initiated five new disease directed trials with these antibodies since the start of third quarter and we anticipate that one of these antibodies, 1121B to move in the Phase III trials by the end of the first half of 2008.

Eric will speak to these in more detail. But let me make a key point. These are proprietary antibodies, which ImClone alone fully owns. We have taken them from the bench, to the clinic and we entirely control the commercial rights to them. We will thoroughly leverage the value of these antibodies, including their potential use outside targeted cancer therapy and perhaps some selective partnerships.

Significant progress was also made towards our third goal of building our capabilities. First, a very important achievement that occurred during the third quarter was the FDA approval of our BB50 manufacturing facility. The approval of this state of the art facility more than doubles our total available production volume capacity for ERBITUX, providing ImClone with one of the largest antibody manufacturing capacities in the world. I wanted to personally congratulate our operations team on this significant accomplishment.

On the corporate front, we continued to further strengthen our Board of Directors, with the appointment on Dr Tom Deuel, a preeminent scientist with a strong background in oncology. We also strengthened our scientific base with the recruitment of Dr Larry Witte back to the research team at ImClone. Larry co-chairs our new research and development review committee with Eric. Under Larry and Eric's leadership, this group is charged with accelerating our overall pipeline.

Finally, a key legal achievement during third quarter was the settlement of litigation with MIT and Repligen in September. Importantly, as part of this settlement ImClone was granted a sub-license for the future use of other technology including a patent, which is a subject of an infringement lawsuit brought about by Abbott against ImClone. While the case involving Abbott's litigation claims against us remains pending, and in the early phases of discovery, we are now sub-licensee to that patent through the settlement agreement with Repligen.

I look forward to working with the Board and rest of the team here at ImClone to take the company to the next level. ImClone's employees are the critical component to the company' recent progress and our future success. Their dedication, hard work and loyalty are highly valued. I'd like to take this opportunity to recognize and thank them for their contributions.

In closing, I believe that this is a very exciting tie to be with ImClone, and I believe our future holds tremendous potential. The past year has been critical for ImClone, and what a difference a year can make. We successfully addressed a number of major hurdles and we are now in a much better position to capture the numerous opportunities that lie ahead of us. The third quarter was a solid quarter on many important fronts, and I look forward to reporting on our continued progress over the coming quarters.

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

Michael P. Bailey - Senior Vice President of Commercial Operations

Thank you, John. The third quarter US in market net sales for ERBITUX increased to a $184.5 million from a $162.1 million in second quarter of 2007, an increase of 14%. This quarter-over-quarter increase in sales we believe is a result of three key factors.

First, we believe that sales and share increases reflect the US oncology community's confidence that ERBITUX is unique among therapeutic antibodies and that ERBITUX is the backbone of the standard of care treatment in refractory colorectal and head and neck cancers.

Second, we believe this growth in sales is the result of the initial impact of our expanded ImClone sales force which was fully implemented as of July 1st.

Finally, the increase in sales for the quarter is in part, reflective of the change in ERBITUX distribution model resulting in wholesaler inventory buildup during the quarter, we estimate to be roughly $9 million.

During the quarter our dominant share of EGFR market sales further increased from the second quarter of 2007 to over 80%. This increase in share of sales in EGFR market was accompanied by share increases in our strategic promotional targets of second and third plus line colorectal cancer. As well as increases in our indicated head and neck patient populations of local, regional and second line metastatic disease. As mentioned in our last quarterly earnings call, the expanded sales organization is fully implemented. This quarter we have seen an initial positive impact of this aggressive strategic move and we continue to be optimistic about the positive near and long term impacts of our expanded commercial organization.

During the third quarter, we had several significant regulatory and clinical developments, which may favorably impact the long term opportunity for ERBITUX. On the regulatory front, ERBITUX was granted a full approval and overall survival claims for single agent colorectal cancer, in patients who have failed oxaliplatin and irinotecan. This is important as this claim establishes ERBITUX as the first and only therapeutic antibody to convey survival benefiting colorectal cancer out of a single agent, making it distinct from both bevacizumab and panitubimab, which has failed to demonstrate such a benefit. We believe the primary impact of this label change will not be a significant share increase, but rather this claim will make ERBITUX more resistant to competitive erosion.

On the clinical front, at the recent ECCO meeting, the final results of the EXTREME study were presented which arguably set a new standard for first line head and neck cancer therapy. Additionally, at ECCO, top line safety results for CAIRO-2 [ph], a PACE like study were presented, demonstrating the feasibility of combining ERBITUX, bevacizumab and chemotherapy in the first line colorectal cancer setting. These data will serve to further differentiate the therapeutic potential of ERBITUX as compared to panitubimab. Additionally Dr. Len Saltz and colleagues published the BOND-2 study in JCO providing further documented support for this therapeutic triplets.

Last, but certainly not least, during the quarter ERBITUX became the only biologic to demonstrate an overall survival benefit in a first line non-small cell lung population that was not restricted with regard to histology, and the only EGFR targeted agent to demonstrate the ability to improve survival, when added to a chemotherapy doublet in this challenging population. Eric will share the details of these studies during his section.

Suffice it to say, these outcomes, in combination with the existing body of clinical evidence placed ERBITUX in a class by itself among antibody therapies. Another accomplishment of note for the quarter was the inclusion of ERBITUX Q2 weekly dosing as an acceptable schedule in the updated NCCN colorectal cancer guidelines. These guidelines are widely recognized as defining clinical practice in the United States.

As mentioned on the last quarter's earnings call, we have submitted for compendia listings for early line used for colon, and head and neck cancers. We hope to have a response from these organizations some time in the first half of 2008. Additionally, in the future we hope to expand our FDA approved label using the significant body of positive ERBITUX data from CRYSTAL, EPIC, FLEX and EXTREME. However, until these events occur, which will enable reimbursement and allow for sales force promotion respectively, we do not anticipate to realize significant commercial impact from this data.

To conclude, we have built on the positive sales trend with increased promotional efforts to establish ERBITUX as the standard of care in refractory colorectal and head and neck cancers. With our expanded field force, we hope to increase share in markets where ERBITUX has proven to provide significant clinical benefit and has received FDA approvals. Overall, we are encouraged by the performance of ERBITUX and optimistic about our prospects for the future.

