Medarex, Inc. Q4 2007 Earnings Call Transcript

Medarex, Inc. (MEDX)

Q4 2007 Earnings Call

February 26, 2008 4:30 pm ET

Executives

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

Christian S. Schade - Senior Vice President, Finance and Administration, Chief Financial Officer

Analysts

Analyst for Geoff Meacham - JPMorgan

Mark Monane - Needham

Brian Rye - Janney Montgomery

Jason Kantor - RBC Capital Markets

Ying Huang – Wachovia

Eun Yang - Jefferies

David Miller - Biotech Stock Research

Jason Zhang - BMO Capital Markets

Presentation

Operator

Good afternoon ladies and gentlemen and welcome to the Medarex 2007 fourth quarter and year end financial results conference call. (Operator Instructions) At the request of Medarex, I will read the following forward-looking statement of the company.

Except for historical information, the matters discussed during this conference call may constitute forward-looking statements that involve risks and uncertainties, including uncertainties related to the following factors; product development, the need for regulatory and other government approvals, dependency on proprietary technology, market acceptance of Medarex’s product candidates, business opportunities, the receipt of future payments, the continuation of business partnerships, and other details from time to time in Medarex’s filings with the Securities and Exchange Commission.

All forward-looking statements included in this conference call are based on information available to Medarex as of February 26, 2008, the date on which this conference call has taken place. We do not assume any obligation to update information contained in these materials. Our actual results may differ materially from the results discussed in the forward-looking statements.

I will now turn the conference call over to Mr. Howard Pien, President and CEO of Medarex.

Howard H. Pien

Thank you very much for joining our conference call to review Medarex’s 2007 fourth quarter and year-end financial and business results. Joining me is going to be Chris Schade, our Senior Vice President and Chief Financial Officer.

On today’s call, I will review some of the company’s highlights in 2007 and outline our milestones for 2008. Then Chris will review the 2007 financial results in more detail and provide guidance for 2008. Following this discussion, we will open the call for Q&A.

2007 was an eventful year and a period of significant accomplishment at Medarex. Nearly all of our employees directly contributed to progressing our internal product pipeline and maintaining the company’s leadership position in developing therapeutic antibodies.

We delivered on our goal of advancing three proprietary programs into clinical development. Three INDs were filed; the first, a second-generation antibody to CD30 or MDX-1401 for CD30-positive lymphomas; the second, an antibody to CD19 or MDX-1342 for lymphoma and rheumatory arthritis; and the third, an antibody to CD70 or MDX-1411 for renal cell cancer.

During the year, we also expanded our development of anti-PD-1 or MDX-1106 to include not just cancer, but also hepatitis. And our partner MedImmune expanded the anti-interferon-alpha clinical development program of MEDI-545 to include a Phase 1 trial in psoriasis, in addition to their lupus development program.

Also in 2007, we reached a significant milestone with the development of ipilimumab and broke the blind on the three registration trials in the second line, metastatic/melanoma monotherapy.

As we discussed in December, one of the three studies conducted under a Special Protocol Assessment do not achieve the target on its primary end point of that subjective response rate.

However, we were and we continue to be encouraged by the totality of data across the three trials in the registration program, which include a clear dose response relationship and best objective response rate for the three studies ranging from mid-single digits to mid-teens as well as a pattern of delayed and sustained responses beyond 24 weeks.

Our goal is to finish compiling additional data from the ongoing clinical trials and meet with the FDA to discuss the registration path, and submit the BLA file in the first half of 2008.

Also in 2007 our licensing partners made great strides in advancing several products into the next phase of development. We note with great excitement the recent announcement from Centocor on FDA’s acceptance for review of the BLA filing for CNTO 1275 for psoriasis and other notable late-stage milestones by our licensing partners, including the announcement of Phase 3 data and expected 2008 BLA filing by Centocor for its anti-

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antibody CNTO 148, as well as the advancement of Novartis’ ACZ885 anti-IL-1 beta antibody into Phase 3 development for Muckle- Wells Syndrome which is an inherited inflammatory disease.

