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Millennium Pharmaceuticals Inc. (MLNM)

Q4 2005 Earnings Conference Call

January 26th 2006, 8:30 PM.

Executives:

Dr. Deborah Dunsire, President and Chief Executive Officer

Marsha Fanucci, Chief Financial Officer & Sr. VP Corporate Strategy

Dr. Robert Tepper, President of Research and Development

Dr. Nancy Simonian, Sr. VP Clinical Research & Regulatory and Medical Affairs

Lisa Adler, VP Global Corporate Affairs

Analysts:

John Wilson, Robert W. Baird

David Witzke, Banc Of America Securities

Philip Nadeau, SG Cowen

Rachel McMinn, Piper Jaffray

Chris Metropolis, J.P. Morgan

Maneesh Jain, Thomas Weisel Partners

Operator

Ladies and Gentlemen, thank you for holding and welcome to the Millennium Pharmaceuticals Conference Call. At this time all participants are in a listen-only mode. There will be a Question and Answer session to follow. Please be advised that this call is being recorded at the company’s request. At this time, I would like to introduce your host for today’s call, Mr. Kyle Kuvalanka, Director, Investor and Corporate Communications at Millennium Pharmaceuticals. Please go ahead sir.

Kyle Kuvalanka, Director, Investor and Corporate Communications

Good morning everyone and welcome to Millennium’s Conference call to discuss the financial results for 2005. With me today are Dr. Deborah Dunsire, our President and Chief Executive Officer; Marsha Fanucci, Chief Financial Officer and Senior Vice-President of Corporate Strategy; Dr. Robert Tepper, President of Research and Development; Dr. Nancy Simonian, Senior Vice President of Clinical Research and Regulatory and Medical Affairs; Lisa Adler, Vice-President of Global Corporate Affairs.

Our agenda for this morning is as follows: Marsha will open with the highlights of our financial results for the year, Bob will provide an update on research and development activities, Deborah will then ramp up our prepared comments. We will then take your questions. Before we begin, let me remind you we will be making forward-looking statement, when we discuss our growth signs, products and cost effects, a 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. No one can predict the future, and there are risks that could cause the company’s actual results could differ materially from these statements. You can review a list and description of these risks in the reports we filed with the SEC.

During this call we will be referring to non-GAAP net loss, non-GAAP net income, and non-GAAP profitability. These financial measures are not prepared in accordance with Generally Accepted Accounting Principles. 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 useful for investors and of the additional purposes for which management uses these measures is included in the Form 8-K we furnished to the SEC this morning. The press release and the Form 8-K are available on the Investor section on our website. Let me now turn the call over the Marsha.

Marsha Fanucci, CFO and Sr. Vice-President, Corporate Strategy

Thank you, Kyle and good morning everyone. I am happy to report today that Millennium achieved its annual financial guidance for the third consecutive year while continuing to develop a solid foundation for profitable growth long-term. Our non-GAAP net loss narrowed significantly to $87 million in 2005 from a $181 million in 2004. Total revenues were up 25% for the year and R&D and SG&A operating expenses were 13% lower as planned.

Let me provide some perspective on these results starting with VELCADE™. VELCADE™ is the market leader in the relapsed multiple myeloma treatment setting. US net product sales were $192 million, an increase of 34% over 2004. Based on our quarterly survey of 75 US based oncologist who treat significant numbers of multiple myeloma patients, VELCADE™ growth in 2005 was primarily attributed to an increase in end user demand in the second line treatment setting, corresponding with full approval of the drug in March and the expanded label. Annual growth was also the result of increased end user demand in the frontline setting even though Millennium only promotes VELCADE™ in it’s approved indication.

We are confident in the growth prospect for VELCADE going forward. 2006 US net products sales are estimated to be between $225 million and $250 million, a 17% to 30% increase over 2005 result. We expect this growth to come from increasing the average length of therapy used by patients as indicated in our label and from treating more patients with VELCADE™ as a result of our new marketing messages and the expansion of our sales force.

Our sales force is expected once fully trained and deployed to approximately double the number of daily calls to physicians. We expect to see the impact of these new programs increase over the course of 2006, with the greatest effect in the second half of the year. Let me now turn to revenues received from our collaborators.