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

Eric K. Rowinsky - Senior Vice President of Clinical Development and Chief Medical Officer

Thank you, Michael, and good morning. The third quarter was very productive in terms of ImClone clinical development efforts, with the achievement of several important milestones for ERBITUX, as well as steady progress in the advancement of our pipeline. I will first review our progress with ERBITUX and then I will move on to our early clinical pipeline.

Since the beginning of this year, ImClone, along with its partners have announced top line results of five Phase III trials of ERBITUX, which will serve as pivotal studies for regulatory filings in new and highly relevant indications. That is in early stage colorectal, head and neck, and lung cancers over the next one to two years. These include evaluations of ERBITUX in patients with advanced colorectal cancer in the first line, second line, and refractory settings, and the EXTREME study in which ERBITUX was evaluated in the first line treatment of patients with metastatic and recurrent head and neck cancer. With specific regard to EXTREME, top line survival results initially presented at the past ASCO meeting, showed that patients receiving ERBITUX and chemotherapy had a median survival of 10.1 months compared to 7.4 months with chemotherapy alone.

At the recent ECCO meeting last month, additional information was presented. Consistent with ERBITUX conferring the robust survival benefit, patients receiving ERBITUX had a near 50% reduced risk of tumor progression and a near doubling of the response rate compared to those receiving chemotherapy alone. To put this into perspective, there have been no comparable therapeutic advances in this setting in the modern era of cancer treatment. Now to top this off, more recently we announced that the FLEX study, which evaluated the merits of adding ERBITUX to chemotherapy and the treatment of advanced non-small cell lung cancer met its primary endpoint of increasing overall survival. I would like to try to put the FLEX study into perspective, from both historical and clinical standpoints. First, ERBITUX is now the only agent in the EGFR inhibitor class that improves survival in the frontline setting. In FLEX, survival was significantly increased in the EGFR expressing lung cancer patients treated with ERBITUX plus cisplatin vinorelbine chemotherapy compared to those receiving chemotherapy alone.

It is important to recognize that in contrast to the only other clinical trial in advanced non-small cell lung cancer in which a biological agent, that is bevacizumab when added to platin containing regimens, increased survival. The patients participating in FLEX resembled a cross section of a typical lung cancer patient population. To be more specific, FLEX included patients with the full range of performance capabilities. Patients with both good, and not so good performance capabilities participated, including ECOG 0s,1s, as well as 2s. Patients were not excluded if they had prior histories of certain bleeding, or cardiovascular disorders.

And finally. FLEX enrolled patients, irrespective of tumor histology, meaning that patients with schlimazel [ph] subtypes, which constituted anywhere from 25% to 35% of all lung cancer patients participated. In fact, approximately half of all patients with advanced non-small cell lung cancer are not eligible to receive bevacizumab largely because they have either schlimazel histology or relevant cardiovascular or bleeding disorders that increase the risk of serious treatment related side effects. And another modest faction of patients are not felt to be ideal candidates to receive bevacizumab largely due to poor performance capabilities

Our partners, Merck-Serono who sponsored the FLEX study is currently validating all secondary endpoints, and preparing to present the FLEX results at a major medical meeting in the future. The presentation will include the survival curves in their entirety as well as information about secondary endpoints and pre specified subset analysis.

We also look forward to discussing the FLEX results with the FDA in the near future. And we are currently formulating regulatory strategies to register ERBITUX in early stage lung, head and neck and colorectal cancers. We anticipate disclosing our specific registrational plans as they become clear following discussions with the FDA over the next several months. However it is clear that our planned regulatory submissions for head and neck and lung cancers will be centered primarily on the improved survival demonstrated for patients receiving ERBITUX in the EXTREME and FLEX studies respectively.

With specific regard to colorectal cancer, the recent granting of full regulatory approval for ERBITUX monotherapy based on its survival advantage in refractory patients will form the cornerstone for registrational efforts in early stage disease, which will center on the significant improvement in progression free survival, demonstrated in the first line CRYSTAL study, further supported the second line EPIC study

Nevertheless drug approval in early stage colorectal cancer in the United States has traditionally based on meeting the on survival endpoint. However, we are at an opportune juncture and flux in the regulatory environment, which is currently involving to enable drug approval based on alternate endpoints like progression free survival, particularly in early stage colorectal and breast cancers. Since study patients are living longer and will have ample opportunities to receive meaningful treatment like ERBITUX, which may improve survival after first line treatment, thereby potentially compounding the interpretation of the primary survival endpoint. This changing regulatory environment is perhaps illustrated by the oncology advisory committee meeting planned for this December in which the panel will likely discuss progression free survival as a primary endpoint in the first line breast cancer setting, largely driven by the ECOG bevacizumab breast cancer study in which approval is being sought, based on progression free survival.

With this in mind, we will file an SPOA for early stage colorectal cancer, following availability of mature survival data from the FLEX study, which we expect by mid 2008. Although survival, a secondary endpoint of the CRYSTAL study may indeed be impacted by the post-treatment use of ERBITUX and other therapies, the submission of a complete set of data to the FDA represents the most sensible strategy to enable an optimal assessment of the CRYSTAL results given the current regulatory environment. Based on rather provocative evidence from CRYSTAL, in which ERBITUX significantly increased the proportion of patients who underwent a potentially curative resection, studies are currently being implemented by both Merck-Serano and ImClone-BMS to evaluate different ways in which ERBITUX can be used to increase the rate of curative surgery, which is perhaps the only way in which long cancer free remission and cure can be achieved.

Cooperative group studies have just begun in Europe and under development in the United State. With regard to ERBITUX in the adjuvant colorectal cancer setting, a setting in which new activations can really make a impact on survival, studies are also strongly accruing patients in both Europe and the North America and are on track.