In addition, nine new antibodies moved into clinical development in the hands of our licensing partners, including one from Amgen, one from ImClone, three by Genmab in partnership with Roche, and four other INDs, bringing the number of antibodies in clinical development by Medarex licensing partners to a total of 33.

These programs are important financial assets to Medarex as we receive milestones and/or royalty payments or we have an equity interest. These sources of revenue supplement the significant financial assets on our balance sheet.

So, in addition to our pipeline progress in 2007, we formed three new partnerships, extended existing ones, and added approximately a $152 million to our cash, which supports our plans to advance our product portfolio in 2008 and beyond. And that brings me to 2008.

We entered 2008 with great enthusiasm and expect the year to be busy. While there are more than 40 products based on Medarex technology, I want to highlight today our strategic assets, which are the focus of our managerial attention and resource application this year.

These strategic assets, in addition to ipilimumab, which of course is in co-development with Bristol-Myers Squibb, encompass six other products in the clinic, which we are referred to as the an encumbered assets over which we have control in development and eventual commercialization.

Let me start with the milestones that we expect of which there are six for ipilimumab. One, as we previously announced, we expect to have the data sets from the three registration studies for monotherapy treatment of metastatic melanoma at ASCO in June.

Two, as previously discussed, we aim to file the BLA for second line metastatic melanoma monotherapy in the first half of 2008, three, and the completion of patient enrollment in Phase 3 trial in combination with chemotherapy for first line metastatic melanoma. By the way, this milestone has just been reached. We expect data in late 2008 or early 2009.

Medarex and BMS are pursuing a comprehensive development program for ipilimumab, and this development program includes, and this brings me to the fourth milestone, the initiation of a Phase 3 trial for adjuvant therapy for melanoma in the third quarter of 2008, and the fifth milestone, the initiation of a Phase 3 trial for prostate cancer, which we expect by the fourth quarter of 2008.

And finally, the sixth milestone for ipi, a Phase 2 trial for chemotherapy combination for lung cancer, and incidentally this milestone has already been reached this month. And we expect to enroll up to 400 plus previously untreated, that is first-line patients with either non-small cell or small-cell lung cancer.

Let me now turn to five milestones expected this year for our unencumbered assets in clinical trial this year. One, data from the Phase 1 cancer trial of MDX-1106, that is the antibody to PD-1, is expected in the fourth quarter of 2008.

Two, a Phase 2 proof of concept study in cancer is expected to initiate during the second half of 2008. Data from the hepatitis trial may be expected in 2009.

Three, data from the Phase 1 ulcerative colitis study of MDX-1100, an antibody to IP-10 is expected at this year’s DDW in May.

Fourth, a Phase 2 proof of concepts trial in ulcerative colitis and a Phase 2 proof of concept in rheumatory arthritis are planed to initiate in the second quarter of 2008 with the data from these studies expected in the first half of 2009.

Five, proof-of-concept studies from the Phase 2 Hodgkin’s disease trial of MDX-060, an antibody to CD30 in combination with chemotherapy is expected in 2008, potentially at ASH this December.

Data from the ongoing Phase 1 trial in Hodgkin’s disease with the second-generation antibody to CD30, MDX-1401 is expected in 2009. Also in 2009, we expect Phase 1 data for MDX-1342, which is an antibody to CD19 in CLL and rheumatory arthritis, and for MDX-1411, an antibody to CD70 in renal cell cancer.

Finally, we have a pair of milestones for research output and for advancing our technology. We expect to continue to follow our success and filing multiple INDs each year, with the addition of two to four new product candidates into the clinic, including an antibody that targets the ligand to PD-1, which we call MDX-1105.

And we anticipate the filing of an IND for the first of our candidates out of our second technology platform, which is the antibody drug conjugates.

