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Executives

Kyle Kuvalanka – Senior Director Investor Relations

Dr. Deborah L. Dunsire – President, Chief Executive Officer & Director

Marsha H. Fanucci – Chief Financial Officer & Senior Vice President

Dr. Christophe M. Bianchi – Executive Vice President Commercial Operations

Dr. Nancy A. Simonian – Chief Medical Officer

Analysts

Rachel McMinn – Cowen and Company, LLC

Howard Liang – Leerink Swan

Christopher J. Raymond – Robert W. Baird & Co., Inc.

James F. Reddoch – Friedman, Billings, Ramsey Group, Inc.

Katherine S. Kim – Banc of America Securities

Yaron Werber – Smith Barney Citigroup

May-Kin Ho – Goldman Sachs

Edward Tenthoff – Piper Jaffray

Matthew Rodin – JP Morgan

Brett Holly – CIBC World Markets

Thomas McGahren – Merrill Lynch

Sapna Srivastava – Morgan Stanley

Millennium Pharmaceuticals, Inc. (MLNM) 2008 Guidance Call January 4, 2008 8:00 AM ET

Operator

Good day everyone and welcome to today’s Millennium conference call. Today’s conference is being recorded and to get us started I’m pleased to turn the call over to Mr. Kyle Kuvalanka. Please go ahead sir.

Kyle Kuvalanka

Good morning everyone and thanks for joining us this morning to discuss our press release on Millennium’s goals and financial guidance for 2008. The release was issued in advance of the J.P. Morgan conference where we will be presenting on Wednesday, January 9th at 3:30 PM pacific time. With me today are Dr. Deborah Dunsire, Millennium President and Chief Executive Officer; Marsha Fanucci, Chief Financial Officer and Senior Vice President of Corporate Strategy; Dr. Christophe Bianchi, Executive Vice President and Head of Commercial; and Dr. Nancy Simonian, Chief Medical Officer.

Deborah will open the call with our prepared remarks and then the team will be available to take your questions. Before we begin let me remind you that we will be making forward-looking statements when we discuss our growth, science, products and prospects our point of reference is how we as a company think, expect or believe the future will look based on information as we know it today. There are risks to our business that could cause actual results to differ materially from these statements. You can review a list of these risks with the reports we file with the SEC.

During this call we will be referring to non GAAP net income, non GAAP research and development expenses and non GAAP selling, general and administrative expenses. These financial measures are not prepared in accordance with generally accepted accounting principals. A description of the differences between these non GAAP financial measures and the most directly comparable GAAP measures is included in the press release we issued this morning. A discussion of why we believe these measures are important are included in the Form 8K we furnished to the SEC this morning. The press release and Form 8K are available in the investor section of our website.

I will now turn the call over to Deborah.

Dr. Deborah L. Dunsire

Good morning and happy New Year to you all. 2007 was the most successful year in Millennium’s 15 year history. It was driven by record results across commercial, R&D and operations. We’re well positioned for continued success in 2008 and beyond and this morning we’re going to give you an overview of our guidance and goals for 2008. The primary focus of course for us is to maximize the potential of VELCADE.

In 2007 US net sales grew to $265 million a 20% increase over 2006 driven primarily from increased use in the relaxed myeloma settings. In 2008 our goals are going to be to drive the timely approval and very successful launch in newly diagnosed multiple myeloma patients. We did file a supplemental new drug application in December of 2007 as we had told you and I view this as a very significant accomplishment given the data became available only in September.

It was data based on the company sponsored Phase III Vista Trial. The data showed very successful complete remission rates of 35% and a significant survival benefit for patients who were ineligible for stem cell transplant and they’re generally older and sicker as you well know. The results are consistent with other large well controlled Phase III trials that were presented at ASH including the ISM and Cavo trials. So, we demonstrated excellent results really across the full spectrum of myeloma patients.

With VELCADE we’re also looking to expand in non-Hodgkin’s lymphoma and are on track to complete the patient enrollment into the Phase III LYM3001 trial in the first half of this year. We’re also looking to initiate other combination studies in the non-Hodgkin’s lymphoma settings. As you know the relaxed setting of non-Hodgkin’s lymphoma is more patients than there are in all multiple myeloma so we see this as a very significant future growth driver for VELCADE beyond this current growth drive of the front line myeloma population. We’re also looking a registration enabling trial of VELCADE for subcutaneous administrations which is broadening administration options for our patients.

Moving on to the second strategic driver for 2008 moving our innovative development pipeline forward. MLN0002 is the latest stage product candidate in that pipeline and it represents the next revenue growth driver from the company’s own pipeline. MLN0002 is a gut-specific immuno therapy and it demonstrated significant improvement in physical remission rates in both ulcerative colitis and Crohn’s disease in randomized Phase II clinical trials which were published in the NEJM.

In 2007 we completed the patient enrollment in the very important and core bridging trials and have demonstrated a favorable pharmacokinetic, pharmacodynamic and safety profile in these studies for the new material generated in the cell line which we generated for this product. So, we’re very excited about the ability to move forward into pivotal trials towards the end of 2008.