To wind up this discussion on ERBITUX studies in colorectal cancer we expect the efficacy results of CAIRO-2, a Northern European Phase III first line study in which patients receive treatments with Xelox plus bevacizumab with or without ERBITUX to be available in the first half 2008. The ECCO meeting last month provided a first glance at CAIRO-2 at which time the preliminary safety results were presented. As expected, the instances of hypersensitivity reactions and skin rash were higher on the ERBITUX containing arm. The patients who received ERBITUX combined with bevacizumab and Xelox did not experience higher rates of other toxicities and a higher rate of treatment discontinuation for toxicity compared to those treated with bevacizumab and Xelox without ERBITUX. We remain encouraged by the preliminary safety results of this PACE like study which confirms prior results indicating that ERBITUX is generally well tolerated when combined with both bevacizumab and chemotherapy. And we look forward to the presentation CAIRO-2's efficacy results, which are expected in the first half of 2008.

We certainly have a lot of work ahead of us, not only in terms of seeking regulatory approval, and continuing to evaluate ERBITUX in early stage colorectal lung and head and neck cancers, but to expand the use of ERBITUX in other indications.

The recent amendment to the agreement between Bristonl-Myers-Squibb ImClone provides a roadmap of new evaluations of ERBITUX in cancers of the stomach, esophagus, prostate, breast, brain and bladder cancers. With these efforts intended to openly register ERBITUX in these indications. The amendment also delineates expanded trials in both early and late stage non-small cell lung cancer based on a positive FLEX study which has indeed come to pass.

Lastly, I would like to turn to our clinical stage pipeline beyond ERBITUX. In the third quarter, three ImClone fully human IgG1 antibodies entered Phase II trials and two candidates continued to make progress towards Phase I completion.

In contrast to most other new agents targeting the VEGF receptor ligand access, lead clinical pipeline candidate 1121B blocks all signaling through the VEGF-2 receptor. And we continue to be excited by preliminary clinical activity as a single agent. Based on its unique mechanism, robust preclinical activity and notable clinical activity to date, ImClone is not only in the process of opening Phase II studies but the breast cancer international research group known as the BCIRG will be initiating a global Phase III breast cancer study in the first quarter of 2008. And we are planning a second Phase III study in another indication a more abbreviated timeline in the second half of 2008.

Additionally, Phase II studies including studies in melanoma and kidney cancers have begun. Over the next two quarters we also plan to initiate evaluation of the antibody as monotherapy in ovarian cancer and as part of standard first line regimen in patients with lung, colorectal, prostate and liver cancers.

During the third quarter, we also opened several Phase II studies of IMCA 12 which targets the insulin growth factor like receptor. Our strategy for the initial stage of disease directed studies of A12 is broad, generally randomized and in indications directed at registration. Since their preclinical results indicate the targeting both the epidermal and insulin like growth factor receptors are synergistic, combinations of A12 and ERBITUX are being evaluated in several disease settings. We are also in the process of enacting Phase II trials of A12 in pediatric cancers, sarcoma, breast and prostate cancers. In addition to eight ImClone sponsored Phase II studies, National Cancer Institute is opening 10 studies in indications that do not overlap with those selected by ImClone. Six of these trials could potentially serve as the foundations for future registrational effort including several U.S. cooperative group randomized studies in many tumor types including pancreatic and breast cancers.

In the last quarter, we also began enrollment of the Phase II trial of IMC-11F8, ImClone's fully human IgG1 anti EGFR therapeutic combined with chemotherapy in colorectal cancer patients in Europe.

Lastly, progress continues to be made in our Phase I studies of IMC-18 F1 which targets VEGFR1 expressed by both malignant blood vessels and tumors alike and IMC-3G3 which targets the tumor growth and survival factor platelet derived growth factor receptor alpha. And we anticipate completing these studies in the next two quarters, with disease directed valuations planned for 2008.

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

Peter R.Borzilleri - Interim Vice President of Finance

Thank you, Eric. I will briefly highlight our financial results for the third quarter with the focus on the financial impact on the BMS amendment. I will also address our guidance on certain expense line items for the full year of 2007.

During the quarter, we achieved total revenues of $147.5 million compared to a $150.7 million for the same period last year. This decrease is due to lower license fee and milestone revenue partially offset by increases in the other revenue line items. As a result of the amendment with BMS, recognition of license fee and milestone revenue has decreased by $15.7 million from the $34.9 million reported in the third quarter through the third quarter of 2006.

Effective August 1st 2007, under the terms of the amendment, the future clinical development program for ERBITUX has been modified and expanded. This has resulted in changes in the cost estimates we use to calculate the recognition of license fee and milestone revenue.

Collaborative agreement revenue for the quarter was $18.5 million or $2.2 million higher than the same period last year. This revenue line was also affected by BMS amendment because of changes to the ERBITUX cost sharing arrangement. The amendment specifies that each year BMS will fund nearly all the annual ERBITUX development costs up to a specified threshold value. Costs in excess of this value are shared by both companies according to a predetermined ratio. This change is effective retroactive to January 1st 2007 which resulted in an increase in collaborative agreement revenue of $2.3 million to recover costs incurred by ImClone through the effective day of the amendment because they are now reimbursable from BMS. An additional $0.5 million increase over 2006 represents the impact for August and September’s activity. This total increase of $2.8 million is partially offset by the decrease in the reimbursement rate for royalty expenses from BMS to third party royalties from 4.5% to 2.5%, which became effective January 1st of this year.

Now a few comments on operating expenses. As we mentioned during our call last quarter, effective July 1st we transitioned our efforts in our BB50 manufacturing plant, from ERBITUX to producing pipeline products for a clinical development program. Pipeline product costs are expensed as incurred rather than capitalize in the inventory as with ERBITUX. This is the primary reason for the increase in our research and development expenses to $43.6 million which is $17.2 million higher than the third quarter of 2006. This production plan will continue to the end of the year and we are projecting research and development expenses to be in the range of $155 million to $160 million for the year.

Clinical and regulatory expenses is the final income statement line item that is impacted by the amendment with BMS, which is the primary reason for the low expense amount of $4.8 million this quarter as compared to $13.5 million for the same period last year. Similar to the impact on collaborative agreement revenue, an adjustment of $7.6 million was recorded during the quarter to reverse previously expensed ERBITUX clinical development costs for the period, January 1st to July 31st. This represented our share of cost incurred by BMS that we were previously obligated to reimburse, which now fall under the threshold and therefore are the sole responsibility of BMS. Our expectation is that clinical and regulatory expenses will be in a range of $50 million to $55 million for the year.

