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Executives

Carol Hausner – Executive Director, Investor Relations and Corporate Communications

Daniel M. Junius – President and Chief Executive Officer

Gregory Perry – Executive Vice President and Chief Financial Officer

Analysts

Simos Simeonidis – Cowen and Company

Cory Kasimov – JP Morgan Securities

Thomas Wei – Jefferies & Company, Inc.

Joel Sendek – Stifel, Nicolaus & Company

Adnan Butt – RBC Capital Markets

Ling Wang – Summer Street Research Partners

John S. Sonnier – William Blair & Co. LLC

Matthew Harrison – UBS Securities LLC

Jason Kantor – Credit Suisse

Mara Goldstein – Cantor Fitzgerald

Ryan Martins – Lazard Capital Markets

Boris Peaker – Oppenheimer & Co.

Yale Jen – Roth Capital Partners LLC

ImmunoGen, Inc. (IMGN) F1Q13 Earnings Call October 26, 2012 8:00 AM ET

Operator

Good day, and welcome everyone to the ImmunoGen’s First Quarter Fiscal Year 2013 Financial Results Conference Call. Today’s call is being recorded. At this time for opening remarks and introductions, I would like to turn the call over to the Executive Director, Investor Relations and Corporate Communications, Carol Hausner. Please go ahead.

Carol Hausner

Thank you, good morning. At 6.30 this morning, we issued a press release that summarizes our financial results for our first quarter ended September 30, 2012. I hope you’ve all had a chance to review it, if not it’s available on our website.

During today’s call we will make forward-looking statements. Our actual results may differ materially from such statements and descriptions of the risks and uncertainties associated with an investment in ImmunoGen are included in our SEC filings, which also can be accessed through our website.

In our call today, our Chief Executive Officer, Dan Junius, will provide an update on ImmunoGen, and our Chief Financial Officer, Greg Perry, will discuss our financial results and guidance. We will then open the call to questions. Dan?

Daniel M. Junius

Thanks, Carol, and good morning, everybody. I think it was another good quarter progress for ImmunoGen. We are at a stage now where T-DM1 is undergoing regulatory review both in the U.S. and Europe. Roche has indicated that they expect commercialization in the U.S. to begin in the next few months. And based on this, we thought it would be appropriate time to provide more details on the financial terms of this license.

At the same time we have three wholly owned product candidates and seven other partner compounds advancing in clinical testing. We are seeing progress here with data on most of all of these compound expected in 2013. In addition, we look to have one additional proprietary compound entering the clinic in 2013.

So let me walk through the pipeline and I will start with T-DM1. Here as I think all of you know the lead indication is for treatment of HER2+ metastatic breast cancer in patients who previously treated with Herceptin. Across a couple of medical conferences we’ve heard how T-DM1 has significantly improved, both overall survival and progression-free survival easing the co–primary endpoints of the studies.

And this is done with fewer Grade 3 or greater adverse events. Based on this, marketing applications have been submitted in U.S. and in Europe in August and Roche has indicated the U.S. approval is expected in late 2012, or early 2013, and with European approval later in 2013. Approval for this use could open T-DM1 to all of the HER2+ metastatic breast cancer patients previously treated with Herceptin.

So that means, it would be for some first-line patients in the metastatic setting, as well as all second-line and later metastatic patients. While this is moving forward, the MARIANNE is continuing, patients have been Enrolled there with enrollment completed earlier this spring. Data now is now expected as early as late 2013. Approval here would open T-DM1 to the rest of the HER2+ metastatic breast cancer market.

As we look at early-stage breast cancer registration trials in three settings are on track to start in early 2013. This will include adjuvant, neoadjuvant and patients with residual invasive disease with first data, that being for the neoadjuvant patients expected in 2015.

At the same time, enrollment is underway in a trial assessing T-DM1 relapsed advanced HER2+ semi-cancer. Roche has indicated they expect to apply for this use sometime in 2015. We are often get asked about the potential for T-DM1 to capture much of the existing Herceptin market. While that certainly part of the picture, we believe there are other dimensions to consider.

T-DM1 is being developed for all of Herceptin key usage today, plus additional uses. HER2+ breast cancer, Herceptin is approved for first-line treatment of metastatic disease and for adjuvant use in patients with high risk disease, in other words, those patients who are node positive.

T-DM1 is being developed for both of these uses and more. For example, in metastatic breast the EMILIA trial supports T-DM1 for patients who previously received Herceptin, this would be a new indication for Roche. In early-stage disease, it’s being developed for neoadjuvant use and for treatment of patients with residual invasive disease following surgery, again two new markets.

Beyond indication expansion, T-DM1 is expected to be priced at a premium to Herceptin based on comments Roche has made. While T-DM1 pricing has not been disclosed, we know that recently approved Perjeta is priced at $5900 per month, compared to $4500 per month for Herceptin. Again, we don’t know T-DM1 pricing, but we think this provides some direction and potentially magnitude of where they may choose to position T-DM1.