We’re continuing also to strengthen our leadership position in the area of protein homeostasis. Today we’re very pleased to announce the advancement of a wholly owned second generation proteasome inhibitor. We call that MLN2238 just to confuse you. This accomplishment is very rewarding for the many employees of Millennium who are experts in the area and who have been working tirelessly over many years to select and bring forward a molecule with improved characteristics over VELCADE which is a pretty hard act to follow. Pre-clinical studies with this molecule have demonstrated that it is advantageous in multiple animal models of cancer including some that are relative to VELCADE. The results suggest that 2238 holds the potential for a broader clinical utility than the current generation of proteasome inhibitors and we expect to move this molecule forward both in the oral and IV administration form. We’ll be talking to you more about MLN2238 throughout the year. Just to emphasize this is the second molecule that came forward from the discovery pipeline following MLN4924 against the novel [inaudible] NAE.

In 2008 our goals are to keep advancing that pipeline of novel molecules in the area of cancer and inflammation including initiating the global retrial program with MLN0002 in ulcer colitis and Chron’s disease at the very end of the year or beginning of 09. There’s a lot of preparation that goes into those global Phase III trials. We’ll continue the flow of innovative molecules from discovery with the potential advancement of another novel development candidate throughout the year. In addition, we’ll continue to evaluate appropriate licensing, acquisition and partnership opportunities. The third strategic driver for 2008 is to focus on delivering the top and bottom line financial growth while continuing to invest for the future.

For 2007 we’re on track to exceed the non GAAP net income and GAAP net loss estimates from the revised financial guidance outline in our third quarter 2007 earnings call on November 1st. This success was driven by a strong increase in worldwide VELCADE sales as well as by the early achievement of the $40 million ex-US sales milestone payment. Comprehensive financial results for 2007 are going to be issued at our year end earnings release on February 7, 2008.

But, let me know talk about our financial guidance for 2008. For VELCADE US net product sales we expect a 20 to 30% increase resulting in sales between $320 and $345 million. Royalty revenues is expected to be in the range of $175 to $185 million. As you know the revenue primarily comes from royalties from product sales of VELCADE outside the US and from INTEGRILIN both inside and outside the US. We expect the royalties from INTEGRILIN sales to be slightly declined in 2008. But, royalty growth is expected to come from a strong increase in VELCADE ex-US sales.

Combined non GAAP R&D and SG&A expenses are expected to be approximately $450 million. Non GAAP expenses will remain approximately flat with our 2007 guidance even as we launch VELCADE in newly diagnosed myeloma and initiate the Phase III clinical program with MLN0002 and continue to advance the rest of the pipeline. The GAAP R&D and SG&A expenses including stock based comp are expected to be approximately $480 million.

Our non GAAP net income is expected to be in the range of $80 to $95 million. As a reminder in 2007 we received a $40 million one time sales milestone payment under our strategic alliance revenue line and I want to remind you that we don’t expect any significant milestone payments to be earned in 2008. Our GAAP net income guidance is in the range of approximately $10 to $25 million.

In closing I’d like to thank every person here at Millennium for making 2007 a record year for this company. I look forward to working with you all in 2008. We’re going to pause here for Q&A and we’ll take your questions.

Kyle Kuvalanka

Operator please open the line for questions.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question will come from Rachel McMinn with Cowen and Company.

Rachel McMinn – Cowen and Company, LLC

I wanted to better understand and I don’t know if you’re actually prepared to really talk about this but for the fourth quarter VELCADE numbers can you talk about potentially any one time factors that may have impacted the fourth quarter VELCADE numbers? Were there any inventory changes there?

Dr. Christophe M. Bianchi

Good morning. No, we don’t see any change in inventory in the fourth quarter our inventory remained in low end of our desired range. I would like to point out that in the fourth quarter of this year we saw a 34% increase versus the fourth quarter of last year which is indeed showing the acceleration of VELCADE sales. But things have been even place on inventory.

Rachel McMinn – Cowen and Company, LLC

Okay. I guess what I’m trying to get at is just trying to understand the quarter-to-quarter fluctuations and perhaps maybe if there was anything that happen in 3Q that didn’t happen in 4Q? Do you have a sense of whether [inaudible] was in any way was sort of kind of a one time boost to 3Q?

Marsha H. Fanucci

Rachel I think if you look back over the profile of the sales over time you do see these quarter-to-quarter fluctuations. When you look back at Q3 we did see the impact of a price increase in that quarter which was not repeated in Q4. And, as Christophe mentioned the inventory was not a factor in quarter-to-quarter performance. On a yearly basis we are ending the year at 20% growth for the product. So, I think just because of the profile that we tend to see why it’s very helpful to look it at on a rolling basis and as Christophe pointed out as well on the year-on-year changes for the quarter which were extremely strong at 34%.

Rachel McMinn – Cowen and Company, LLC

Great. Just two other questions one on the [subcu] formulation just based on your market research what proportion of the US market do you think will actually benefit from VELCADE? Or, is this really more important in Europe?