Selling, general and administrative expenses were $20.7 million for the quarter, an increase of $4.8 million over 2006. This increase is primarily due to the expansion of our sales force and an increase in legal expense related to patent litigation matters. For the full year we expect SG&A to be in the range of $75 million to $80million.

Included in the cost of manufacturing revenue for the third quarter of 2007 is $2.1 million of cost for damaged batches of ERBITUX. Excluding these costs, gross margin manufacturing revenue was 8% for the quarter. As announced last month, we entered into a settlement agreement with MIT and Repligen which resulted in a $50 million charge for the quarter.

The company’s estimated annual operating effective tax rate for 2007 is approximately 41.5%. Additionally, through the nine months ended September 30, the company has recognized a net discrete charge of approximately $4 million primarily related to certain tax return metric changes filed during a year. Total cash tax payments for 2007 are expected to be approximately $4 million. Our financial position remains very strong with $1 billion in cash, cash equivalents and marketable securities.

I would now like to turn the call back to John to conclude our prepared remarks. John.

John H. Johnson – Chief Executive Officer

Thank you, Peter. I thank you all for joining our call today. I believe this is a truly exciting time for ImClone and I look forward to reporting on our continued progress. I would like to note that we are planning to host and R&D Day for the investment community in the coming months to allow us to more fully showcase the many clinical and preclinical development activities we have ongoing. I look forward to meeting many of you at that event. We will publicly announce the details of that event when they are finalized.

We will now open the floor for questions. Operator?

Question and Answer

Operator

[Operator Instructions].

Your first question comes from May-Kin Ho of Goldman Sachs.

May-Kin Ho - Goldman Sachs

Hi. I guess, I wanted to ask question about really how your payment from Bristol would be recognized and how we should going forward project out the recognition fraction?

Peter R.Borzilleri - Interim Vice President of Finance

May-Kin, this is Peter Borzilleri. So you are referring to the clinical and regulatory expense line?

May-Kin Ho - Goldman Sachs

Yes, as well as the license fee line?

Peter R.Borzilleri - Interim Vice President of Finance

Okay. On the license fee line, with the expanded and modified clinical production plan, this resulted in, in addition to an increase in clinical spend projections also an increase in the amount of dollars being spent in the later years. So with the way we recognize revenue this ended up effectively delaying or deferring the recognition of some of the license fee… license fees and milestone revenue.

May-Kin Ho - Goldman Sachs

But in the past, it somewhat depended on how much up we see to date and it's amortized et cetera. So going forward is that how… the way that it will be done as well or is it different?

Peter R.Borzilleri - Interim Vice President of Finance

No, the approach is the same, just the amounts used in the calculation have changed.

May-Kin Ho - Goldman Sachs

So for example, for the next year how we should we think about that?

Peter R.Borzilleri - Interim Vice President of Finance

I would say, at this point we are not really prepared to give guidance for next year.

May-Kin Ho - Goldman Sachs

Okay. And then for the actual spending then, it sounded like in the past it would depend on whether it was a Phase I, II, III trial, or it was a Phase IV trial, now has changed to a threshold. Is that the right way to think about that.?

Peter R.Borzilleri - Interim Vice President of Finance

I mean that is correct, but it encompasses essentially the same trials. But there is just a defined threshold value in place that until that threshold value is reached, the obligation falls entirely with BMS.

May-Kin Ho - Goldman Sachs

So, under the old agreement, the Phase IV studies were shared equally. And now it doesn’t matter what phase they are, BMS will pay for a certain amount and then above that, you will split about equal or what is the percentage of that ?

Peter R.Borzilleri - Interim Vice President of Finance

We are not at liberty to disclose the percentage. But what you said is correct that it includes the Phase IV studies.

May-Kin Ho - Goldman Sachs

And is the threshold a different one every year, the cumulative threshold

Peter R.Borzilleri - Interim Vice President of Finance

It’s a year-by-year threshold, but the amount we are not at liberty to disclose.

May-Kin Ho - Goldman Sachs

All right. I guess, maybe, Michael you can talk a little bit about the market dynamics at this point. You indicated that you have increased share for EGFR market?

Michael P. Bailey - Senior Vice President of Commercial Operations

May-Kin, thanks for the question. The share of EGFR market is now topped over 80%. Remember we have spoken in previous earnings calls about kind of what that 20% of panitubimab share of the EGFR market is, roughly half of that coming after ERBITUX, half of it coming probably at the expense of ERBITUX. But in the past year, we are below 80%, we are going down around 75%. Now we are above the 80%. So we were very pleased with that.

May-Kin Ho - Goldman Sachs

And have you seen any impact from some of the recent announcements or until we actually have data presented probably not dramatic.

Peter R.Borzilleri - Interim Vice President of Finance

Which specific announcements are you referring to?

May-Kin Ho - Goldman Sachs

For example, CRYSTAL.

Peter R.Borzilleri - Interim Vice President of Finance

Yes I mean, I think there's a general sentiment. We have not necessarily seen major share increases in the first line setting, if that’s what you're referring to.

May-Kin Ho - Goldman Sachs

Yes. And, at this point what is you penetration in the various lines of therapy?

Peter R.Borzilleri - Interim Vice President of Finance

Yes in the second line we have grown to roughly 15% share in second line colorectal cancer. Third line, third line plus is at around 30% share. In the head and neck market, I am a little less confident with these numbers just based on the various market audits that seem to conflict somewhat. But we have got a dominant share, as we mentioned in the refractory, the bottom refractory population up in the range of 45%. And then roughly about 20% in the local regional.

May-Kin Ho - Goldman Sachs

And what about duration of therapy in the various lines?

Peter R.Borzilleri - Interim Vice President of Finance

The duration of therapy has been relatively stable from quarter to quarter.

John H. Johnson – Chief Executive Officer

So May-Kin, if you don’t mind, we could move on to next questioner.

May-Kin Ho - Goldman Sachs

Thank you very much

John H. Johnson – Chief Executive Officer

All right, thank you, May-Kin.

Operator

Thank you. Your next question comes from Gene Mack of HSBC Securities.