So for our size, Medarex has shown unmatched productivity. This capability has yielded a tremendous pipeline and product opportunities. Our products are bright, but we recognize clearly that it is the successful execution of what I have outlined as the 13 milestones for our strategic assets, that is, six for ipi, five for our unencumbered assets, and two milestones for feeding the pipeline of our future that will turn our prospects into value.

So, I will now turn over the call to Chris Schade, Medarex’s Chief Financial Officer to review our numbers and lay out our guidance.

Christian S. Schade

First I like to turn the attention to a review of our full year 2007. For the full year ‘07, we reported revenues of approximately $56 million, above our previously discussed revenue guidance of between $42 and $47 million. The increase in revenue was largely explained by payments from certain licensing partners related to their clinical milestones.

Total R&D expense of approximately a $198 million includes $11.4 million of non-cash expenses related to Celldex, our 60% owned subsidiary which is consolidated in our financial statements for accounting purposes, and $8.9 million of non-cash expenses associated with stock-based compensation. Excluding these two items, total R&D spend on a non-GAAP basis was $178 million, which was slightly below our original guidance of $185 to $195 million for the full year 2007.

We have reported G&A expense for 2007 of $46.9 million, excluding a $5.6 million non-cash expense attributable to Celldex and a $10.9 million of non-cash compensation expense. Our non-GAAP G&A expense of approximately $30.4 million was within our previous guidance of $27 to $32 million.

All told, excluding the non-cash charges relating to the consolidation of Celldex, stock-based compensation, impairment loss on investments in partners, acquisition of in-process technology and the gain reported on the sale of Genmab stock, we reported a non-GAAP net loss of approximately $141.1 million, or a loss of $1.11 per share.

As always, it is important to be vigilant over our cash resources, while maintaining important productivity in our research and development activities. For 2007, we had previously guided a net cash burn for of approximately $13 million per month, which included approximately $10 million per month of operating cash burn associated with our continued investment in pipeline and product opportunities, and approximately $3 million per month associated with our net contribution to the ipilimumab program.

The actual cash burn for 2007 was below the original guidance at approximately $11.5 million per month, and consisted of approximately $8.6 million per month of operating cash burn and approximately $2.9 million per month of net cost associated with the ipilimumab program.

The operating cash burn rate, excluding ipilimumab of approximately $8.6 million per month is roughly similar to comparable burn rates for 2003, 2004, 2005 and 2006; and clearly demonstrates the efficiency we have developed to move multiple product candidates from research to our manufacturing group into clinical development, and through to clinical proof of principle. The $2.9 million per month for ipilimumab is in line with our previous guidance of approximately $3 million per month.

Our year-end headcount increased by only 8 to 500. Nearly 86% of this workforce is devoted to our R&D activities.

Finally, excluding the consolidation of Celldex, we ended 2007 with approximately $344 million in cash, and the value at year end of our equity interest in Genmab was approximately $290 million.

Now let’s turn to the 2008 guidance. And as a reminder, the following statements are based on our current expectations. These statements are forward looking and actual results may differ substantially from those described in these statements. Please refer to our SEC filings for a description of the important risk factors that may cause such differences.

We’re very pleased with our 2007 results and the progress of our maturing clinical pipeline. The goal for 2008 will be to continue to invest in our exciting research pipeline and support clinical development of multiple proprietary programs, including the ipilimumab program.

As in previous years, we will provide guidance on an annual net cash burn. We expect the amount net of any non-cash adjustments necessary to support our robust and maturing critical pipeline for 2008, excluding those costs of the ipilimumab program to be approximately $11.5 million per month.

This ex-ipilimumab operating cash burn is higher than our average burn rates for the past few years and represents further investments in R&D development, including a growing number of products advancing further into clinical development at year end 2008. In addition to ipilimumab program, we expect to have at least nine proprietary programs in various stages of clinical development.