Dr. Christophe M. Bianchi

It’s a bit early to tell. We’re developing VELCADE [subcu] for the long run – what we know right now is that we want to give as options for physicians to be able to administer VELCADE. In some practices giving VELCADE subcutaneously will be a tremendous advantage because it will allow physicians and patients to get the drug even more quickly. In some of the practices it will be of even greater advantage because VELCADE could be administered at home. There is a lot of things that needs to happen between now and then but you could consider giving VELCADE at home under the supervision of a physician, under the supervision of a nurse. It’s going to bring value in the [inaudible] delivery options and as a flexibility for the usage of VELCADE.

Rachel McMinn – Cowen and Company, LLC

The timing of the pivotal study when could that start and when could you actually get an expansion in your label?

Dr. Nancy A. Simonian

We are going to initiate the trial that’s necessary for registration in this year, 2008. And, I think as time goes on we can be more specific about the timing for the submission of the filing.

Operator

Our next question will come from Howard Liang at Leerink Swan.

Howard Liang – Leerink Swan

You mentioned that the out performance on the bottom line basis in 2007 was driven in part by the $40 million milestone. Can you say without that $40 million would you have accretive year goal?

Marsha H. Fanucci

Howard, we’re not prepared to talk about the full year results at this point in time because we’re going to be discussing that on the February call. But, I think if you look at the components of value you certainly can see that both the US and the ex-US revenues were a primary driver of performance for the company and that milestone was something that occurred earlier than we had anticipated but all of our planning and all of our excitement about the performance of the company are really stemming from the fundamental – let’s say aside from that milestone which were all strong.

Howard Liang – Leerink Swan

I have a few questions regarding 2238 the [inaudible] proteasome inhibitor. Can you say when it will be in the clinics and also can you talk about the proteasome inhibition specificity in terms of [inaudible] and the different proteasome specificities. Is it a boronic acid based compound?

Kyle Kuvalanka

We’re going to have Nancy take those questions. So, she’ll start off with when it’s going to go in the clinic and then a little bit more about the mechanism.

Dr. Nancy A. Simonian

We’re quite excited abut 2238. As Deborah mentioned VELCADE is a very tough act to follow because it’s so effective but we believe that we have a molecule that has the potential to be superior to VELCADE and really opens the avenue to treatment of cancers beyond the hematologic malignancies. At this juncture we are as we said we’ve just nominated this as a development candidate. We are moving into pre-clinical development and we are going to be very aggressively pursuing an I&D and that will happen really near the end of 2008. And, as it relates to anymore specificity on the molecule I think we will be in a position over 2008 to give you more details about the molecule but it is a boracic acid.

Operator

Your next question will come from Chris Raymond at Robert W. Baird.

Christopher J. Raymond – Robert W. Baird & Co., Inc.

Maybe to follow on Howard’s questions on 2239 just quickly do you have any data, clinical data on its renal tox profile?

Dr. Nancy A. Simonian

In the studies that we’ve done to date we haven’t seen any evidence of renal toxicity. Obviously, the GLP tox studies are the next step but based on what we know about this molecule, what we know about VELCADE we wouldn’t anticipate that there would be any issues of renal toxicity.

Christopher J. Raymond – Robert W. Baird & Co., Inc.

So not like some of the other proteasome inhibitors.

Dr. Nancy A. Simonian

That’s correct.

Christopher J. Raymond – Robert W. Baird & Co., Inc.

Maybe switching back to VELCADE and to sort of continuing beating a dead horse here on Q4 just trying to understand it was a little surprising to see the numbers as they were given the script data. Can you maybe comment, I know you guys probably subscribe to the same services we do is there some issue with the capture rate that might have provided a bit of a [headsake]?

Marsha H. Fanucci

Chris I think we have emphasized pretty strongly over time that we really encourage people not to rely on the short term information from these sources because in our experience there is not a good correlation in the short term time horizon. And, sometimes when the quarter ends because the rolling corrections just don’t happen to match the end of the nice fiscal quarters you see a bigger differential than others and I think the only thing that we can do is to continue to say we find it very challenging to correlate that information on a short term basis and we do not recommend that others try to do so.

Christopher J. Raymond – Robert W. Baird & Co., Inc.

I know it’s only been a month since ASH but have you seen any dynamics in physicians prescribing patterns in terms of frontline use? Anything you can talk about with regard to how docs – how things have changed since the vista data and others at ASH?

Dr. Deborah L. Dunsire

I think we saw tremendous enthusiasm from the participants at ASH and to actually see randomized Phase III data from three large well controlled trials and we know from physicians that Phase III data is extremely impactfull. However, I will say that ASH comes sort of in the middle of the month and then is followed by a lot of holiday weeks so we certainly have not seen impact on prescribing as yet. We also know that really the full impact of the data will come with the approval which we anticipate in the middle of the year having filed the supplemental NDA in December.

Operator

We’ll move forward to Jim Reddoch with FBR.

James F. Reddoch – Friedman, Billings, Ramsey Group, Inc.

Just a different direction of question – it seems to me that you would have some flexibility on the price of VELCADE because on an annual basis it turns out to be about half the price of REVLIMID. Have you thought about what you can do there? How do you know that it’s really priced with what the market will allow or would be happy to pay? Secondly, just talking about ex-US it does look like that is a particularly robust area for VELCADE sales so far. Can you give us the Europe versus outside of Europe break down? And secondly, what exactly – you did mention that you did expect that to be strong in 2008 what are the drivers of that area of that geography’s growth if they are any different from the US.