For the first 8 months of 2005 the company reported a co-promotion revenue of a $123.5 million associated with the original collaboration agreement between Millennium and Schering-Plough for INTERGRILIN®. As you will recall effective September 1st 2005 millennium modified its relationship with Schering-Plough from the co-promotion arrangement to a royalty-based agreement. As a result Millennium stopped reporting co-promotion revenue and began reporting royalties in a separate line item.

Royalties for the last four months of 2005 were approximately $38 million and primarily included royalties from Schering-Plough for product sales of INTERGRILIN® and from Ortho Biotech for sales of VELCADE™ outside the US. As a reminder, we expect to receive minimum loyalty of $85 million from Schering-Plough for INTERGRILIN® in both 2006 and 2007. These payments increased the near-term certainty a revenue to Millennium associated with the product, while still allowing us to participate in any potential upside.

Recognition of the royalties from this relationship will be somewhat complicated as it will not be straight lined throughout the year. Royalties will be recognized as earned based on the performance of the product and then the future quarterly revenues will be recalculated based on the unearned balance of the $85 million. The royalties received from Ortho Biotech will be recognized as earned based on the performance of the product.

Turning to our strategic alliance revenue, this revenue increased to $204.5 million in 2005 from $99 million in 2004. Strategic alliance revenue in 2005 included the $71 million one-time sale of INTERGRILIN® inventory to Schering-Plough as well as reimbursement and payments for the achievement of milestones from our collaborators. In 2006, we anticipate including in this line approximately $20 million to $25 million in milestone payments for VELCADE™. We’ll do our best to alert you of any material milestone payments in a timely manner.

Regarding our operating expenses, research and development expenses in 2005 decreased to $342 million from $403 million in 2004 primarily as a result of cost reductions associated with the company’s strategy refinement and restructuring efforts.

Selling, general and administrative expenses in 2005 decreased to $181 million from the $197 million from 2004 primarily as a result of the cost savings associated with the restructured relationship with Schering-Plough for INTERGRILIN®. We will continue to see reductions in our operating expenses. Full year 2006 operating expenses are expected to be approximately $425 million roughly 30% lower than 2004 results and 19% lower than 2005. Our 2005 GAAP net loss including amortization and intangibles and restructuring narrowed 21% to $198 million from $252 million in 2004.

Turning to the balance sheet, we ended 2005 with $646 million in cash, cash equivalents and marketable securities, and $105.5 million outstanding principal amount of comparable debt of which approximately $6 million is classified as short-term. In our release this morning, we reiterated the guidance we provided earlier this year. For the sake of time, I am not going to review the line items with you; however, I do want to provide some prospective on the expected non-GAAP quarterly results for 2006.

During this transition year to non-GAAP profitability, we do not expect to see steady quarterly growth and our achievement of non-GAAP net income. Instead quarterly results will fluctuate due to variability in product sales expenses and strategic alliance revenue including the achievement of milestones. So, for example if all possible milestones are achieved in the first quarter, we may reach non-GAAP net income for the first quarter. As Millennium grows as an operating company, we continue to build strength in our financial management team.

I am happy to announce the appointment of Mark Kost as Vice President of Finance reporting to me. Mark brings with him over 20 years of experience in both finance and accounting, most recently serving as Vice President at The Gillette Company. Mark will start at the company in early February and will hold responsibility for both financial planning and accounting activity. With that I will turn the call over to Bob.

Dr. Robert Tepper, President of Research and Development

Thanks Marsha. Today I want to update you on VELCADE™ clinical data as well as review some pipeline announcements. Let me start with VELCADE™. As many of you know we had a very exciting cache in December with 117 VELCADE™ abstracts accepted further demonstrating significant interest in the product from the hematology community. VELCADE™ as a single agent demonstrated a median 30-month survival in relapsed multiple myeloma patients. Which has a 6-month survival advantage over dexamethasone. This result was achieved even after 2/3rd of the patient in the dexamethasone arm switched to VELCADE™ in our phase III Apex trial. Promising data were also presented in the multiple myeloma frontline setting, demonstrating some of the highest overall and complete response rates seen in the treatment of this disease, when VELCADE™ is added to standard therapy.