In addition to supporting this pipeline, we currently expect to spend an additional $3 million per month in cash burn on the continued development of the ipilimumab program. Please note, should we have a positive regulatory outcome during the year with ipilimumab, we would expect to receive milestones from BMS, which could offset potential commercial and marketing commitments to the program.

When and if that event should occur, we would, of course, provide an update on the effect these milestone payments and related commercial commitments may have on our 2008 cash burn guidance.

The components of 2008 cash burn are as follows. We expect total revenues to be between $45 and $50 million; total R&D expense to be between $195 to $205 million; G&A expense to be $34 to $38 million, net interest income to be approximately $14 million and CapEx to be approximately $14 million.

These estimates do not include the non-cash charges associated with the consolidation of Celldex, a full year depreciation and amortization of approximately $13 million and non-cash stock-based compensation expense to be in the range of $19 to $23 million.

Also, Celldex Therapeutics scheduled to complete a merger with AVANT Immunotherapeutics during the first quarter of 2008. Assuming successful completion of this merger, our interest in Celldex will be reduced to below 50% and accordingly we will no longer need to consolidate the operation of Celldex in our financial statement.

After the completion of the merger, we anticipate using the equity method of accounting to account for our investment in combined company which is expected to be approximately 35%. As such, we would expect to record a non-cash charge of the combined company’s net loss equal to our ownership percentage.

In early February 2008, we received approximately $151.8 million from the sale of 2.5 million shares of Genmab, which reduced our ownership in Genmab to approximately 5.1%. This non-diluted source of financing brings our current cash and cash equivalent to approximately $500 million.

Finally, we currently expect headcount at year-end 2008 to be between 520 and 540 employees. The majority of this less than 10 % increase in total headcount is expected to be in our clinical development group, commensurate with the growth of our proprietary pipeline.

At this point, I’ll turn the call over to conference call operator for Q&A.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from the line of Geoff Meacham - JPMorgan.

Analyst for Geoff Meacham - JPMorgan

I just have a couple of quick questions for you on what to expect for ipilimumab at ASCO in terms of what types of efficacy metrics can we expect? And then outside of ipilimumab, can you give us an idea of any other data that we could expect at ASCO?

Howard H. Pien

The abstracts for the ASCO have been submitted. We don’t know which ones have been accepted yet. It’s more than a dozen abstracts that have been submitted and we are waiting to hear from ASCO as to just precisely what the program is going to be and what are the various opportunities for the data to be presented and showcased.

Analyst for Geoff Meacham - JPMorgan

Can you give us an idea of some of the potential efficacy metrics that we would see there?

Howard H. Pien

No. Except to say what we have said before, we will have the entirety of the data set including the specific numbers on the response rates, as well as the various ways that the response rates beyond the conventional definition of the 24-week efficacy can be fleshed out to demonstrate the profile of ipilimumab’s utility in this potential indication.

Analyst for Geoff Meacham - JPMorgan

It looks like prostate cancer might be one of the more advanced indications for ipilimumab outside of melanoma. I am just wondering if you can talk a little bit about the trial design. What are the endpoints there? What types of patients are you going to be targeting, and what combinations would you potentially be using?

Howard H. Pien

We have not yet come to a conclusion on all of these important parameters that would define the clinical development program with BMS. But as I said before these discussions are ongoing in such a way that we have the confidence to say that we will have a milestone this year on the Phase 3 development program initiating for prostate.

Operator

And your next question comes from the line of Mark Monane - Needham.

Mark Monane - Needham

Interestingly, the data you’ve presented, I know you’re working on submitting an application, but it seems that the Phase 3 in front-line melanoma might be available at the end of this year or the beginning of next year, and therefore two applications may be rather contiguous in time.

Can you talk about the strategy? Are you going to potentially wait for the Phase 3 data and the front-line to submit the application? Or how will you balance the programs?