Dr. Deborah L. Dunsire

They’re all great questions Jim. I think on the price we did take a 2.67% price increase Jan 1. The last price increase we had taken was approximately that in July. One of the challenges we have with the way Part B drugs are reimbursed is that price increases that go beyond that put physicians in a place where they’re actually underwriting the drug and not getting fully reimbursed for what they’re paying and that tends to be very poorly received. So, that’s something we always keep in mind as we think about the price increases. With oral drugs they can essentially do what they like until the market doesn’t like it anymore. So, there is a difference between the Part B and Part D drug reimbursements.

I think that we’ll continue to evaluate mechanisms of price increase but for now we’ll continue to take the price increases as we have been in the past and ensure that there isn’t a great impediment to physicians making the right choice for the patients to use VELCADE. VELCADE also delivers extraordinary value for patients as you point out. Delivering the survival advantage that it has in the relaxed setting and now these tremendous PR rates and the survival advantage in the frontline setting at a very cost efficient rate. I think that payers are as we’ve seen with what happen with the ESAs they are looking at the cost of oncology drugs and they will demand that the relationship between the delivery of advocacy and cost be a factor in prescribing. And, that’s something that we have seen with respect to some of the payers.

VELCADE is going to be a backbone of therapy throughout. We know that frontline myeloma can only really be treated in combination therapy and VELCADE as we demonstrated at ASH can be used across all the different regiments and so as we pursue our course of making VELCADE the front line combination agent of choice we feel very confident that the price will certainly not impede that and VELCADE will be able to be that backbone giving it the ability to be used across all the frontline and then into with re-treatment into the relaxed setting. But, I think that’s actually a tremendous advantage for the product.

To turn now to your questions about outside the US we’ve seen growth of VELCADE through the excellent efforts of our partners Johnson & Johnson across all the territories. VELCADE being approved in over 85 countries and growth is coming throughout. As you know with the worldwide roll out of a drug it takes different lengths of time in different countries. So, we’ve seen the ramp as the countries have rolled out first the third line and then the second line. We did see our partners submitting to the EMEA at the same time that we submitted at the FDA. So, the frontline approval will be the next strong growth driver but, obviously European approval does take a little bit longer than priority review in the US. So, we won’t see that kick in until very late in the year or early into 2009. And, I’m sure Johnson & Johnson will be able to give you more color on their expectations for the brand.

I think you had wanted to see whether there is a differential growth rate in the [inaudible] and I think that’s something they would have to give you more color on.

James F. Reddoch – Friedman, Billings, Ramsey Group, Inc.

Actually I was just asking for a breakdown in sort of absolute proportions.

Dr. Deborah L. Dunsire

That would be something that they would have to give to you.

James F. Reddoch – Friedman, Billings, Ramsey Group, Inc.

Lastly is there some way to get the extra six months of treatment that were present in the Vista Trial that are not present on the current VELCADE label – someway to get those included in the listing before official approval? And, will that extra six months be stated overtly in the ultimate label?

Dr. Deborah L. Dunsire

Well, I’ll start and then I’d ask Nancy to comment on the labeling. The way that compendium reviewed the data is based on the trials at hand. So, the submission to compendium included all the data from the various different trials that were available at the time of the submission. So, they accept the data as the trials are planned. So, in other words there’s no limitation placed on the length of therapy. So, that’s not something that has to be explicitly stated. The trials are what drives the compendium acceptance.

Dr. Nancy A. Simonian

Jim, in the label in the package insert it will discuss in the dosing section the dosing regiment of VMP that was used in the study and that is based on a 54 weeks of VELCADE treatment. So, that’s explicit because that’s the regiment that gave the benefit to patients.

James F. Reddoch – Friedman, Billings, Ramsey Group, Inc.

Okay. Great so the doubling of time will actually be stated in the compendium.

Operator

Next we’ll take a question from Katherine Kim at Banc of America Securities.

Katherine S. Kim – Banc of America Securities

Regarding the European approval is there a milestone payment connected with it? And, can you tell us how much?

Marsha H. Fanucci

What we have said is that we’re not anticipating any material milestones next year Katherine.

Katherine S. Kim – Banc of America Securities

What about – I’m just wondering what the magnitude of the milestone payment will be? I’m assuming it will be in 2009?

Marsha H. Fanucci

Well you know our perspective on guidance with milestones is to try and give you some color when we get close to those events and so I’ll defer in commenting on that right now. I just would mention that we have received nearly $150 million in milestones related to the multiple myeloma indication to date. So, it has been a very significant component of the deal structure even in the earlier lines of therapy.

Katherine S. Kim – Banc of America Securities

So there is going to be a milestone payment connected though with the approval?

Marsha H. Fanucci

We’re not going to speak specifically about the milestones at this point in time.

Katherine S. Kim – Banc of America Securities

In terms of in the US when will you know whether or not you will get priority review?