One trial is particularly important to highlight. Data from the phase I/II study of VELCADE™ with melphalan and prednisone showed transplant like responses in patient 65-years old and older, with an overall response rate of 86% and a complete response rate of 30%. Very importantly this triplet achieved a deep molecular remission in 50% of the patients who did receive a complete response. Thus showing we are potentially leading the way one day to the cure of this disease. These are spectacular results compared to melphalan and prednisone without VELCADE™, which had demonstrated a response rate of only 50% and a complete response rate of only 2%. We also saw exciting data with VELCADE™ in non-Hodgkin’s lymphoma.

Interim results of the phase II trials of the combination of VELCADE™ plus rituximab in two dosing regiments in the follicular relapsed and refractory setting showed response rates over 50% in both arms. In the arm with the convenient once-weekly VELCADE® regimen, matched with the once-weekly rituximab regimen, we were pleased to see improved efficacy as well as improved safety.

These are very strong results in the treatment of follicular lymphoma patients, while we know the response rate of rituximab in the rituximab naïve patients in the relapse setting, there are no clearly established results outlining the use of this drug as retreatment therapy in patients who had previously received it in combination with Chemotherapy. The results from our trial exceeded the threshold the established internally and also by our advisory board giving us the confidence that the VELCADE™ and rituximab combination should be tested in a phase III randomized trial. This trial is expected to start in the second half of this year. The most common adverse-events seen with VELCADE™ in these trials just discussed where gastrointestinal events, hematologic events, fatigue and peripheral neuropathy. Now let me turn to our pipeline.

Millennium continues to advance the pipeline of the seven clinical and three pre-clinical molecules in oncology and inflammation, including two high priority molecules, which have shown meaningful clinical activity with manageable safety profile. These molecules are first MLN02, our antibody to alpha 4 beta 7, where we have shown clinical efficacy in ulcerative colitis and secondly MLN518, an oral small molecule inhibiter of type III receptor tyrosine kinases in AML, acute myelogenous leukemia and along with CTEP being studied in other indications. As part of the company’s ongoing portfolio management process, Millennium has also decided not to continue the development of two other molecules: 2704 and 1202 for one of it’s indications, rheumatoid arthritis. The 2704 which is a novel anti-PSMA antibody conjugated to the DM1 toxin, the company does not believe that its sufficient therapeutic window is achievable.

As you will recall, we have seen encouraging data with this drug 2704 in terms of PSA declines and tumor reductions as indicated by the resist criteria. However, we have also seen peripheral neuropathy which we believe is the result of the three toxin. We are currently evaluating whether to continue development of the antibody with other toxins including other maytansinoid. The strategy with 12O2, our CCR2 an antibody has been to explore this molecule in several indications in parallel including rheumatoid arthritis, multiple sclerosis, atherosclerosis and scleroderma. The goal of this strategy has been to select the best indications for moving forward into pivotal trials. While the company has seen biological activity through biomarkers, Millennium does not believe that the data in rheumatoid arthritis from the phase IIa proof-of-concept trial warrants moving forward at this time. However, Milllennium will continue to explore 1201 in other phase IIa studies including multiple sclerosis, atherosclerosis and scleroderma.

With our earlier pipeline we had several important advances in the fourth quarter of 2005, which are outlined in our press release this morning. I want to emphasize that, we advanced our fourth Millennium discovered molecule to the development pipeline within the last two years. This is an exciting accomplishment particularly given that we have been focused on our internal pipelines for only the past 5 years. Now I will turn the call over to Deborah for closing remarks.

Dr. Deborah Dunsire, President, Chief Executive Officer

Thank you Rob. Millennium emerged from 2005 stronger and more prominent poised to achieve our goal of becoming a company that continually delivers new medicines in areas of high of unmet medical need. Our actions in 2005 were taken to solidify the foundation of building Millennium for the future, profitability is just one marker in the Millennium lifecycle. 2006 will come up with its challenges however, we are confident in our ability to achieve our goals.

We will need to make careful investment decision to find the right balance of investing in the drivers of short-term topline growth, with investments in areas that will ensure a long-term value creation. Entering the year we believe that the company is focused on the right priority and is executing with fiscal discipline. In 2006, we will face new competition for VELCADE™, while we strongly believe in the product and that that is room in the market for new agents, there maybe a period of disruption in the marketplace. Our goal is to continue pushing forward to raise the standard of care in order to provide those better outcomes for patients.