And finally, date to-date suggested T-DM1, which is likely be given longer than Herceptin at least in the metastatic study. The data that we have from the Phase II first-line study showed that patients were on a T-DM1 regiment, a median of 10 months versus 8.1 months for the Herceptin(R). All of the aspects speak to significant commercial potential for T-DM1.

As we talk about or think about the financial terms, we’ve disclosed in the past milestones, which aggregate of $44 million, $13.5 million of that has already been earned and we have $15.5 million to potentially be earned with U.S. and European approval, and $0.5 million and $5 million respectively, the balance of $3 million would be divided across various additional regulatory events.

We discussed royalty duration on our last call and it has been in a number of our SEC filings before that call. In that, we’ve indicated that we earned royalties on T-DM1 sales in each country for a minimum of 10 years and a maximum of 12 years. And we believe based on our IP position, we will get the full 12 year period in the major markets of the U.S., Europe and Japan.

Our intellectual property also benefits the level of royalties we receive. If we had no IP in a country, the royalty level would be 2%. However, as noted, we believe we’re in good shape in all of the major markets. The actual royalty rate is based on the level of annual sales in the U.S. as one territory and the rest of the world has the second territory.

And the brakes on the annual sales is as follows. So for commercial sales in each territory, and again they are evaluated separately, on sales up to $250 million, the royalty rate is 3%. On sales above $250 million up to $400 million, the royalty rate is 3.5%, above $400 million up to $700 million to royalty rate is 4% and for all sales above $700 dollars to royalty rate is 5%. So we’ve indicated in the past is a tiered royalty, those would be the breakpoints in the various royalties that would apply to the sales. Again looking at the U.S. and rest of the world has two separate territories.

At ImmunoGen, we’re excited about T-DM1. We think that it can make a significant difference for cancer patients. We’re very proud of the technology that we brought to this compound. At the same time, we believe it will be a very successful product that will provide ImmunoGen with substantial royalty income for many years to come. It is however, by no means, the only value driver for the company. We have wholly-owned compounds in clinical testing and expect to advance our fourth into the clinic next year. Our proven technology is used in these compounds and in the many compounds in clinical and preclinical development by our partners.

So let me provide an update on the rest of our proprietary pipeline, and I’ll start with IMGN901. In our NORTH Phase II study for patients with extensive small-cell lung cancer, patient enrollment is underway of 33 centers across the U.S., Canada, Spain, and the UK, and we think we’re making good progress here.

We have made an adjustment to the protocol that should facilitate ongoing improved enrollment without compromising the quality of information that we should be able to drive from the study. We’ve done this to be able to complete patient enrollment as quickly as possible.

For the Phase I dose finding portion of this study, we reported data both that ESMO and at a thoracic conference in Chicago earlier this year. What we found was that we are able to administered 901 in combination with etoposide/carboplatin at the IMGN901 dose established when assessed as monotherapy. That dose was 112 milligrams per meter square. We think this is important because it speaks to a lack of added in toxicity, when combined IMGN901 with the existing first-line therapy for extensive small-cell cancer. Also at the same time, those core therapies of etoposide/carboplatin were able to be administered at standard doses.

So while that was very important information around dosing, we also saw activity, although I have to remind everyone that the patient population here was not our target patient population. We were not looking in order to get through the dose escalation phase as quickly as possible and get to the Phase II dose. We didn’t limit the population to small-cell lung cancer patients, the patients actually did not even need to express the target of CD56. So it was a very heterogeneous patient population and it’s not reflective of the target patient population for the Phase II.

That said we did attract some small-cell lung cancer patients to the study. Three of the patients actually were chemotherapy-naïve. Of these three small cell lung cancer patients, two of them have showed a partial response during the dose escalation phase of the study.

We had 10 patients with small cell lung cancer all had received have been previously treated all of them had a prior platinum-based therapy. Seven of them were platinum-resistant or refractory of the 10 that had previously received – have been previously treated, four of them had a PR, of the seven who were platinum-resistant/refractory, two of them had PRs, which was considered by the investigators to be very significant as in small cell lung cancer generating any sort of objective response in a patient after first-line therapy is extremely difficult.

So that’s the activity in the small cell lung cancer indication. Recall we also have a study underway in multiple myeloma. We are completing the study, which assess IMGN901 in combination with Revlimid and dexamethasone or multiple myeloma patients who have previously been treated with the standard of care.

Some findings from that, the dose-escalation phase had been presented at ASCO back in 2011 in an oral presentation. In December, at ASH there will be another oral presentation with the initial findings from the expansion phase. So we find, we think that this will be interesting, while our small cell lung cancer is our registration pass for this component. We believe that the data generated from the multiple myeloma combination study can add value to the apps that should we choose to partner 901.

For IMGN853 recall this is a compound that targets the folate receptor 1 and it is being explored for ovarian and non-small cell lung cancers. We brought this compound into the clinic in July, it’s making good progress. The protocol here allows for single patient cohorts at the lower dosing levels. We’ve already been through several dose escalations, and so we’re encouraged with the progress there and we think this will allow us to have data over the course of 2013.