Gene Mack - HSBC Securities

Hi, thanks for taking the question. I guess, first is, when do you think that… I guess, it's kind of hard to predict some of the expenses or some kind of meaningful guidance on your total. When do you think you might be in a position to do that with the agreement that you have in place with Bristol-Myers, or at least give us some comfort on what will be delivered on a net income basis going into 2008?

Peter R.Borzilleri - Interim Vice President of Finance

Gene, you were coming in a little bit lower down in the volume. But your question was about guidance for 2008?

Gene Mack - HSBC Securities

Yes.

Peter R.Borzilleri - Interim Vice President of Finance

Yes, at this point we are not in a position to provide any guidance. I would say in our end of the year call in the first quarter 2008, we will be able to do that.

Gene Mack - HSBC Securities

And I'm sorry, if I missed this, but did you talk about what might be presented or is there any update on when that might be presented?

Eric K. Rowinsky - Senior Vice President of Clinical Development and Chief Medical Officer

Gene, hi, this is Eric, good morning.

Gene Mack - HSBC Securities

Hi

Eric K. Rowinsky - Senior Vice President of Clinical Development and Chief Medical Officer

At this time, we have not made that decision and it will be a decision made in the near future.

Gene Mack - HSBC Securities

Okay, and has there been any operable use of this drug since the announcement?

Eric K. Rowinsky - Senior Vice President of Clinical Development and Chief Medical Officer

In lung cancer.

Gene Mack - HSBC Securities

Yes.

Eric K. Rowinsky - Senior Vice President of Clinical Development and Chief Medical Officer

We have not seen an appreciable change in that share.

Gene Mack - HSBC Securities

Okay, thank you

Operator

Thank you. Your next question Yaron Werber of Citigroup.

Yaron Werber - Citigroup

Yes, hi good morning. Eric, I wanted to ask a question FLEX. The study was designed to increase survival from eight months to ten months. Can you give us a sense, is that the absolute… should we think of this as a two months difference as to what you had to show to reach your end point? Or if the curves are pretty consistent throughout, does that mean that you can actually make your endpoint successfully without showing too much difference? And then I had a follow-up as well.

Eric K. Rowinsky - Senior Vice President of Clinical Development and Chief Medical Officer

I think, Yaron, we have discussed this in the past. Those eight to ten months are relative assumptions for patient number projections that would be necessary in the study. Obviously, how the curves will basically turn out will depend on many factors, depend upon the coefficient of variability, around the numbers and as well as on the numbers themselves. And I think at this time, we would really like to present all the FLEX data in its entirety both the primary endpoint, the secondary endpoint and the subset analysis and hopefully that will be presented real soon.

Yaron Werber - Citigroup

What about, what can we… one of the things we hear from docs is it's going to be important to try to handicap or translate the differences in the chemo regimen to the US type regimen where the US regimen, now you can typically see nine or 10 months just fro the chemo arm alone.

What would you expect… or what should we expect in this data in terms of how competitive this regimen would be, just chemo alone, relative to the US regimen?

Eric K. Rowinsky - Senior Vice President of Clinical Development and Chief Medical Officer

Well, Yaron, I will just start out and I think I'll let Michael to join in. But I think the cisplatin and vinorelbine regimen has been performed very well in clinical trials. And the range of its performance encompasses the range of performances of other regimens, other modern day platinum-based regimen. And I think that you will just have to look at how this particular regimen performs. But as far as the relevance of the regimen, Michael, do you want to--?

Michael P. Bailey - Senior Vice President of Commercial Operations

Yes, I mean, I think that we got to remind ourselves of a couple of key points. One is, this data represents the first time an EGFR antibody has shown a survival benefit in this setting, in combination with the chemotherapy doublet. In addition, as John had pointed out, it's the only antibody to show overall survival in a patient population that’s not restricted by histology. So, I think that’s going to be one of the most important points, going forward.

In addition though, we've got clinical studies and significant clinical experience in combination with the predominant chemotherapy regimens such as carbo-tax and gem-sys [ph] but not restricted to those. What the regulatory agencies are going to say at the end of the day is anybody's guess, but our goal is to ensure maximum access to all patients for this regimen, for this therapy.

Yaron Werber - Citigroup

I mean, in your view, is there a certain number of absolute weeks of overall survival difference that you have to show for this to be considered clinically meaningful? I mean what’s the magic number here? Is it two weeks, it is four weeks?

Eric K. Rowinsky - Senior Vice President of Clinical Development and Chief Medical Officer

Well, I think, Yaron, I don’t really have the answer to that. And obviously there is a point in which a difference is not going to be clinically relevant. think that is something that we all know. Obviously, we are going to see the data, you are going to have to see it yourself and you're going to have to look at what… currently bevacizumab is not indicated for approximately half the patients with this disease. And another significant proportion of patients, it’s really not prescribed for, it's felt, these patients are not felt to be good candidates for it. I think you are really going to have to take really the whole data sets, take a look at it, take a look at subset analysis, but I am not going to… obviously there is a cut point at which any significance, statistical significance is not clinically relevant. I really can’t answer this question to this particular trial, but again, you also can't look at medians, you have to look at all the data and we intend to show you all the data.

Yaron Werber - Citigroup

Okay, fair enough, I'm just going to ask, pricing wise…

Unidentified Company Representative

Actually if you don’t mind…

Yaron Werber - Citigroup

I will hope back in the queue.

Unidentified Company Representative

That will be great. Thanks so much, Yaron.

Operator

Thank you. You next question comes from Geoffrey Meacham of JP Morgan

Unidentified Analyst

Hi guys, this is actually Terry calling in for Geoff today. Just real quickly, now that you guys have the first data in-house, do you think that this trial alone could be enough to file on and also is there potential that you could file before presenting the data?

Eric K. Rowinsky - Senior Vice President of Clinical Development and Chief Medical Officer

This is Eric, hi. This study is by all means defined as a pivotal trial. And it's our intention obviously I will hope to be able to clarify precisely our filing strategy, but FLEX study can be filed as a pivotal, single study to support this indication. And particularly because the endpoint is the best endpoint you can get in terms of clinical benefit, and that’s overall survival.