VELCADE™ is an important differentiated drug and we are confident in its growth prospect. Data presented the GR X (ph) continue to confirm the characteristics of VELCADE™ that has offered significant building blocks of growth. It’s significant survival advantage combined ability as we see from numerous clinical trials, a well characterized safety profile as evidenced by it’s use in more than 30,000 patients worldwide, and its benefit to a broad range of patients. Including those patients with renal impairments, common and multiple myeloma to meet the charge on setting a new sophisticated vision for the commercial organization, I am pleased to announce the appointment of our new executive Vice President of Commercial Dr. Christophe Bianchi.

Christophe comes to Millennium with more than 17 years of pharmaceutical marketing experience, and with most recently Vice President and Business Unit Head of Oncology at Sanofi-Aventis in the USA, one of the largest oncology franchises in this country. It was driven by success of Taxotere® and Eloxatin® as well as other important cancer therapeutics.

Previously Christophe was with Sanofi-Aventis pharmaceuticals and prior to that with Rhone-Poulenc Rorer. In Rorer, Christophe was responsible for the successful pre-marketing and launch activities for several cancer drug, and met the commercial efforts for the market-leading anti-coagulant LOVENOX®. Christophe will work closely at growing VELCADE™ with Grant Bogle who was recently promoted to Senior Vice President of sales and marketing. We will make sure that you have the opportunity to meet the two events coming month.

As we get through our first year of non-GAAP profitability and continue to position the company for long-term growth, Millennium is focused on three key strategic drivers of the business with clear goals against each. For our first strategic driver VELCADE™, we expect to continue to grow the use of this important therapy in multiple myeloma patients, with the supporting publications the company will be investing in the myeloma on frontline setting while we continue driving forward our registration trial. We also expect to file a supplemental NDA in the mental cell sale non-Hodgkin’s lymphoma relapsed setting. And finally in the area of relapsed follicular and marginal zone lymphomas, our goal in 2006 is to initiate the phase III trial.

Moving on trial second strategic driver our pipeline, our goal to share or to continue accelerate in our highest priority programs 02 and 518, progressively two molecules to critical decision points in order to advance the pipeline and focus our resources on the key program, and to advance two new molecular entities from our discovery organization to development candidate status to fuel the pipeline for the long-term.

Turning to strategic business relationship, we have a strong internal team, led by Anna Protopapas who recently joined the executive team, working on several front with the goal of supporting the long-term growth of the company. The collaboration is not necessary for us to achieve non-GAAP profitability in 2006. But, the right ones could add significantly to our growth profile in 2007 and beyond.

Millennium evolved into a stronger and more focused company in 2005. One that achieved its financial goals for the third consecutive year. We have grown VELCADE™ significantly since its launch in 2003 and we will continue to do so into the future. In 2006, we expect to reduce operating expense to approximately 30% compared to 2004 and 19% compared to 2005 results, producing an effective lean organization going into 2006 and beyond. We are focused on the right strategic drivers, VELCADE™, the pipeline and our strategic business relationship. And we will continue to improve execution with the goal bringing Millennium to profitability, growth and sustainability. In addition to that we have plenty of time for your questions. It was great getting to know many of you over the past six months, it is an exciting evolutionary time for the company and we look forward to working with all of you throughout the year. Thanks and I will turn the call back to Kyle.

Kyle Kuvalanka, Director, Investor and Corporate Communications

Thanks Deborah. Operator, we are now ready to take questions.

Questions-and-Answer Session

Operator

Operator Instructions Our first question comes from the line of John Wilson from Robert W. Baird, please proceed.

Q - John Wilson

Hi, thanks for taking my question, I actually got in the call late so I apologize if you have already answered it, but back in the Analyst Day in November, you indicated that around 25% of physicians are using VELCADE™ for the recommended eight cycles, given your recent marketing efforts, could you provide an update on that number?

A. - Kyle Kuvalanka

John, thanks for your question. We are going to have Deborah to answer that.