Howard H. Pien

It is not planned for now with BMS and ourselves to wait. It is our plan instead, as we have said before, to have this dialog with the agency, to let the agency give us guidance on the registration path for second-line.

And if the dialog with the agency give us sufficiently warm feelings about the kind of questions that we are going to be able to answer with the data that we already have for second-line then it is, as we said repeatedly, our objective, our goal to have that file for the second-line melanoma take place before the middle of the year.

Mark Monane - Needham

And have we heard anything about the Pfizer program? I know they have a license for CTLA-4 about their program in melanoma. Do we have any information from your partner there?

Howard H. Pien

The nature of that partnership for Medarex is not a strategic one. That is unlike the BMS relationship, we do not participate in the operational aspects of Pfizer’s development program. So our intelligence on the Pfizer program’s progress pretty much is as good as probably what you have.

Mark Monane - Needham

In your impressive list of programs I did not hear about one of my favorite programs the C. diff Program 066 and 1388. Can you update us on the status of those programs?

Howard H. Pien

I am terribly sorry that we neglected to mention one of your favorite programs. The C. diff program of course as you know is in a 50-50 development and potential commercialization partnership with MBL. So it is our expectation that in the course of 2008 we will get to proof-of-concept that is conclusion of the Phase 2 study.

And our plan beyond that point is really going to be shaped by what the data says whether or not it’s clear enough in demonstrating clinical efficacy in a way that is going to give it a very competent profile. So in the absence of knowing that data we have not highlighted the C. diff program.

Operator

Your next question comes from the line of Brian Rye - Janney Montgomery.

Brian Rye - Janney Montgomery

I think one of the milestones for ipilimumab that you mentioned was to commence with I think a 400-patient, which has commenced actually, I guess a 400-patient or so Phase 2 study in lung cancer, and I know that’s an area where there is a lot of activity going on.

Still sort of waiting to hear ImClone’s FLEX data in that frontline sending in non-small cell lung cancer for example and I know OSI has some things in the maintenance setting. So I am curious to the extent you can talk about the design of the study, what chemotherapy you are combining it with, and how you envision it in the commercial landscape?

Howard H. Pien

I’ll give you the same answer as I gave to the prior question about prostate. It is not yet complete in the discussion that we have with BMS to have a definitive announcement on the entirety of the program, suffice to say that there is enough discussion for us to be able to say that we will have a milestone.

The study that is likely to be adopted and subject to the final decision making apparatus between ourselves and BMS is going to a randomized double-blind, three-arm study, evaluating ipi in combination with Taxol and probably a platin and compared to Taxol and a platin alone.

Christian S. Schade

Suffice to say from a commercial opportunities, it’s obviously a pretty large market. And just further confidence in our development of the program beyond melanoma to include the bigger tumor types like prostrate cancer and lung cancer and to push this anti-cancer compound forward commercially as rapidly as we can.

Brian Rye - Janney Montgomery

Howard, on the ipilimumab BLA strategy, I want to make sure I understand the company’s standpoint at this time. You said, you and BMS will sit down with the FDA and I believe you’ve said if you get sufficiently warm feelings after that meeting, you would then proceed with the BLA filling before the end of the second quarter.

Based on everything that’s happened so far, I assume that’s your expectation or is there still some questions as to what exactly the FDA is going to want to talk about.

Howard H. Pien

I think that’s a fair surmise, Brian that the process of having a dialog with the agency has started but not yet complete. So we have not had a meeting to be able to discuss substantively what the agency’s view is on the data set.

So premature for us to speculate on, therefore what the outcome is going to be, bit suffice it to say that we remain enthusiastic so as to reiterate our guidance that we have a milestone to have the BLA filed by midyear.

Operator

Your next question comes from Jason Kantor - RBC Capital Markets.

Jason Kantor - RBC Capital Markets

You have stated that you plan to file but that this filing is contingent on meeting with the FDA. Is it just that you believe that you have everything you need and you want to get that blessed by the FDA? Or I mean is it possible that on a subsequent conference call you will tell be telling us that based on the guidance, you decided not file, is that a possible outcome?