For the last compound in the clinic IMGN529, this is a compound that targets CD37 and is for patients with Non-Hodgkin’s Lymphoma. Non-Hodgkin’s Lymphoma from a study execution standpoint is relatively crowded space, but we think that we have something that is unique even the profile this particular compound recall that we have an antibody component that preclinically has suggested activity at the level of Rituxan through, which we’ve been added our TAP technology.

Here we following the path of 853, we’ve amended the protocol and the FDA has accepted our request to allow for single patient cohorts in this particular study and we think that that, that will allow us again to move forward and get to therapeutic dose levels on a faster basis and also should provide us the data to report on progress with this particular compound sometime over the course of 2013.

For the rest of the pipeline with partners, in addition to TDM-1 recall there are seven other partner compounds in the clinic. We expect clinical data to be reported for most if not all of them over the course of 2013, and we know that several of our partners were beginning to prepare for advancement into pivotal testing.

So with that on the pipeline, let me then turn it over to Greg.

Gregory Perry

Okay, thanks Dan. So let me step you through the press release. Our net loss for the first quarter fiscal year 2013 was $25.2 million or $0.30 per share compared to a net loss of $19.5 million or $0.26 per share for the same quarter last year. Revenues for our first quarter were $4.1 million as compared to $2.5 million in the same quarter last year. The increase was principally due to greater revenues from clinical materials, reimbursement in this quarter compared to the same quarter last year $1.8 million versus $0.3 million respectively.

We also had greater revenue from research and development support fees $1.4 million compared to $1.1 million for the first quarter of our 2012 fiscal year. These revenue items tend to vary by quarter depending on the work, we’re doing to support our partners. The first quarter revenues also included $900,000 of license and milestone fees compared to $1.2 million for the same quarter last year.

Operating expenses for the first quarter of this fiscal year were $29.3 million compared to $22 million for the same quarter last year. The first quarter operating expenses included $23.7 million of research and development expense compared to $17.2 million last year. The increase is primarily due to greater investment, we’ve made in aggressively advancing our wholly owned product candidates, including increased third-party costs to produce finished drug product for clinical use, increase personal expenses, particularly stock comp, and increased clinical trial costs.

In the first quarter of the current fiscal year, operating expenses also included general and administrative expenses totaling $5.6 million compared to $4.8 million last year. This increase reflects increased personal expense particularly, stock comp and increased patent expenses. Cash used in operations in our first quarter was $21 million compared to $11.6 million for the same period last year. The increase is primarily resulting from higher net losses we invest in our proprietary pipeline and changes in working capital.

Our guidance for the full fiscal year of 2013 is unchanged from our last quarterly call. We project that our net loss for the fiscal year ending June 30, 2013 will be between $70 million and $74 million. And our net cash used in operations will be between $78 million and $82 million.

And our capital expenditures will be $4 million to $5 million. As discussed previously, these projections include an expectation of $10.5 million milestone, we expect to earn with the T-DM1 approval in the U.S. We have not included the $5 million milestone associated with this European approval as we think there is some risk, this won’t occur by the end of our fiscal year in June.

We have assumed a product launch in the early 2013 and we expect that royalties will be reported one quarter in arrears. So we have not included royalties in these projections. As projected previously, we expect to end this fiscal year with cash and cash equivalents of between $172 million and $176 million. We believe this cash combined with the expected cash inflows from royalties and other revenue sources is enough to fund us through our 2015 fiscal year in establishment of proof-of-concept of our lead wholly-owned compounds. Dan?

Daniel M. Junius

Thanks Greg, let me just summarize what we expect from an events standpoint for our pipeline compounds over the balance of this year and through the course of 2013. And I will start again with T-DM1. So for the metastatic breast cancer indication, patients who have been previously treated with Herceptin and whose diseases has advanced while on Herceptin, we would expect U.S. approval either late this year or early 2013 with the sales to follow immediately thereafter.

European approval is expected sometime over the course of 2013 more likely than that in the back-half of the year. And then for our first-line of Phase III data for metastatic disease, that would come in late 2013 or early 2014. The registration studies for the various early breast cancer indications would commence over the course of 2013, some of them starting in the early part of the year.

For the seven other partner compounds in the clinic, we look for clinical data on most, if not all of those, over the course of 2013 and this would include the Phase II data on the Sanofi compound that targets the CD19, and SAR3419, recall there are three Phase II studies underway there. We would look for the next partner compound, after that the two that are in pivotal testing, we look for the next partner compound to enter pivotal testing sometime over the course of 2013.

For the proprietary pipeline, we will have the Phase I data on the single-arm combination study of 901 in combination with REVLIMID and dexamethasone for multiple myeloma patients at ASH in December. And then initial data offers the NORTH study for the small-cell lung cancer patient population sometime in the back-half of 2013.