A - Deborah Dunsire

We haven’t done any further research and to see where we are, but we will be doing that through the year as we go forward, but that is one of the most significant areas of growth for VELCADE™, as we have go into 2006. Actually just to expand the math even further our Apex trial had demonstrated the significance of that for patients and maybe Nancy, you can comment on that.

A - Nancy Simonian

Yes. So this is the data that we presented ASH on the APEX data and in that trial, individuals that responded to the drug received a median of 10 cycles and that in, over 20% of patients the best response occurred after Cycle 8. So, I think, it's pretty clear that the standard regimen use, in which we saw the survival advantage, individual’s received 8 cycles and that’s very important message that we need to get out there.

A - Deborah Dunsire

And our expanded sales force is delivering that as we speak.

Q - John Wilson

Alright, thanks a lot.

Operator

Our next question comes from the line of David Witzke from Banc Of America Securities. Please proceed.

Q – Mark Ingles

Good Morning. It’s actually Mark Ingles for David Witzke. A couple of questions on your 2006 guidance. First, with respect to the VELCADE™ sales guidance, 17% to 30% increase over last year, just wondering if you could give any additional details on your expectations or competitions specifically from Revlimid® in terms of timings what is the magnitude of that, new player to the myeloma market?

A - Kyle Kuvalanka

Sure, Deborah, we will have answer that question.

A - Deborah Dunsire

Thanks Mark. I think that Revlimid® coming into the market is a good thing for myeloma patients. We need extra drugs, it is not a disease that’s cured, and in the true traditional of oncology, we see new agents coming in being combined. What’s very interesting is, we’ve seen VELCADE™ combinability with all the agents its been used with in myeloma adding to the efficacy, and being able to be safely delivered. We had that tremendous data at ASH at San Miguel showing VELCADE™ addition to the melphalan and prednisone regimen and we also have data coming up from VELCADE™ with a new agent including with Revlimid®. So, I think that, while 2006 maybe turbulent than you see that in the guidance range, that we have given you, we believe that VELCADE™ has strong growth prospects into the future and that ultimately the combination of active agents could change the phase of myeloma, and Nancy, would like to start in terms of adding commentary?

A - Nancy Simonian

Yeah, I think, as Deborah said, we have that strong single agent activity with VELCADE™ and it's so combinable with other agents including with Revlimid® and as you know the data we presented at ASH last year demonstrating very encouraging activity both response data’s reliability with VELCADE™ and Revlimid®. We are very encouraged about that combination and that in the future, our positions as they always have will combine active drugs together and that really is the way the future and the growth of these products.

Q – Mark Ingles

Okay, thank you and then just very quickly if I might, with regards to the R&D SG&A expense strategy. Does that include within it the stock option expense $40 million to $50 million, or is that separate?

A - Kyle Kuvalanka

We are going to have to ask Marsha answer that question.

A - Marsha Fanucci

That guidance is prior to the option expense which we’ve provided as a separate line item in the guidance and we are estimating between about $40 million and $50 million in total for the stock-based compensation estimate but we have not provided a breakout of that line item yet.

Q. – Mark Ingles

Okay, thank you

Operator

Our next question comes from the line of Philip Nadeau from SG Cowen, please proceed.

Q - Philip Nadeau

Good morning, thanks for taking my question. My question is actually is on the use of VELCADE™ in combination with rituxin in lymphoma, it does seem like there is some buzz building in the physician community about VELCADE™‘s use. Could you tell us, what you are currently seeing, how much VELCADE™ is actually being used in the treatment of lymphoma?

A - Kyle Kuvalanka

Lets have Nancy start off with what we are seeing in terms of the clinical trial and Rob may follow up and then Deborah can respond with what we are seeing in the marketplace?

A - Nancy Simonian

Yeah, it's great to hear that you are hearing the buzz because we are actually hearing the same thing, a lot of really exciting news coming out in terms of VELCADE™ and Lymphoma, both in mantle-cell lymphoma as well as in follicular lymphoma. We are hearing the same thing, Nadeau, we have very encouraging data on our VELCADE™ rituximab combination study that was presented at ASH last year, I mean, interestingly looking that once weekly VELCADE™ in combination with rituximab looked very well tolerated and showed very impressive overall the response rate of greater than 50%. So, we are very encouraged with, met with lots of outside investigators in terms of these data and I think they are encouraged in moving forward in pursuing both development and follicular as well as a mantle-cell.