Howard H. Pien

We haven’t had that discussion, Jason, so we are not going to be able to guide you on what we think the outcome is going to be. I can’t quite tell you whether or not there is a specific contingency, these discussions are nuanced and complex and comprehensive. So we’ll have the discussion and on the basis of the feedback from the agency, if there is somehow a decision that it is not the right decision to file, of course that will trigger announcement.

Jason Kantor - RBC Capital Markets

And back I guess to an earlier question, would you consider filing and then supplementing that with data from the first-line trial at a later date? Is that an option as well?

Howard H. Pien

As we had tried to say before, it is our intent to file for the second-line by midyear and then pending the data from the first-line, which we hope to be available by the end of this year or early part of 2009, we will then file for first-line.

Jason Kantor - RBC Capital Markets

When do you expect you might be able to have clarity on your filing strategy, when are you going to have this meeting with the FDA?

Howard H. Pien

We don’t wish to say any more than what we’ve said, which is that the process of having a dialog with the agency to lead to a decision to file and to file itself by mid-year has started.

Operator

Your next question comes from the line of Ying Huang - Wachovia.

Ying Huang - Wachovia

With regard to the ipilimumab first-line trial, I know the target patient population was 500. How many patients did you actually enroll? And is it one-to-one randomization? And also can you talk about powering of the trial? And also is it one-to-one randomization?

Christian S. Schade

Well I think we can answer the first part of your question is that we enrolled just over 500 patients and we don’t have that precise number right now. As far as the powering of the study is concerned, I don’t think at this point we are at liberty to discuss exactly what the powering was. But clearly, as we had said we hope to have data from this study late this year or early next. And at that time we’ll let you know more.

Operator

Your next question comes from the line of Eun Yang - Jefferies.

Eun Yang - Jefferies

Now that you are planning to file a BLA for ipilimumab in the first half of this year, by when do you actually have to make a decision of co-promotion with BMY?

Howard H. Pien

We have been in discussion with Bristol-Myers and when we are ready to make an announcement, we will.

Eun Yang - Jefferies

And second question is some of the discussions that we had with melanoma experts actually suggest that historically progression-free survival for second-line metastatic melanoma patients used to be around six or seven months. But that data is somewhat old and today actually, although they don’t know the reasons behind it but patients actually tend to live longer and then progression-free survival is actually longer than six months.

So my question to you is that you mentioned earlier that duration of response is greater than 24 weeks. So can you provide us a range of the duration of response? And how you actually define a significant improvement in a single-arm study?

Howard H. Pien

There are really three studies that make up the registration program. One of the ways that you discern activity of ipilimumab is actually to look at the very clear dose response. And that is not in the single-arm study. That is the study that has a 0.3 milligram group, a 3 milligram group and a 10 milligram group. And I think we have disclosed that we see statistical significance in the response rate trend line from the lowest dose groups to the highest groups.

We’ve said repeatedly that the framework that we expect to have a discussion with the agency on the approvability of the second-line melanoma is not going to be based on one study, but based on the totality of data. And these include clear dose response as well as the response rate of the three studies as well as the response rate and the pattern of the response, that is sustained response, delayed responses beyond the 24 week period.

Eun Yang - Jefferies

So in terms of the sustained response rate at the 0.3 dosing arm, did you see PFS alterational response to be about six months, similar to the historical number?

Howard H. Pien

The response rate is the WHO defined criteria; it’s not based on survival. So there may be a disconnect in the premise of your question and how the clinical program has been conducted.

Eun Yang - Jefferies

Wasn’t the progression-free survival was a secondary endpoint in the study?

Christian S. Schade

The secondary endpoint was overall survival in the three studies comprising a registrational program in second-line.