We would have initial data for both IMGN853 and IMGN529 over the course of 2013. And then we will have preclinical data on our next clinical compound at a medical conference in the second quarter of next year, looking to have an IND filed and become active sometime around the middle of 2013. So we look for a very active 2013 both in terms of a data development for existing compounds and seeing our pipeline expand further.

Let me turn it back over to Carol to begin the question-and-answer process.

Carol Hausner

Thanks Dan. We are about to open the call to questions. We ask that please be limited to one to two questions per person and so each analyst has had an opportunity to ask questions. You can get back in the queue and ask more later. Operator we are now ready to open the line for questions.

Question-and-Answer Session

Operator

Thank you very much. (Operator Instructions) We’ll take our first question Simos Simeonidis with Cowen and Company.

Simos Simeonidis – Cowen and Company

Thank you for taking the question. Dan, I just want to make sure I heard what you said correctly about the T-DM1 potential application on the metastatic setting. I believe you said that you expected to be used on the basis of the EMILIA data for at least some first-line patients. Should we expect that you think the label will include first-line metastatic patients?

Daniel M. Junius

Well, I think that the label my expectation Simos, it is strictly mine as opposed to this including any guidance from Roche. But I think that the label would follow the patient population that has been tested and given that it’s for patients who have advanced well on Herceptin. It seems like the only appropriate avenue for a physician to treat that patient would be to give them something that is for the next stage of their disease in a stage advanced, while on Herceptin, it would seem to be inappropriate for them to put them on a Herceptin plus taxane regimen for metastatic disease.

So given the fact that the EMILIA study was looking at patients who had advanced while on a Herceptin based, after a Herceptin based therapy. And if some other patients in the EMILIA population were patients with first line Metastatic disease who advanced after treatment with Herceptin in the adjuvant setting, it seems only logical that the label would follow that.

Simos Simeonidis – Cowen and Company

Okay and second one and I’ll jump back in the queue. I want to make sure I understood correctly the breakdown of the royalty rate you disclosed, so first of all, the highest royalty rate in the areas, in the regions where you have IP it’s 5% and in order to get that you have to be more than a $750 million in sales in that region. So for example, in order to get 5% in Europe and in U.S. it would have to be a total of $1.5 billion, is that correct?

Daniel M. Junius

It was actually, its $700 million not $750 million.

Simos Simeonidis – Cowen and Company

$700 million, Okay.

Daniel M. Junius

And to get 5% on global sales if you will, you would have had to have reached $700 million in the U.S. and $700 million in the rest of the world.

Simos Simeonidis – Cowen and Company

Okay, great. Thank you for taking the questions.

Daniel M. Junius

Yes.

Operator

And our next question will come from Cory Kasimov with JP Morgan.

Cory Kasimov – JP Morgan Securities

Good morning and thanks for taking the questions. I have two on the economics disclosed today. So first of all, does the royalty reset each year or a few clips of certain threshold in one year do you continue at that rate into the following? And then the second question is you obviously have the big areas covered of the U.S., Europe and Japan, but what countries do you not have valid claim under patents where you would have 10 years in the flat 2% royalty and do you know what percent of Herceptin sales are generated in those regions? Thanks.

Daniel M. Junius

To the first question Cory, it does reset annually. So these breaks are based on annual sales in a territory.

Cory Kasimov – JP Morgan Securities

Okay.

Daniel M. Junius

In terms of the rest of the world by suggesting that we have coverage in U.S., Europe and Japan is not to suggest that we don’t have coverage elsewhere. But it does become something of a mixed bag. I think that we do have coverage in many of the important lesser important jurisdictions, but you get into such a list of breakdown. There are certainly some where we don’t and we’ll be subject to the lower 2% royalty. But I would point out that those sales they still do fall into those annual sales to build up to the various break points. But I don’t have a breakdown in the rest of the world and into other, the other dimension of the question. I don’t know what the Herceptin sales breakdown here is in those countries either.

Cory Kasimov – JP Morgan Securities

Okay, thanks Dan.

Daniel M. Junius

Yeah.

Operator

Next we’ll hear from Thomas Wei with Jefferies.

Thomas Wei – Jefferies & Company, Inc.

Hi thanks and just a follow-up on Cory’s question. I guess and when you were talking about those sales contribute towards the annual sales threshold. So for instance, if you had a country-by-country where you were going to receive a 2% royalty. I’m a little bit confused by the comment that you just made, because I mean that that country sales contribute towards these tears for the other countries where the royalties go from 3% to 5%?

Daniel M. Junius

Yes, because what would happen is, while they were maybe in a tear. So for example, it’s a sale that would otherwise get you above, those sales would be blocked out whatever as you’re not going through it and they would drop down to the 2% level.

Thomas Wei – Jefferies & Company, Inc.

I see.

Daniel M. Junius

So we would still contributed to getting you through the various breakpoints.

Thomas Wei – Jefferies & Company, Inc.

That’s very helpful. And then, maybe to ask the question in a different way, what are some of the notable territories where you do not have IT coverage for T-DM1, anything that stands out, any potential bigger country that you don’t have IT in?