Dr. Nancy A. Simonian

It is basically in February of this year. It is a certain number of days after you submit that you will hear. 45 days.

Katherine S. Kim – Banc of America Securities

So when they announce the acceptance they will tell you whether or not you’ll get priority review?

Dr. Nancy A. Simonian

Yes, essentially.

Katherine S. Kim – Banc of America Securities

Then in terms of the expenses can you give us an idea on the SG&A line in particular how much incremental will come from the launch in the label expansion?

Marsha H. Fanucci

When we give our annual results in February we’ll talk a little bit more about the color around the division between R&D and SG&A. We probably will not get to that level of granularity even in that conversation but, I certainly will try and help you understand the R&D and SG&A divide when we do our annual presentation results.

Dr. Deborah L. Dunsire

Just to add to that Katherine I think the frontline launch is such a critical component of our growth and so important for patients that we intend to insure that’s resourced effectively.

Operator

Yaron Werber at Citi, your line is open.

Yaron Werber – Smith Barney Citigroup

I have a few questions. First point just some housekeeping. To the extent that you can, can you just give us a little bit of sense of the revenues on strategic alliances how should we model that relative to 07? Obviously, in 07 we need to exclude the $40 million payment so maybe you have a $49 million line there roughly. Should it be fairly flat year-over-year? Should it go up? Should it go down?

Marsha H. Fanucci

The strategic alliance revenue line is comprised primarily of reimbursement revenues for R&D activities and a little bit for supply chain activities and then the milestones. And, when we look at the R&D reimbursement the impact from a NOI standpoint is really very minimal and it does tend to bounce around quite a bit. And, we do not expect any material milestones next year. So, I think you just have to keep in mind that it is a number that does tend to fluctuation with reimbursement. The primary driver impacting the NOI is a milestone payment and we don’t anticipate major milestones next year. Beyond that I don’t think I can give you any more color.

Yaron Werber – Smith Barney Citigroup

Just remind us in 07 in addition to the $40 million payment milestone was that the only milestone or was there another one?

Marsha H. Fanucci

That was the only material milestone in 2007.

Yaron Werber – Smith Barney Citigroup

Can you give us a little bit of a sense just following on previous VELCADE questions how should we think about the run rate? It sounds like you’ll get approval assuming everything should go as it should well at the FDA review you’ll get the approval by June 21st or so for the label expansion and then obviously you’ll have a big up kick in the second half. How should we think of the growth in the first half relative to the current run rate?

Dr. Christophe M. Bianchi

Our guidance for 2008 is really to show growths of between 20 and 30% on VELCADE. As you have seen we’ve had a run rate quarter-over-quarter of roughly 5, 6, 7% Q-on-Q based on – and I’m talking about net sales of course and we would expect to see the same kind of growth rate for the beginning of the year with an acceleration in the later part of the year once the full benefit of our promotion activities start to kick in.

Dr. Deborah L. Dunsire

I think that the growth has really been coming in the relapse setting as we see re-treatment. We’ve also had some growth in [mantel cell] with use in combinations and we don’t see that as being over. We do see that there are some patients that get VELCADE in the frontline setting already. But, while that may increase slightly we really believe that it is the approval and the promotion that will give us the major up tick for VELCADE in the frontline setting.

Yaron Werber – Smith Barney Citigroup

If I projected you did roughly like $73.5 million in sales in Q4 and I just take that forward, I mean if you look at that run rate relative to your guidance your guidance is looking at maybe a 4 to 12% year-over-year growth relative to that run rate and you just did a 2.7% roughly price increase. If you do another one of those in the fall that’s about 4% net benefit from price. So, you’re almost guiding to -1 to about an 8% growth relative to the current run rate. Is that a conservative outlook for 08?

Dr. Deborah L. Dunsire

What we see is there’s a lot of features that can vary as we think about the timing of the frontline approval we said we are anticipating a priority review, we’re looking at what the label will actually say, the ramp up in the run rate, you know what happens between now and then. But, we certainly anticipate strong growth between 20 and 30% year-over-year through this launch. There are a lot of patients in the frontline setting. The launch really kicking in, in the middle of the year so even though patients have treated for longer those patients will be coming on at the back end of the year. So, the full benefit that you’re kind of seeing will be from those longer treated patients who will spill over into 2009. But, we have ever confidence in this brand’s ability to grow and deliver.

Operator

Next we’ll go to May-Kin Ho at Goldman Sachs

May-Kin Ho – Goldman Sachs

I have two questions. One is what is the plan for compendium listing for first line data and then the second is on MLN02 on the manufacturing – where are you with the commercial lots and who will be doing the manufacturing?

Kyle Kuvalanka

May-Kin we’re going to have Christophe take the question on compendia and then Nancy will take the question on 0002.

Dr. Christophe M. Bianchi

Indeed we received compendium listing in Drug Point in the last quarter and it’s really a testimony to the quality of VELCADE. VELCADE in large Phase II trials has shown some great advocacy and we were delighted to see this recognized by this compendium. Compendia is one thing, the ability to promote and the ability to really fully educate physicians of the benefit of VELCADE is really what drives the behaviors of those physicians and drive the adoption of VELCADE. So why compendia is important is we really do expect to see the full benefit of our launch to come at the time of the launch. That’s where the [inaudible] of the year.