Eun Yang - Jefferies

Phase 3 first-line metastatic melanoma study has been completed. And then you’ve already mentioned that data would be available in late ‘08 and early ‘09. So there, the primary endpoint is the progression-free survival and secondary endpoint is overall survival.

But some of the experts actually told us that certainly for inhibitors sometimes some patients actually get worse before they get better, so progression-free survival may not be most optimal endpoint. So my question to you is that whether there is a possibility that you may wait for overall survivor data before you report the data to the public?

Howard H. Pien

Whether or not we end up having a primary endpoint that is PFS or overall survival that is a question that BMS and ourselves are still exploring. So there may be announcements on the subject when a discussion is made.

Operator

Your next question comes from the line of David Miller - Biotech Stock Research.

David Miller - Biotech Stock Research

So you might swap the primary endpoint that’s currently PFS in the first-line trial of melanoma to overall survival.

Christian S. Schade

Again as Howard said, David, we’re still exploring that with our partner BMS. Clearly, the kinetics of response beyond sort of the traditional endpoint measurement is not lost on us. And to the extent that benefits the program, is clearly something that we would look into.

David Miller - Biotech Stock Research

And do you have an SPA on that trial? You do, don’t you?

Christian S. Schade

Yes, we do.

David Miller - Biotech Stock Research

I have a question on the prostate cancer trial. Are you going to pair this with GVAX?

Christian S. Schade

There is an ongoing GVAX study that continues to enroll patients and move up different dosing schedules. Beyond that, when discuss the Phase 3 study in prostate, we will do so at that time. But right now, as Howard said, all this discussion is still going on with BMS and our clinicians.

David Miller - Biotech Stock Research

And then my final question has to do with the enthusiasm that you expressed about the current data set that you have for the BLA. When we look at recent oncology division decisions that kind of blindly reward primary endpoint success and blindly punish, any other kind of endpoint success, what do you see that we are not seeing in terms of being enthusiastic about your data set and this oncology division?

Howard H. Pien

I don’t think you’re going to draw us in to join you on your premise that somehow there is any blindness in the agency’s attitude towards evaluation of innovative therapy. Suffice to say that we have looked at beyond the 24-week protocol-specified objective response rate, and we have seen a pattern of response that’s entirely uncharacteristic of what you would expect of conventional therapy, chemotherapy primarily.

And we do believe that therefore there is a basis for the agency to evaluate this innovative therapy in what is after all a desperate disease with no credible ways of dealing with it. So those are the bases of our enthusiasm to conduct discussion with the agency. And until we have had that discussion with the agency, we’re not going to be able to foretell just how it’s going to turn out.

David Miller - Biotech Stock Research

I guess what some of us are having a hard time with, is trying to understand why you think that the agency won’t just utter the kind of dreaded words “hypothesis generating” and tell you to go back and run another trial. Was there something in your discussions with having to do with the SPA that indicates that this kind of a post 24-week look would be something, or exactly what, or is it just a general optimism that it’s the “right thing” to do for this underserved patient population?

Howard H. Pien

Well. I think we have said before and we’ll say again that the discussions leading into the whole development program with the three registration study had given both our partner BMS and ourselves a sense that the agency would be inclined to evaluate the approvability of this product in this setting on the totality of data.

So we have not been therefore thinking that it is going to be a simple response rate that is defined on the basis of conventional therapy. And we have therefore, always expected that when we provide a full set of data analysis, much of which will be available at ASCO, that the agency will give us the feedback as to whether or not our enthusiasm to go forward is justified.

And if the agency says no, our enthusiasm is not justified, of course, that will make our expectation to file by mid-year unjustified, and therefore we will make an announcement. But that’s not our current expectation.

Operator

Your next question comes from Jason Zhang - BMO Capital Markets.

Jason Zhang - BMO Capital Markets

If you file a BLA, I know it’s going to trigger milestone payment from BMS. I don’t think you have disclosed the exact amount, but could you give us a range of what milestone payment would be?