In addition, we feel the same way about EXTREME, single study filing, and we intend to do that. Now obviously in the lung cancer filing, we will be filing several other studies as well, including BMS 99 and 100 in the package. But FLEX as a single study we view as a supportive study to support the indication.

Geoffrey Meacham - -J.P Morgan

Okay and just a quick follow-up. The percentage of the long population that are EGFR expressing patients do you guys have an idea there?

Eric K. Rowinsky - Senior Vice President of Clinical Development and Chief Medical Officer

It's been quite difficult in the past. Then obviously you will also have to see the data, but I will say that in the past, when you look in the history, in the literature, if you look in the textbook, per se, often you will see a range. That range is anywhere from 40% up to 90%. And I think that really is a function of the various methodologies that have been used over the years. If you look at the recent JCO test what actually defines EGFR positivity, is any positive staining and we're seeing currently at the present time in long and call-in [ph], the majority of, the overwhelming majority of patients staying positive. As far as the specifics in the FLEX study, I would love to be able to give you those data. Now we're compiling all the data and we will present it in full in the near future .

Geoffrey Meacham - JP Morgan

So do you think that it will be limiting to EGFR expressing patients, based on the FLEX study or that might not be the case?

Eric K. Rowinsky - Senior Vice President of Clinical Development and Chief Medical Officer

I think, our... we haven't really completed our discussions with the FDA. Obviously it may depend upon the predominance or the number of the EGFR positive patients in the study, I mean the proportion. But we have not completed our due diligence with the Agency at this point.

Geoffrey Meacham - JP Morgan

Okay, thanks a lot.

Operator

Your next question comes from Michael King of Rodman & Renshaw.

Michael King - Rodman & Renshaw

Thanks for taking my question. A commercial question about KRAS [ph]. Your competitors at Amgen, yesterday on their call were making a fair bit of noise about how KRAS mutants are going to be excluded and that’s going to help Vectibix. And you guys had at ECCO regarding KRAS, response in KRAS mutants as well. So I was just wondering, how you see that playing out commercially and also what available kits there are to test for KRAS mutations?

Michael P. Bailey - Senior Vice President of Commercial Operations

Hey, Mike, it's Michael Bailey. Good question. Obviously the data that was presented at ECCO for panitubimab was pretty convincing, especially for the European authorities. But I do want to make sure that people understand that that’s for monotherapy. So what that may answer is that KRAS is predictive of therapeutic intervention, but it doesn’t necessarily apply to a chemo combination or any kind of combination.

So I think we've got a hold on our assessment of this ultimately until we get that data, that compares in ERBITUX and chemotherapy versus a chemotherapy looking at KRAS. And obviously we've got an interest in looking that from a CRYSTAL, and EPIC and all of those other combination there.

So it's enticing data, but I think it's a little early days to be applying that to combination therapy. And I think we learned that lesson with PACE.

Eric K. Rowinsky - Senior Vice President of Clinical Development and Chief Medical Officer

Michael, this is Eric and I just want to add another facet of the story. KRAS, until… I agree with what Michael said that KRAS looks pretty nicely predictive from monotherapy and refractory setting in the panitubimab study. But KRAS has always been a prognostic factor. It’s a factor that really marks bad disease. And I think we have to really be careful particularly in the combination setting in the upfront patients because now we start to select patients out on the basis of KRAS, certainly patients with good prognostic disease always do better with any therapy generically. But then you are going to say, you patients who have bad disease who could also benefit but yet left would not actually be selected for these therapies. So we are really looking at KRAS but we are also looking at other biomarkers that may be more predictive. And I think we have to be careful about KRAS and prognostic markers. We don’t want to exclude the patients who still would benefit from therapy, but would not as much.

Michael King - Rodman & Renshaw

So we shouldn’t expect any prospectively designed trials looking at response of PSS in a KRAS positive population?

Eric K. Rowinsky - Senior Vice President of Clinical Development and Chief Medical Officer

No, I think that that is… we are really going to, before doing that, we want to make certain that based upon the data that we have, and the study data that we have, we are actually looking in our early stage studies. Is KRAS really predictive and we'll have patients that did not get ERBITUX and who did get ERBITUX, for benefit. Because it may just predict for chemotherapy benefit as well, and we want to look at other markers and we're doing that now.

Michael King - Rodman & Renshaw

Okay, right. And is there a commercially viable test as far as you know?

Eric K. Rowinsky - Senior Vice President of Clinical Development and Chief Medical Officer

I believe that… I don’t know have the answer to that one, but I believe that you can run KRAS in many labs including Genzyme.

Michael King - Rodman & Renshaw

And then, if I may, just one more. And on the commercial front again, Michael can you help us understand what your target inventory level is going to be for ERBITUX going forward? Is the $9 million still going to be adequate or should we see subsequent quarters with some kind of inventory accumulation?

Michael P. Bailey - Senior Vice President of Commercial Operations

We've moved to open distribution model for about 50% of our sales. So there might be some additional inventory, if you will, build up over the course of the next year as we go more fully to this open distribution model. But we will try to keep you as informed as possible with regard to that.

Michael King - Rodman & Renshaw

Any other goals to how much inventory you'd want to have in the channel or is it going to be a function of weaker sales?

Michael P. Bailey - Senior Vice President of Commercial Operations

Yes, that is a good question. Generally speaking, we're shooting, and it seems like the wholesalers are leaning towards keeping an inventory at about 0.3 months.

Michael King - Rodman & Renshaw

Thank you

Michael P. Bailey - Senior Vice President of Commercial Operations

About a week, a little below a week and a half.

Michael King - Rodman & Renshaw

Perfect, thanks a lot.

Operator

Thank you. Your next question comes from Han Li from Stanford Group Company.

Han Li - Stanford Group Company

Yes, just quick questions on the regulatory pathways for ERBITUX. Merck KgA mentioned yesterday because it filed for a first line colorectal last quarter and they may have to wait till '08 to file for lung cancer and head and neck. What’s the… because there is no high level regulatory pathways in Europe. What’s the situation here in the States and what should we expect regarding the SPOA filing of the three additional indications?