May-Kin Ho – Goldman Sachs

Thank you. I was really referring to the launch of compendia.

Kyle Kuvalanka

May-Kin that’s what he’s talking about the drug point.

Dr. Deborah L. Dunsire

The compendia listing I think you’re referring to May-Kin we did achieve at the end of the third quarter, I think we announced it on our third quarter call in the Drug Point Compendia. So, we haven’t had a different one since then. Is that clear? Nancy, perhaps you’d like to take on 0002?

Dr. Nancy A. Simonian

So, as we said we have the commercially scalable sell line. We have material from that sell line at a production level that is going to be similar to what we’re going to be having for the safety material and commercial material in that’s what’s in currently the bridging trials that we described that we’re seeing very favorable PK and PE in safety. So, that’s a really critical piece of data. There’s additional scale up working that is ongoing to get us ready for the production for Phase III. And, we have not been explicit about who is actually doing the contact manufacturing for us. But, we’ve been very pleased with the progress that we’ve made as it relates to the material and the yield from the cell line that we have.

May-Kin Ho – Goldman Sachs

So the gating factor right now is to make the clinical material?

Dr. Nancy A. Simonian

Between now and the start of Phase III there are multiple things that are ongoing. First of all it’s to gather all of the data from the ongoing studies to make sure that we have the appropriate doses that we’re selecting for the Phase III. That’s a critical decision in terms of – but things are looking very favorable in terms of the previous materially. Secondly, we have a significant regulatory interactions that are ongoing both with the US and European authorities. And thirdly, we have the clinical trial material that is on track but is in progress for Phase III. So, all of those together are what are the gating factors for starting Phase III.

May-Kin Ho – Goldman Sachs

Just to follow up you need to actually find the dose?

Dr. Nancy A. Simonian

As you know the original Phase II studies that were done were using material from a different cell line and so as you know when you develop a new cell line you have to demonstrate that your material has comparability to your previous material. So, that’s really where we are and in addition to the comparability the physical chemicals comparability we want to ensure that the pharmacokinetics of the new material look similar to the previous material. And, the good news is that it’s looking very similar and that’s going to then allow us to translate in the doses that were effective in the Phase II study to the doses in the Phase III.

May-Kin Ho – Goldman Sachs

I was just commenting on what you said that you actually need to find the dose. Because, my understanding is that your bridging study tells you that it’s very similar therefore you can use the former dose.

Dr. Nancy A. Simonian

Sorry. Okay, so what I was saying is that the bridging study are the vehicle by which we determine the appropriate doses for Phase III. The preliminary data that we have suggests that the new material is very similar but, we want to make sure that we have that actually completely confirmed before we select the final doses which will be likely similar to what was used in previous studies.

Operator

Edward Tenthoff with Piper Jaffray your line is open.

Edward Tenthoff – Piper Jaffray

I may have missed this but is the non-Hodgkin’s lymphoma enrollment still on track for early 08?

Dr. Nancy A. Simonian

I think we said that we’re over two third of the patients that are enrolled. This is a very large international Phase II trial and that we plan to have enrollment complete in the first half of 2008. We’re on track for that.

Edward Tenthoff – Piper Jaffray

I realize a lot of the other questions have been answered but the focus has really been on leveraging the top line growth here and to earnings but when you consider the strength of the balance sheet and also the increase in your equity capital recently how are you guys evaluating strategic options in particular to grow the oncology franchise?

Dr. Deborah L. Dunsire

I think as we’ve talked about before we have a very strong and busy ongoing program evaluating appropriate opportunities to bring into the company, to strengthen the pipeline, looking at acquisitions, licensing and different partnerships. We will continue to do that and we will continue to be very disciplined in looking at the price points and the value of those assets. It is competitive but there are certainly some interesting programs that we continue to look at. And, it is a priority for us but there’s also many things out there that sound good but when you dig under the surface we don’t believe will be successful so we avoid those ones or that are simply priced beyond their ability to deliver value back to our shareholders so we don’t choose to go forward with those either. We’ve focused very much on keeping ourselves on track moving our own pipeline forward but have a very strong dedicated effort to looking for those transformative value opportunities to bring into the company to strengthen it.

Operator

We’ll go next to Geoff Meacham with JP Morgan.

Matthew Rodin – JP Morgan

Hi this is Matt Rodin in for Geoff today. I guess it’s a question for Christophe I’m just wondering if you could talk a little bit broader about your guidance for VELCADE for 2008 specifically with respect to where growth should come from in terms of segments of multiple myeloma market. So, specifically for front line versus [inaudible] and then in the frontline transplant eligible versus ineligible.

Dr. Christophe M. Bianchi

We do expect number one we’re the leader in relaxed setting and we do expect to keep a leadership position in the relax setting for multiple myeloma. This being said a big accelerator of our growth in the second half of the year once we get the approval will be in the frontline setting. I think naturally we are seeing some off label sales of VELCADE, unsolicited sales of VELCADE in the frontline setting and we tended to see a bit more of those sales in the transplant setting than we did in the non transplant settings this probably because the transplant setting is being done by academic physicians. So, we would expect to see based on the Vista data a big area of growth with the non transplant eligible patients because the Vista data is non transplant eligible patients and the data is very impressive indeed.