A - Robert Tepper

Yeah and I just want to do add to that comment in terms of earlier studies that we continued to get data on for investigators about, again the combinability of VELCADE™ in the lymphoma setting as well, as many of you are familiar with the CHOP regimen, not that different from melphalan and prednisone that we just spoke about in terms of classes of drugs. So we are finding that physicians are interested in studying the addition of VELCADE™ to the active agents not only in myeloma but also in lymphoma. So we feel that there is going to be some very important information coming over the next year or two on the use potentially in earlier settings again mostly through investigators at this time while we focus on our phase III VELCADE™ rituximab study.

A - Deborah Dunsire

And to address the marketplace, we are starting to see some use in lymphoma reflected in the awareness at Trial and Usage study that we do, but of course are directional, it’s definitely a very small proposition versus the myeloma usage, which is by far the majority and it's fair, it’s growing and of course we do have compendia listing for mantle-cell lymphoma and are reimbursed for that and as you know we will be submitting a supplemental NDA for mantle-cell lymphoma. While that’s a smaller portion of the lymphoma patients, it is a very aggressive disease and really does not have any adequate therapy. So, we are very excited about VELCADE™ activity in that population and of course, then will be building on that, in a much larger relapsed follicular setting as Rob said.

Q - Philip Nadeau

What’s your experience with reimbursement in the relapsed follicular setting, are you getting reimbursed there currently?

A - Marsha Fanucci

Yeah there is, the usage has been mainly for mantle-cell, there is some utilization in follicular and in certain states, we are getting the reimbursement. Of course, in any unapproved indications where its hard to work for the physician because they have to make representation for the necessity for the patient but in certain cases where the physician have done that, they have been reimbursed.

Q - Philip Nadeau

Great, Thank you.

Operator

Our next question comes from the line of Rachel McMinn from Piper Jaffray, please proceed.

Q - Rachel McMinn

Yeah, maybe it’s little bit too early but can you talk about the impact, are you seeing impact at all from Revlimid® right now or is that your projections?

A - Kyle Kuvalanka

Hi Rachel, we are going to have Deborah answer your question.

A - Deborah Dunsire

I think it’s very early Rachel, remember Revlimid®’s approved for myelodysplastic syndrome, there’s a very significant program that patients have to go through and I think it's very early to tell, thus far.

Q - Rachel McMinn

Okay and then the survey results that you typically give, are you prepared to give them by setting for VELCADE™ in terms of penetration?

A - Deborah Dunsire

Rachel, we haven’t updated since the last call, I think we are still saying that we are around 9%, 10% in the frontline setting, 40% to 45% in the second line setting and 40% to 50% in the third line setting.

Q - Rachel McMinn

Okay and then-?

A - Deborah Dunsire

What was interesting about that Rachel, but I am interested to comment on it, is when we do look at the data there are significant number of patients still receiving older therapy that those deliberate to vital advantage that VELCADE™ does, that’s one of the things that excites us about the growth opportunity for VELCADE™ as we go forward. So, we are really looking to make sure myeloma patients get appropriate therapy that can deliver a survival advantage.

Q – Rachel McMinn

And just kind of following up on that, can you talk, I guess more generally as what do you see as peak sales for VELCADE™ and multiple myeloma, if we take a step back and kind of look at where the penetration is right now in second and third line and think about the markets as frontline maybe being twice out or maybe equivalent to those combined opportunities. Should we think about peak sales going from current levels of around $200 million to $400 million, and then anything beyond that driving sales higher, how do you think about it internally?

A - Deborah Dunsire

I think, we haven’t communicated that in specific breakdown Rachel, but what we did communicate back at J.P. Morgan is that, we do see a significant growth for VELCADE™ in the myeloma setting and lymphoma and then potentially some of encouraging lung cancer data, what we’ve said to you there was that worldwide sales for this product will go over $1 billion.

Q – Rachel McMinn

Okay and then one quick financial question just, Marsha based on your comments about the milestones, should we read into that that you are expecting to achieve that $20 billion to $25 billion in the first quarter?