Eric K. Rowinsky - Senior Vice President of Clinical Development and Chief Medical Officer

Hi Han, this is Eric again. You can imagine with all the data that’s come into our labs recently from these pivotal trials there’s lot of dynamics going on. Dynamics in terms of data flowing from our partner Merck KgA to us, three sets of data from three major clinical trials. Certainly the data needs that we have are very different from what Merck KgA faces with EMEA and Europe meaning that when you are file in the United States, it's a bottom of filing, the FDA sees all data, all alrorithms and actually outs them together and does the analysis. It’s very different in Europe.

In addition we have three parallel of discussions going on with the FDA that will go one with regard to lung, head and neck and colorectal carcinoma. And then there is the filing. Now obviously, as I stated I think in reference to Michael’s question, or prior question that we have two files based upon very robust survival data, and I think that those will obviously be somewhat clear cut. That's the EXTEME study for head and neck, and the lung cancer, FLEX. And we will, when we complete our negotiations with FDA and discussions with FDA and determine precisely what needs to be in the filing, I envision that those will be rather easy filings and will go in relatively soon.

With regard to colorectal carcinoma, we have actually taken a different route. And let me say that CRYSTAL made its primary endpoint of progression free survival solidly, with an IRC and we are quite proud of those data. Be feel that we want to really pursue a very sensible, comprehensive strategy in view of what we have observed at the FDA over the last couple of years. And we feel that there is tremendous evolution that’s occurring. And this is an opportune time for us. But we have elected certainly with all the other business going on with lung and with head and neck cancer that we will prepare those files first and we will wait for survival data, mature survival data which will occur in mid 2008. Can we file before in colorectal cancer? Certainly we can do that. But we think that it is wise to get our other files out of the way and send in a comprehensive package to the FDA. And in view what’s going on with progression free survival now at the Agency, we think that that’s the best strategy to pursue.

Han Li - Stanford Group Company

And also along that line, the follow-up is, what's the time line for the survival data for CRYSTAL in colorectal cancer and also the survival data for the lung cancer study, BMS-099?

Eric K. Rowinsky - Senior Vice President of Clinical Development and Chief Medical Officer

Well, we anticipate that CRYSTAL will have survival data by mid 2008. That will allow us to put the package together. Certainly we will be working on that package in the interim. With regard to BMS-099 it would be in the first half of 2008. However remember with regard to survival on the BMS-099 study that was not the primary endpoint.

Han Li - Stanford Group Company

I understand. Thank you.

Eric K. Rowinsky - Senior Vice President of Clinical Development and Chief Medical Officer

You are welcome.

Operator

Thank you. Your next question comes from Eric Schmidt of Cowen And Company

Eric Schmidt - Cowen and Company

Thank you for taking my question. Most of them are answered. Maybe a bookkeeping question on Japanese revenue, how that might flow through your P&L once you get approval in Japan, and maybe you can update us on your thoughts on timing for approval.

Michael P. Bailey - Senior Vice President of Commercial Operations

Yes, this is Michael Bailey. I can comment our estimates for timing of approval. As was stated in the press release back in January, we are looking at the end of '07; the beginning of '08 is our hope. As far as booking sales, I can defer to Peter on how those sales will be booked in Japan.

Peter R.Borzilleri - Interim Vice President of Finance

Right, as and when we announce the execution of the agreement, there is a 50% share of profit and loss with Merck getting 50% and BMS sharing the remaining 50%, or 25% each. And then we will also be getting a 4.75% royalty from Merck from the sales to Japan.

The sharing of profit and loss reflects that coast wasn’t right to ERBITUX in Japan that was previously granted by ImClone to Merck.

Daniel J. O'Connor - General Counsel, Secretary

And Eric, this is Dan O'Connor, I'll kind of fo9llow up just a little bit. So the Merck Japan entity is going to actually be booking the sales in Japan. And as Peter just said there will be a profit-loss split 50-50 between the Merck Japan entity, and the Bristol Japanese entity. And then thereafter this 50% that goes to the Bristol's Japanese entity, BMKK will be further split between ImClone and Bristol. And also, as we noted in our press release, ImClone we see 4.75 net sales royalty paid by Merck. And that is on the Japanese sales.

Eric Schmidt - Cowen and Company

So you book royalties on Japanese sales, I assume on your royalty line, and then book a separate line for your interest in that Bristol-ImClone Japanese JV? estimated so much you keep an eye when you put a separate line for your

Daniel J. O'Connor - General Counsel, Secretary

Correct

Eric Schmidt - Cowen and Company

Okay, and one follow-up on the FLEX data for Eric. I think the comment was made that Merck KgA is sort of validating some of the secondary endpoints of analysis. Can you speak at least to in the first brush whether there is some consistency to this data set or is that being questioned by these analyses? I didn’t know how to interpret that statement.

Eric K. Rowinsky - Senior Vice President of Clinical Development and Chief Medical Officer

No, Eric we, Merck-KgA worked primarily to get out that primary endpoint and when the last event occurred that triggered the analysis and you can imagine progression-free survival on response rates are much more difficult. And Merck has a very solid validation process and they are working on those endpoints. There is really nothing to knock here and which is basically waiting for there validation processes to come to and end.

Eric Schmidt - Cowen and Company

Eric, do you think you need consistent response rate in PFS data from this trial to file?

Eric K. Rowinsky - Senior Vice President of Clinical Development and Chief Medical Officer

That’s a good question. I think that you will have…. survival really trumps all, it's always nice to have consistency.

Eric Schmidt - Cowen and Company

Thanks.

Operator

Thank you. You next question comes from William Sargent of Banc of America

William Sargent - Banc of America

Thanks for taking my question. Eric, I guess, the first part of the question, based on waiting until, especially mid '08 to get the CRYSTAL overall survival data and filing, could you talk about what next steps would be, once the CAIRO-2 is available and if it’s positive if you would wait to make that more of a comprehensive packages, package or make potentially two filings?

Eric K. Rowinsky - Senior Vice President of Clinical Development and Chief Medical Officer

Well, at this point, our intention is not to make a two filing, so that can always change, but we feel we are confident about CRYSTAL PFS data and its supported data from EPIC. We are not going to wait for CAIRO-2. CAIRO-2 is the Northern European cooperative group trial. Data was actually, will be assessed, will be quite different from our routines in company sponsored trials that were really aimed at filing. So that is not our intention at this time. Could we file a supplement based on CAIRO-2. You bet you, we can do that.