This being said we also got a great presentation off the IFM data at ASH which will provide further data for the market. Bottom line, we’ll keep growing, we’ll keep our leadership position and we’ll make some [inaudible] in the area of frontline especially probably in the non transplant eligible patients.

Matthew Rodin – JP Morgan

Just a question to follow up on that IFM study do you know should we expect to see survival data from that study in a conference mid year or perhaps later in the year?

Dr. Nancy A. Simonian

As you know this is a cooperative group study that’s being led by [inaudible] so, I think it’s likely that he will present follow up data in 2008 and at major medical meetings. And, I think clearly as the data matures there will have the opportunity to see survival data it’s just a question of the maturity of the data. But, I think I would expect that you would see an update this year.

Matthew Rodin – JP Morgan

Can you comment on the risk that the payment arrangement in the UK could be see broader adoption across Europe?

Dr. Deborah L. Dunsire

Obviously our partners Johnson & Johnson would be much closer to that situation. I think what has been publicly said by them is that this is a specific arrangement for the UK and they have different arrangements with different health authorities but they do not see expansion of the UK beyond that in Europe. But, they would be able to give you much more color on that.

Operator

We go next to Brett Holly with CIBC.

Brett Holly – CIBC World Markets

I just had a quick question on when we might expect data from the Phase II trial in non-Hodgkin’s lymphoma in 2009 I assume?

Dr. Nancy A. Simonian

I think that the first key milestone is completing patient accruals. The end point to the study are event based driven and I think we’ll be in a position as the year goes on to better inform you about when we think we’re going to hit those event date milestones that will trigger the analysis from the trials.

Operator

Next we’ll go to Lehman Brothers’ James Birchenough.

James

A couple of questions – one, I’m just interested if you can comment on the differential dynamics between the community physicians and the larger academic centers in terms of what percentage of patients are treated in the community versus larger centers. If you could comment specifically on a magnitude of any economic incentives for community physicians to use VELCADE and as well whether there’s any limitations in community physicians given the infusions?

Dr. Christophe M. Bianchi

The breakdown of sales in academic centers and community centers is probably more than 80% of the patients get treated in non academic centers in community centers. The market dynamic are sometimes a bit different for instance I spoke earlier about the frontline transplant setting usage of VELCADE and in the academic setting they tend to sometimes adopt drugs more quickly because they can effectively buy the product. And, even if CMS does not reimburse for it later on it because it’s not covered yet they may eat up the cost and give VELCADE to the patients. So, we tend to see a quicker adoption pre-approval in academic centers.

This being said the dynamics eventually are going to be I believe the same because VELCADE brings the value both for the academic treated patients and the non academic treated patients. What will drive the behaviors of those physicians and the treatment the patients will receive is the advocacy of the product. You spoke about the economic incentive for the physician in the community setting and we don’t think this plays a major role. Physicians make decisions based on the benefit their patient gets and with VELCDE in the relapse settings gets great survival and we do expect that they will get great survival with VELCADE in the frontline setting. There is some issue on fees but we know the physicians treat the patients for the best interest of the patient and economic incentives don’t play a major role in their decisions especially after the change in regulations of Medicare a few years ago. The economic incentive for the physician is limited.

James

Just in terms of easy gains can you describe what percent of patients right now in the frontline setting may be getting already melphalan prednisone where they’d go to VMP pretty quickly?

Dr. Christophe M. Bianchi

We have seen an increase melphalan prednisone in combination with – this because melphalan prednisone in the US was not really tested to be a very strong contender but when it’s associated with other treatment and VELCADE is definitely one we will expect to see a big growth of that because advocacy will drive behavior. So, there is some patients that do get MP and only MP and we would be in a great position to transfer those patients from MP to VMP. This being said there is also a segment of the market that is right now using [Celldex] and we may see some unsolicited use from [Celldex] for those patients to get VELCADE [Celldex] based on the strength of the [inaudible] that was released at ASH. If you remember when you add VELCADE to a [Celldex] regiment the response rate quadruples. It’s quite spectacular the complete response rate goes from 9 to 36% which is really a spectacular increase. Our supplemental NDA is not incorporating

this data coming from Italy but still it may drive some unsolicited use.

James

I know this may change with the Vista data but just currently what’s the duration of therapy with VELCADE on the frontline setting versus the relapse setting. If you could comment on that?

Dr. Deborah L. Dunsire

I think what we’ve said is in responding patients the relaxed patients are getting about six cycles of therapy and the frontline Vista trials is a 54 week regiment. Now, not every patient gets all the weeks for a number of different reasons. In the Phase II trial that had a similar design I think they averaged about 44 vials of therapy in the Phase II trails that were the same design as Vista. Though, you know, it’s certainly looking like about double in the frontline setting for the utilization of VELCADE.