Daniel M. Junius

I don’t have a comprehensive list. I think as you go down to the next tier of countries, when you get into, for example, the BRIC countries and like, we have IT in many of those jurisdictions. So there certainly have some where we don’t, but I do think that even as you get as the major jurisdictions, we have reasonably comprehensive coverage, not universal, but reasonably comprehensive.

Thomas Wei – Jefferies & Company, Inc.

And then just lastly, I’m sorry if I missed this. But you’d referenced a protocol change for the 901 study; can you go through that in a little bit more detail?

Daniel M. Junius

Yeah, for example, one of the things we did in looking at the protocol for 901, we had been requiring some testing by the centers who allow us to monitor PK. And that certainly is being thorough from a protocol standpoint, but as we get into the study and as we looked at and as we had dialogue with the centers, we determined that it was an obstacle for some of the centers, certainly those that are more community based to be able to do the piece of blood draw to evaluate PK within their hours of operation.

And so as we evaluated it, we determined that we had substantial PK across the number of studies and having this as a requirement in the Phase II for all patients was probably extraneous. So by virtue of amending the protocol do not require PK drugs on all patients. We removed an obstacle that was inconvenience to patients and difficult for some centers to execute. So it was some things in that arena that we were able to do, time has allowed us to make it easier for both patients and centers without as I said reducing the quality of data that we are going to be getting from the study.

Thomas Wei – Jefferies & Company, Inc.

Great, thanks.

Daniel M. Junius

Yeah.

Operator

And our next question will come from Joel Sendek with Stifel, Nicolaus.

Joel Sendek – Stifel, Nicolaus & Company

Hi, thanks. And thanks a lot for giving us all the detail on the royalties in advance of when you actually received them, it helps out a lot. So I just want to ask some crystal clear on this. On every breakpoints you’ll get the lower amount such that if you are, the drug is selling a $1 billion a year for example, let me ask you in a different way. If the drug is selling, let’s say just over $700 million, you’re really not getting 5% until you get the incremental dollar above $700 million, is that right?

Daniel M. Junius

Yeah, that’s correct. So you can see it. So it doesn’t, I am getting to the incremental point, it doesn’t increase to royalty on all the subsequent, all the lower level sales.

Joel Sendek – Stifel, Nicolaus & Company

Right, okay. And then…

Daniel M. Junius

(inaudible)

Joel Sendek – Stifel, Nicolaus & Company

Got it, okay. And then I just did a quick calculation. If theoretically the U.S. and the rest of the world would launch at that same time and go in the same identical ramp, and reached a $1 billion, actually $2 billion, $1 billion in the U.S. and $1 billion worldwide, you would effectively get just under $40 million from each jurisdiction, or $80 million, and so about 4% of the first $2 billion in that theoretical scenario, is that math generally correct?

Daniel M. Junius

Yeah, that math, that looks close to the math that we’ve done, Joel.

Joel Sendek – Stifel, Nicolaus & Company

Okay, all right, great thanks a lot. And then just on the guidance, back to the guidance, it’s look like your, on the spend, it looks like your spending in the first quarter anyway a little bit more than your any more guidance I’m wondering if I’m looking at that right or if there’s going to be some declines in R&D for the rest of the year?

Gregory Perry

Yeah, Joel, this is Greg. I think the best way to look at that is of course we haven’t give any guidance on operating expense, but we have on net loss. If you look at the first quarter operating expense and you would annualize that, it’s actually not a bad number. It’s a pretty good number. It will probably tick up even just a little bit more in that first quarter annualized run rate.

The difference to get back to the net loss guidance as revenues of course, so if you would annualize the first quarter revenues that is not a good number, because we anticipate $10.5 million royalty from T-DM1. We also expect some additional revenue associated with the potential taking of licenses by some of our partners, as well as some other milestones from some other partners. So if you annualize the operating expense and make it a snitch higher and then you can back into the kind of the revenue expectation we have here.

Joel Sendek – Stifel, Nicolaus & Company

Got it. Okay, thanks a lot.

Operator

Adnan Butt with RBC Capital Markets as our next question.

Adnan Butt – RBC Capital Markets

Thanks for taking my question, and again thanks for the detail. Just a couple of questions on T-DM1 please. First, just I haven’t heard the two [readings] are added up separately to get to the different Tiers collected, if we should look that as two different buckets? Secondly, is it pretty much fair to assume that the major readings that U.S., Europe and Japan towards that you should put 12 years and it’s recognized with a lag, and then finally when is the time approval expected?

Daniel M. Junius

Okay. So across the questions Adnan, yes, they are two separate buckets, so that they are two separate territories to apply the rates. Your question on Japan, I think Japan is looks to be approval in 2014 was my recollection, I think that’s the guidance from Roche. And there was a intermediate question of them.

Gregory Perry

Yeah, in terms of the timing, yes, we do expect that our recognition of royalties will be one quarter in arrears, just given administrative issues associating with the processing and notification in our timing of reporting. We think there will be a quarter lag between realization and reorganization.