William Sargent - Banc of America

Just to clarify real quickly. Is CAIRO-2, is it a centralized review?

Eric K. Rowinsky - Senior Vice President of Clinical Development and Chief Medical Officer

At this point I do not have the, those information, the centralized review is basically going somewhat delayed. The data that will initially be reported will not be a centralized review. That can always be kicked into gear.

William Sargent - Banc of America

Sure. And then I guess looking toward the future with FLEX and with the CRYSTAL filing going in the first line, I guess more of a question from Michael. What are your thoughts about pricing changes moving forward in earlier lines of therapy?

Michael P. Bailey - Senior Vice President of Commercial Operations

Hi, Will. I think as we've said in the past, we're revaluating all that. certainly the FLEX data rolls in, that’s another piece of information that is going to be critical in that decision. But again, our aim is to ensure maximum access to patients and we will define a price that will do that.

William Sargent - Banc of America

Would you expect this before inclusion, no, or around any pricing or essential more?

Unidentified Company representative

My personal opinion would probably be pretty closely linked to an indication, any new indications.

William Sargent - Banc of America

Thanks a lot. Congratulations on the quarter. Thanks.

Michael P. Bailey - Senior Vice President of Commercial Operations

Thanks Will.

Operator

Thank you, your next question comes from Steve Harr of Morgan Stanley.

Unidentified Analyst

Hi guys, it Marshall here in for Steve. So I have two questions. The first one is, are you guys committed to also presenting the long data from the BMS study to help us put the chemotherapy differences in some perspective?

Unidentified Company representative

That’s a great question. And we are intending to look at all their trials and to analyze all the data and potentially look at subset analyses across the studies, particularly in the underserved patient populations or also to look if there are any general themes that are emerging. But at the present time FLEX is our major trial. There are some interesting subset analyses that will be conducted, obviously we are going to be focusing on histology and some strategic subsets across all studies.

Unidentified Analyst

So just to be clear, at this point you guys have no plans to present the BMS data?

Unidentified Company representative

We did present the BMS data at the ISLAC [ph] meeting just a few months ago.

Unidentified Analyst

All right. And then on Yeda, can you guys give us some kind of update on where that is and when we are going to expect to get some visibility?

Daniel J. O'Connor - General Counsel, Secretary

Sure. This is Dan, Marshall. So we have got basically two court actions occurring in parallel. One is the appeal from the district courts decision to the federal circuit. That appeal has been fully brief and is now moving on to the oral argument phase. The second is the declare to a judgment action, that action that is in discovery. And as said, they are both continuing in parallel.

Unidentified Analyst

All right, thanks.

Daniel J. O'Connor - General Counsel, Secretary

Sure.

Operator

Thank you, your next question comes from Eric Ende of Merrill Lynch

Eric Ende - Merrill Lynch

Thanks. I am still trying to understand with respect to the FLEX study what the label might look like. Would the label specifically mentioned the chemo regimen used in FLEX or might it be all cisplatin based chemo regimens. How might that look?

Michael P. Bailey - Senior Vice President of Commercial Operations

Eric. This is Michael Bailey. I’m asking the same question and looking forward to the regulatory authorities giving us some guidance on that.

Eric Ende - Merrill Lynch

Okay. Thanks.

Operator

Your final question. The question comes from Jim Reddoch of FBR.

James Reddoch - Friedman, Billings, Ramsey & Co

Good morning guys. I think all my questions have been answered, except for two modeling kind of things. One is, gross royalty expense is jumping around a little bit over the past three quarters, and it was 10%, 12% and 10%. Is 10% what we should use going forward?

And secondly is it fair to think on May-Kin's question on the licensee as just previously the collaboration with Bristol had in earlier ending date? Sp all the amortized, the balance of the amortized revenue had to fit within that date and now that’s just stretched out. So, we're just stretching out the and are now begin to amortize each year. Thanks.

Peter R.Borzilleri - Interim Vice President of Finance

Jim, this is Peter. That’s not entirely correct. With the amendment the spend has been effectively increased. The period is not necessarily extended but just larger dollars being spent in later years than the original program.

James Reddoch - Friedman, Billings, Ramsey & Co

I see. Okay. And then the royalty fees.

Peter R.Borzilleri - Interim Vice President of Finance

Well, repeat that question, I’m sorry, on the royalties.

James Reddoch - Friedman, Billings, Ramsey & Co

Which one should we use for the fourth quarter? 10%, or 12% or something else? I think I calculated that it was 10% in 3Q but it was 12% in 2Q. If I calculated that right? Is there any particular reason why that gross royalty expense would move around?

Peter R.Borzilleri - Interim Vice President of Finance

We had a… let's see.

Daniel J. O'Connor - Senior Vice President and General Counsel

This is Dan. Sorry, are you referring to the third party royalty that the company is paying out to the royalty camp in ERBITUX ?

James Reddoch - Friedman, Billings, Ramsey & Co

Yes. Maybe you don’t call it gross royalty expense.

Daniel J. O'Connor - Senior Vice President and General Counsel

I was sure in my models. Suggest this and you guys look at my model. Just kidding. So it’s the royalty expense.

James Reddoch - Friedman, Billings, Ramsey & Co

So the gross royalty expense.

Daniel J. O'Connor - Senior Vice President and General Counsel

Historically it's been a 9.75% royalty sack for ERBITUX and that’s recently gone down a bit and I think Peter can follow up and give you the exact number on that.

James Reddoch - Friedman, Billings, Ramsey & Co

Okay. Fair enough. Thanks.

John H. Johnson – Chief Executive Officer

Okay. Now, thank you.

Well upfront, we had a little bit of technical problems, which I’d like to thank you for your patience in holding on. And as I mentioned at the end of the prepared remarks, we have an upcoming R&D day. We're excited about sharing the progress of our pipeline with you, both preclinical as well as clinical. And on a personal note I look forward to meeting many of you at that time. Thanks for your patience and I look forward to seeing you there.

Operator

Thank you. This concludes today’s ImClone Systems 2007 third quarter earnings release conference call. You may now disconnect.

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