I think the other thing to say you had a question on any limitations on administration and I just wanted to circle back with you on that and I think the administration of VELCADE is basically a three second push. So, patients can be in and out very quickly. It’s not something that absorbs a lot of chair time and in a community practice that’s important. So, the physicians are able to move the patient through very quickly. They do gain an infusion fee from the utilization of VELCADE but they don’t occupy their infusion suite for prolonged periods of time with the VELCADE patients. So, we’ve seen that be very efficient for them and as Christophe pointed out with the non transplant eligible and also they are often elderly that’s a very important thing to be able to be seen in the community setting and have an administration that is very quick and efficient. So, I think that’s going to be an important driver for VELCADE.

Operator

Next we’ll move to Tom McGahren at Merrill Lynch.

Thomas McGahren – Merrill Lynch

Specifically when will we see additional data for MLN0002 in 2008? Secondly, are there any updates on the evolution in upfront trials in the frontline setting? And, is there any progress in [inaudible] the MLN1202 program? And then I have one financial question.

Kyle Kuvalanka

We’re going to have Nancy take the question on 0002 evolution and upfront. We’ll have Deborah talk about 1202 and then Marsha will take your financial question.

Dr. Nancy A. Simonian

Tom I think we said that we will have the full data from the bridges study available 2008. We haven’t been explicit about where we will present that data but I think certainly we would not be able to discuss it externally with all of you. In terms of evolution and upfront both of those trials are progressing as planned and I think we may have data available, at least preliminary data near the end of the year from probably at least one of those studies.

Dr. Deborah L. Dunsire

On 1202 that’s something that initially when the MS trial was running we looked at potentially [inaudible] I think now we look at out licensing that molecule and our business development colleagues are active on that front. It’s an important objective for us but it does require that we find the right partner.

Kyle Kuvalanka

And you had some more questions on financials?

Thomas McGahren – Merrill Lynch

Just one question – do you think there’s any potential for actually reducing R&D spending going forward? It looks like I know you didn’t bring it down between R&D and SG&A for the expense guidance but is there anyway of actually reducing that R&D spend to maybe better leverage the VELCADE top line to the bottom line?

Marsha H. Fanucci

I think first of all Tom a lot of our focus in the company with respect to expense management has been more on the G&A side of the company because I think we’re having to really gain that leverage through the areas that are not as direct value drivers. And, there’s been a lot of attention to efficiency there. As we look at the R&D and SG&A lines, as I mentioned when we finish the year I certainly will give you some more directional information about the breakout but I think you do need to keep in mind that we have a long patent life on VELCADE. We do certainly view VELCADE as a continued growth driver for the company and therefore the investment in VELCADE include the NHL trial, the subcutaneous trial, upfront, evolution, two Phase III trials for 0002 and a emerging pipeline in the oncology area of some very exciting assets. So, while we are certainly extremely attentive to operating leverage and continuing to grow that and as you look at the profile just over the guidance that we had gave you for 2007 and the guidance for 2008 you see that we are intending to double that performance for the company. You have to also keep in mind that we have a very robust pipeline that we want to ensure sees the light of day and we will continue to invest in that albeit prudently with consideration to delivering operating leverage.

Thomas McGahren – Merrill Lynch

Have there been any [inaudible] commissions paid to J&J to this point with regard to the co-promote?

Marsha H. Fanucci

When you see the final results for the year any of those payments are going to show up in the SG&A lines and they fall within the guidance that we had given you earlier and that we had provided on the Q3 call. So, you’ll see them more visibly with the year end results. But, they are certainly incorporated in the guidance.

Thomas McGahren – Merrill Lynch

Is it possible to give a percentage of the SG&A that is the commissions?

Marsha H. Fanucci

We haven’t got to that level of detail but it’s a very minor portion of SG&A.

Operator

Our last question will come from Sapna Srivastava with Morgan Stanley.

Sapna Srivastava – Morgan Stanley

Almost all my questions have been answered. Just two quick questions – one is could you give us your market share through the [inaudible] currently and for the second and third line? And then secondly if you’re willing to comment on what exactly are you seeking for the frontline?

Kyle Kuvalanka

We’re going to have Christophe take the question on market share and then Nancy will take the question on our label discussions with the FDA.

Dr. Christophe M. Bianchi

What I can tell you is in second and third line we are the market leader in those fields. We do perform studies on a regular basis but we really use them for giving us a sense of direction of where the market is moving but they are not that accurate, they are not so accurate that we give you the numbers. But, I can tell you that is VELCADE is the market leader in the relapse multiple myeloma setting and we do intend to become the leader in the frontline setting as well.

Dr. Nancy A. Simonian

We would obviously want to seek the broadest label possible in the frontline. So, we have proposals and then we have discussions with the FDA and obviously those things haven’t occurred yet. You know, we think based on the strength of all the data [inaudible].

Dr. Deborah L. Dunsire

Thanks everybody for taking time to join us this morning and we look forward to seeing many of you in San Francisco next week. Bye-bye.

Operator

This does conclude today’s Millennium business update conference. We thank you all for your participation. You may now disconnect your lines and have a great day.

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Source: Millennium Pharmaceuticals 2008 Guidance Call Transcript
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