Adnan Butt – RBC Capital Markets

So Dan, a follow-up and then I’ll get back in queue. For the major reasons, it is 12 years of royalties, and then secondly if there is an additional in Acacia, such as gastric cancer that total would just be added to the blood cancer totals?

Daniel M. Junius

Correct of both, yes. Any new indication would just fall into the revenue computation and our guidance is that we believe our IP will allow us to receive, we aid the full 12 years in the major jurisdictions and at the higher royalty rate not the default royalty rate of IP were not in effect.

Adnan Butt – RBC Capital Markets

Okay, thanks.

Operator

Our next question will come from Ling Wang with Summer Street Research.

Ling Wang – Summer Street Research Partners

Good morning and thank you for taking my questions. The first one is on the IMGN853. Can you give us an estimate, when should we expect the trial progress into the Phase I extension phase? And then for 901, the small-cell lung cancer trial you mentioned of that will be expected second half of next year. What should we expect the initial data to be? Should I include some provision for the survival data or just abnormal response rate? Thank you.

Daniel M. Junius

Thanks Ling. In 853, it’s difficult to say. But we’re very pleased with the progress that we’ve made thus far. The reason it’s difficult to project when you’re going to get into the expansion phases as you just don’t know when you’re going to see the maximum tolerated dose. We’re very pleased that we’re moving up and getting to if not close, if not to therapeutic levels very quickly based on the protocol design. But our hope frankly is that we’ll be able to dose patients up to reasonably high levels, which would increase the potential for success. And so we just have to wait and see how that evolves.

So I think sometimes over, not later than the middle of 2013, we’d be getting in the expansion cohorts, but there is kind of a wide range of one that will actually take place given that we just don’t know when we’re going to get to a level, where we’re starting to see our dose limiting toxicities.

On 901, yes, we have indicated that the NORTH data, we expect that to be in the second half of 2013, I think that what we would look for would be to have data coming out of that first cohort from the Simon Two-Stage Design. So would be as we’ve noted the 59 patients of that would be randomized across the two harms and we would be looking to have – the reason that would be the back of 2013 as we need the data to mature from that first patient that first cohort, so we would have some sense of progression free survival. So I think that would be the key data that we’ve been looking for, as we report in the back half of the year.

Ling Wang – Summer Street Research Partners

Great. Thank you.

Operator

And we’ll take the next question from John Sonnier with William Blair.

John S. Sonnier – William Blair & Co. LLC

Thanks for taking the question. So longer-term personally no matter how you do the royalty amount or like we heard that you guys have some pretty nice flows coming your way and the relative near-term is high and it raises a question Dan when you think about looking out two, three, four years the deployment of royalty revenue. How do you see that unfolding? What are the bottlenecks which might be addressed through greater investment, when you think about growing the company and what do you think the company shape like maybe four years out?

Daniel M. Junius

Well it’s a nice problem to think about John, it’s a new one for us to do. But I would agree with your premise that the – their royalty stream will provide a different profile for us to consider. The game plan for the next certainly two to three years is pretty clear. We have three. We think high potential compounds in the clinic. We’ll know over the course over the next certainly 12 to 18 months the potential on a couple of those and the game plan would be to continue to support expansion of those compounds deeper in the clinical studies.

So and then involve a few different dimensions, there is obviously the clinical side of executing the pivotal study. We also has begun, and you’ve heard great talk about in the financials, we’ve begun to do the spade work to prepare on the CMC side as to be able to support pivotal studies for both IMGN853 and IMGN901.

I think over that period of time that you referenced though, certainly we see proof-of-concept in one or more compounds. We will be faced with the question of what is the gap to fully exploit the value on the compounds, do we do that on our own, do we do that with appropriate partner in one form, that can change the financial profile in a couple of different ways.

If we choose to bring in a partner, obviously there is the opportunity to bring in some meaningful upfront money. But depending on what the appropriate development of course is it may also demand reinvestment of those funds in a broader range of studies assuming we maintain a high-level of participation, which would be our intent.

We also have a decision of, do we want to after the intent of some point with proof-of-concept looking good would be to be able to consider commercialization dimension. So what we do there, we do that again on a co-promote basis with the third-party, do we try to carve outs from geography for ourselves? We do that for the initial compound, do we wait and do it on a second compound?

So there are a lot of emerging questions, exciting questions from a company’s standpoint, and being able to evaluate them in the context where we’re seeing support coming in from a very attractive royalty stream, it gives us a wide range of flexibility on how we choose to address that. But I think I’ll call it a high class problem, because it really does let you look at what’s the best way to realize value on behalf of the company.

John S. Sonnier – William Blair & Co. LLC

I think that’s fair. It sounds like the data will inform, but it sounds like most of your investment would be in around clinical development and maybe on the manufacturing side?

Daniel M. Junius

I would say more clinical developments than manufacturing. Manufacturing that will be some meaningful increments to get to pivotal material. And I think once we’re over that, it will be at a more normal level. But some of the early stage development cost for antibody conjugate represents a meaningful increment that we’ll have to work our way through.