Christian S. Schade

No, I don’t think so, Jason. At this time, we haven’t disclosed precisely what regulatory milestones will trigger a milestone payment. But when that does happen, we’ll certainly let you know.

Jason Zhang - BMO Capital Markets

So very interesting to hear that you are actually initiating large lung and prostate study. I wonder could you share with us of some of the early Phase 1, Phase 2 data that will be the basis for the large Phase 3 studies.

Howard H. Pien

We don’t have the data available for description yet. We hope to have it available, and as soon as we have it available, of course, we’ll describe it.

Jason Zhang - BMO Capital Markets

But you do have the data. So we are not even going to see that at ASCO?

Christian S. Schade

Yes, at this point, we are not a liberty to talk about what abstracts have been submitted at ASCO. We have submitted and presented prostate data at ASCO previously, where we have seen signs of activity in monotherapy in prostate cancer patients. So, that is, you know, actually older data, Jason, which has been around.

Jason Zhang - BMO Capital Markets

Did I get it right that for the first-line Phase 3 study, there is a possibility you could actually change the primary endpoint. However, when you were answering the previous question you said that there is a possibility that you could change the primary endpoint, and when you do that you will make announcement.

So my question, if that’s the case, you know, whether the powering assumption for the PFS would that be enough for overall survival?

Christian S. Schade

Yes. You heard that correctly, and it really refers to the kinetics of response, which we highlighted at ASCO last year and continue to see it as a very powerful part of anti-CTLA4 treatments. The front-line study has a PFS currently the SPA has a PFS primary endpoint and a secondary endpoint of overall survival. So we are still obviously tracking the patients for overall survival.

And when and if we discuss a primary endpoint that has an overall survival as opposed to PFS, we’ll let you know exactly what that means and what that means to timing. Our current assumptions are that we expect to have data late this year or early next, and we would not expect those assumptions to change much from changing the endpoint in the study. If we change the primary endpoint of the study given the fact that we are collecting this data as a secondary endpoint.

Jason Zhang - BMO Capital Markets

And also given that you said you’re finishing accrual, so there’s really no way you could change the size of the trial, even if you decide to use overall survival as the primary endpoint?

Christian S. Schade

Yes. We couldn’t get into powering assumptions right now, Jason, but perhaps in the not too distant future, we’ll let you know about that.

Operator

That does conclude the question-and-answer session. I’ll now turn it back to Mr. Pien for closing remarks.

Howard H. Pien

At Medarex we are confident in our opportunities, and we are clear on our strategy, our plan and our priorities. 2008 will be a year that we stretch ourselves to progress our development pipeline and we look forward to updating you as the progress is made. We are committed to translating innovative science and technology into products that make a difference in people’s lives. So thank you very much for joining us for this call.

Operator

As a reminder, except for historical information, the matters discussed during this conference call may constitute forward-looking statements that involve risks and uncertainties, including uncertainties related to the following factors; product development, the need for regulatory and government approvals, dependence on proprietary technology, market acceptance of Medarex’s product candidates, business opportunities, the receipt of future payments, the continuation of business partnerships, and other risks detailed from time-to-time in Medarex’s filings with the Securities and Exchange Commission.

All forward-looking statements included in this conference call are based on information available to Medarex as of February 26, 2008, the date on which this conference has taken place. We do not assume any obligation to update any information contained in these materials. Our actual results may differ materially from results discussed in the forward-looking statements.

A webcast archive will be available through the Investor Relations section on the Medarex website at www.medarex.com for 14 days following the webcast. A telephonic replay of this event will be available until midnight Eastern Standard Time, March 4, 2008. To access the replay, please dial 1-888-286-8010 in the U.S. and Canada, or 1-617-801-6888 international, and enter the passcode 75836084.

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Symbol needs to come out, don’t know if that is an a or an x but it won’t parse when we upload

It was an “a” which was used as an abbreviation for “Agent”.