A - Marsha Fanucci

It wasn’t that really precise, in the delay which Rachel, we felt, well what we are saying is that if you look at Q1 and you look at how the milestones and other strategic alliance payments going forward, that you could see profitability in Q1. But we haven’t commented on the timing of the full $20 million to $25 million in VELCADE™ milestone.

Q – Rachel McMinn

And can you provide any color on what those milestones relate to you or are they specifically sales milestones or development really?

A - Marsha Fanucci

As we have outlined in the past, the milestones are a combination of sales clinical regulatory milestones around that product. But we haven’t done more specific to define which of those these are coming from. But as we do get close we certainly will keep you apprised of those.

Q - Rachel McMinn

Okay, thanks very much.

Operator

Our next question comes from the line of Geoffrey Meacham from J.P. Morgan, please proceed.

Q - Chris Metropolis

Hi actually this is Chris Metropolis. I had a couple of questions. First, regarding the clinic, I was, you mentioned that couple of weeks ago that we see data from our frontline myeloma study in the second half of ’06. Just wondering out of the three ongoing which study that might be?

A - Kyle Kuvalanka

We have Nancy Simonian to answer that question.

A - Nancy Simonian

And so, we are not going to state specifically which trial that we’re going to present data from. But as we know, we have three frontline trials ongoing and one we should have data by the end of the year, the interim data by the end of the year.

Q - Chris Metropolis

Okay, great. And regarding the sharing relationships, can you tell how after, in 2008 that relationship changes and when the $85 million is guaranteed?

A - Kyle Kuvalanka

Sure, we are going to have Marsha to answer that question.

A - Marsha Fanucci

After that timeframe the agreement just changes to a royalty-based agreement and also would include any of the COGX reimbursement for supply, if we were so continuing to supply the product at that point of time.

Q - Chris Metropolis

Okay and regarding the stock options expensing, I know, you said, you haven’t broken it down. Well can you add any color on, how we should expect $40 million to $50 million to be distributed between various line items?

A - Marsha Fanucci

We haven’t got into that level of granularity but I think, if you look back over our distribution of employees overtime that can give you some rough idea of where things would fallout since those just follow the people so. That’s about the best advice I can give you at the moment.

Q – Chris Metropolis

Sure. And then regarding R&D if we kind look at the run rates from the first quarter and extrapolate that over ‘06, it might be difficult to achieve the R&D and SG&A guidance. Do you anticipate R&D trailing off from the level that it’s at now over the course of next year?

A - Marsha Fanucci

Well, in 2005 you have not yet seen the full impact of the restructuring run rate because a number of the programs were being phased out through the end of the year and so I think that when you look at the Q1 run rate for R&D and SG&A that that will give you a better platform to look through the rest of the year. We do see quarter-to-quarter variations in our expenses and Q4 has historically been our heaviest quarter of expenses just because we have a lot of events and contracts that tend to fall into that period.

Q – Chris Metropolis

Okay. And then finally regarding the strategic alliance line, can you give any color on how the miles that going forward would you say with the variability that you discussed and related to the Q1 payments, any particular quarter we should look at it as kind of an average quarter for that line?

A - Marsha Fanucci

I think that you know we’ll have to give you a little bit more counsel as we can get closer to some of those milestones because the predictability of those milestones is not such that I could give you the quarter-to-quarter guidance right now and I think that’s part of the reason that we want you to just pay special attention to those and think about when they do occur that those are non-recurring events and so I’ll try and give you as much guidance as I can as close to the event as possible.

Q – Chris Metropolis

Great thank you very much.

Operator

Our next question comes from the line of Maneesh Jain from Thomas Weisel Partners, please proceed.

Q- Maneesh Jain

Good morning, thanks for taking my questions. The first was, can you give us a sense for some of the data points that we can look forward to perhaps in the first half of ‘06 and even second half if you can provide them, especially on the clinical trials?

A – Kyle Kuvalanka

You are talking about clinical trials. We’re going to have Nancy Simonian to answer that question.

A – Nancy Simonian

So your question was what was the little rehab data available from the pipeline in 2006, is that the question?

Q- Maneesh Jain

That’s the question yeah.