John S. Sonnier – William Blair & Co. LLC

Okay. Thanks so much.

Daniel M. Junius

Yep.

Operator

Next is Matthew Harrison with UBS.

Matthew Harrison – UBS Securities LLC

Hi, good morning. Thanks for taking my questions. Two on the royalty stream, can you help us understand when you referenced Roche potentially having to pay royalties for use of TAP technology, what you are thinking about when you say that? And then secondly, do you have to pay any royalties out of your royalty stream? Thanks.

Daniel M. Junius

Yeah, I think you’re referencing something that was in the 8-K we found this morning Mathew. We don’t believe that is, and it relates to royalty assets. Royalty assets are fairly common term in a licensing agreement It’s a -- if we or others enter into contracts generally there is some provision, that if they have some other royalties, that would applied and that we would share in that cost, we don’t believe there would be any royalty offsets associated with the TAP technology, that growth would be obligated to pay, that we would potentially dilute the royalty to us, we’re not aware of any, and we’ve done some research in that area. The second half of the question was? Pending royalties? Well, in terms of we have any obligations on around no we don’t the technology is wholly owned by us we have no third party obligations that again we – that would dilute the royalty, but we would dilute the yield, but there are not…

Matthew Harrison – UBS Securities LLC

Okay, so just to be clear any obligation Roche may have the pDOI is not part of what would be considered in that royalty offset?

Daniel M. Junius

That’s correct.

Matthew Harrison – UBS Securities LLC

Okay, thank you.

Operator

Jason Kantor with Credit Suisse is next.

Jason Kantor – Credit Suisse

Thanks for taking the question, and thanks probably I added detail appreciate is that is there any provision here to program Roche from at some point challenging any of the patents that gets you after 12 years and also can you give us some detail to what those patents are they cover, they give you confident which you can go out for 12 years on this territory.

Daniel M. Junius

Yeah, the first question with the – there are no explicit legal provision that would prevent that I think what we prevented is Roche as most big pharma companies are extremely concerned about maintaining a stronger patent portfolio as they possibly can, so for that it would be get self defeating on their part to challenge our patent to reduce or well to reduce the royalty, if it would weaken their overall patent position.

So I just think that the – I understand the question but I think that the likelihood of them doing that is quite remote. We spend a lot of time with Roche coming over a number of patent related items as we’re going through this entire process and I can assure you that their incentive is to have more patents, not fewer.

In terms of the specific patents, many of the patents, it’s no secret. We’ve disclosed in the past that the – for example the composition of matter patent for DM1 expired in I think right now it’s like May of 2010. So it’s one element that’s not there as composition of matter, but we have a family of patents given the nature of this technology that cover different aspects, some of them can be composition of matter patents in other areas, some of them can relate to various processes and it’s different patents they would apply to get you out into the sort of mid-2020 period that gives us the comfort and we’ll see the full 12 your life.

We don’t disclose specific patents there because in doing so you in essence be revealing a trade secrete that there will be not in our interest or in Roche’s interest and I’ll give you an example.

We have several patents surround conjugation methodologies. It would not be in our interest to identify which individual patent is being used to manufacture T-DM1. What we’d be doing is establishing a roadmap for someone who wanted at some point to attempt to replicate the conjugation process or to circumvent, I guess I should say the conjugation process. So, we’re simply not going to reveal those so that’s our position on identification of IP.

Jason Kantor – Credit Suisse

Okay. And then I just have a follow up on some one else’s earlier question on 901, I guess two things, one are you going to pursue it in multiple myeloma going forward? And second, regarding partnership, I mean you gave a lot of options there, is it your business plan to become a commercial entity in the United States, should 901 be successful or any of your product make successful or are you going to continue more of a hands up approach to commercialization?

Daniel M. Junius

That would be several years up, and we haven’t made a firm decision on that at this point Jason, we have a lot options in terms of what just we want to do, I think that we’ll wait until we see proof-of-concept on be at 901, be at 853, be at 529 to revisit that question because we have plenty of time to respond to it.

Second question….

Jason Kantor – Credit Suisse

On multiple myeloma.

Daniel M. Junius

Yeah myeloma is not the registration strategy for 901. The registration pathway for us is small-cell lung cancer. We think that we’ve generated interesting data with 901 in multiple myeloma as monotherapy we’ll wait and see, so you can see the data in combination. But because of that the treatment alternatives in myeloma being somewhat in flex in multiple myeloma, we thought that we were better going at pathway where the unmet medical need was clear, which pushed us to small-cell lung cancer.

We think 901 quickly develop in multiple myeloma at some point with the newer agents that are being developed with maybe in combination with something other than revenue in dexamethasone, but we do think it shown efficacy and tolerability in that patient population, it still afforded some opportunity to be part of the treatment regiment.

Jason Kantor – Credit Suisse

Thank you.