A – Nancy Simonian

Okay, so I think what we had said is that we are going to start a clinical trial with VELCADE™ with Alimta in the first half of 2006 and we are going to be initiating follicular VELCADE™ study in the second half of the pivotal trial. And data presentations to expect would be the final phase II data from the mantle-cell program in the first half of ’06, also the final data from the follicular VELCADE™ phase II study as well as Mark will be presenting our frontline data with VELCADE’s Gem/Carbo in the frontline multiple myeloma setting. And then as we told you before we’ll be filing the sNDA for mantle-cell in the second half of this year.

Q- Maneesh Jain

So do you think we will see data from MLN02 and 518 studies?

A – Nancy Simonian

So with MLN02, as we said before we are currently working on scaling up a commercial cell line and will be plan to be back in the clinic in early 2007. As you know the data that we have with that molecule it’s already demonstrated in phase IIb study with ulcerative colitis to induce clinical remission specifically significantly greater than placebo. But we have reached to some concept there with a very robust phase II study and now really it’s getting back in the clinic with the new cell line and material and then moving aggressively into pivotal studies there. With 518 as you know we’ve already demonstrated a clinical activity with that molecule in the relapse AML study as a single agent and based on the very encouraging data there we’d now move into frontline studying in combination with induction chemotherapy and we have initiated a trial which is ongoing now with the 518 molecule and chemotherapy and based on the results of that study, in other words, we’re looking at plans to sort of accelerate into pivotal trial studies so we haven’t announced when exactly that would happen.

Q- Maneesh Jain

Great. And if also can I ask the question regarding VELCADE™ utilization. Given the promising data you have now seen in the frontline non-stem cell transplantations, would you expect that area of utilization to be more exploited by VELCADE™ use or you expect to sort of an equal spread of use as you look at your projections going forward in the frontline setting across those two populations, that’s the non-stem cell transplantation versus stem cell transplantations?

A – Kyle Kuvalanka

Sure, we are going to have Deborah to start off that questions.

A - Deborah Dunsire

You know I think the first thing to say about that is any data, to think a physician chose to use it in that settings but I will tell you that we do not promote in the settings for we don’t have approval. And so you won’t expect a huge pickup and that you will once we get a sales force and approval, and together. So I’m going to ask Nancy to comment on the non-stem cell transplantation versus stem cell transplantations.

A – Nancy Simonian

So, as you probably know in the frontline setting in multiple myeloma, the majority of individual actually don’t get a transplant and that’s because of they tend to be elderly and have other sort of risk factors that don’t make them eligible. So people in the past have not been able to get the most aggressive potentially curative or they will have potentially survival advantage. I think what’s really exciting here is that without a transplant we’re actually, with conventional chemotherapy seeing transplant like results. And then that opens up the whole possibility that the majority of patients they are out there now that are getting less intensive therapy that could actually result in survival benefit could get that with VELCADE™. I think that’s a really exciting piece of a story here is the transplant like results with chemotherapy with VELCADE™.

A – Kyle Kuvalanka

Rob is going to add to that question.

A – Robert Tepper

A quick to remind you, because in the phase II studies we’ve done we’ve seen the combinability of VELCADE™ not only with melphalan and prednisone for patients who won’t go onto transplant, but also with other combinations where VELCADE™ has yielded similar marked increases in overall response rate and complete response rate for patients who might go onto transplant. We’re studying in our three registration enabling phase III trials both setting, that is patients who may go onto transplant, or transplant eligible, and also patients who would not be eligible for transplant. So we feel that there maybe a VELCADE™ alternative in the frontline setting for all patients which is a very exciting data coming from our phase II studies.

Q- Maneesh Jain

Alright, thank you.

Operator

Mr. Kuvalanka, there are not further questions at this time.

Kyle Kuvalanka, Director, Investor and Corporate Communications

Great. So this is the end of our conference call today. We just want to thank everybody for joining and we look forward to seeing everybody throughout the next quarter. Thanks a lot.

Operator

Ladies and gentlemen that does conclude our conference call for today. We thank you for participating and have a great day.

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Source: Millennium Pharmaceuticals Q4 2005 Earnings Conference Call Transcript (MLNM)
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