Operator

Mara Goldstein with Cantor Fitzgerald has a question

Mara Goldstein – Cantor Fitzgerald

Thanks for taking my question. Again a follow up on the royalty and just one other, just to clarify, it’s a clock on the royalty resets if you will on an annual rate which is what I thought you said. Does the royalty on day one then start at the same level it was on day 365 or does it set back to $1 of sales.

Daniel M. Junius

You get reset to $0 of sales at midnight on 12/31 and so it’s on the calendar basis and resets annually.

Mara Goldstein – Cantor Fitzgerald

Okay. And then just a question on funding, because there is comment made about have funding [suggestion] to fund holding on lead compounds through proof of concept, and do you consider that to be 901, 853 and 529 or are there others?

Daniel M. Junius

I think we say lead compounds, so we are really looking at proof of concept on those lead compounds.

Mara Goldstein – Cantor Fitzgerald

Okay. All right, thank you so much.

Operator

And our next question will come from Ryan Martins, Lazard Capital Markets

Ryan Martins – Lazard Capital Markets

Hi. Thanks for taking the question. Just on the $700 million break point, can you give us some idea of when that could be reached, I mean when you look at the (inaudible) ramp or the global ramp, just trying to get an idea of when you could reach that the highest break point there. And then the other part of the question was on the gastric cancer study, it seems like there are two scheduled doses being studied. Can you give us some color on that?

Daniel M. Junius

Yeah, on the first in terms of break point that would get us in to forecasting Roche’s sales for T-DM1 and I think that’s a place that we don’t have a tremendous level of insight that’s control by Roche and I think we’re going to not put ourselves in a position of trying to forecast their sales Ryan.

In terms of gastric, I’ll answer the question I think you’ve asked, but you can correct me come back if I don’t get it. That is designed as a second line study and it’s a Phase II, III they have two Phase II arms looking at different dosing and at the end of the Phase II they’re going to select one arm so then move into a Phase III, but they’ve started up so that they can preserve the patient data from the Phase II and included in the registration in the Phase III portion of the study.

So again and rather a design that I hadn’t seen previously, but they felt that they can get through that design and be able to have data to provide for registration for at second line metastatic gastric patient population in 2015.

Ryan Martins – Lazard Capital Markets

Okay, thanks Dan. And then maybe one final follow-up is on, when you’d be talk about doing the single patient dose escalation trials. I mean how much confidence you have in reaching an appropriate MTD and DLTs with the one patient cohort process three plus three typically?

Daniel M. Junius

Well, let me clarify that because when I refer to having single patient cohorts that A is simply for very low doses. What would be due to be non-therapeutic doses? And in doing so, you’re making a trade off so that your definition of [SAEs] that would require more extended dosing in the cohort is reduced. So that you’re not making a trade off on safety you lowered your safety thresholds to ensure that you’re going – you’re not bypassing even milder signals of safety than you might find acceptable in a normal design.

Once you reach a certain level, you will then go to a traditional three plus three patient cohort. That is if there would be three patients assuming there are no safety signs with those three patients, you can go to the next cohort, if there is any safety signal, you would add an additional three patients to ensure that you are not missing something from a safety standpoint. So, if we were only going signal patient cohorts all the way through the study I think you would exposure yourself to some bad conclusions or conclusions based on scanned data.

But I think the design is one that I think benefits both patients because you are not recruiting patients at very low doses, where they are not going to have the opportunity for therapeutic benefit, you are doing it in an environment where you’ve got more stringent safety criteria so exposing patients to safety hazards at low doses. It’s better for the investigators because they are reluctant to bring patients on but they don’t think there is the opportunity for therapeutic benefit. And since you then go once you start to approach therapeutic leverage, you are going to a more traditional cohort design I think that – you are pulling in the appropriate data to draw reasonable conclusions around the study.

Ryan Martins – Lazard Capital Markets

Okay, thanks.

Daniel M. Junius

Yep.

Operator

Next we will turn to Boris Peaker with Oppenheimer.

Boris Peaker – Oppenheimer & Co.

Thanks. Most of them have been answered already but just quickly on 529, are patients being screened for CD37 prior to being enrolled in the study?

Daniel M. Junius

First, I believe all patients express. The CD37 is going to be found all B cells. So we don’t screen for CD37 expression.

Boris Peaker – Oppenheimer & Co.

Okay. And do you have any plans on taking their compound into CLL, just curious about the development strategy there?

Daniel M. Junius

Yeah, we are evaluating it, because you’re obviously aware of just CD37 is expressed on CLL as well. We want to get some early indications around not as since pharma, but that is a pending decision on our part.

Boris Peaker – Oppenheimer & Co.

And lastly on the same compound, have you conducted the CMC work that you would need to get into larger studies, or is that also ongoing right now?

Daniel M. Junius

The incremental investment they were making in CMC for later stage studies thus far as with 853 and with 901. We held up on making the decision around 529. I think for a couple of reasons, one is recognizing the more competitor space than any job and I think we want to see some clinical data to inform a decision about making incremental earlier stage CMC investments.

And I think that that we see as we evaluated between 853 and 529, we thought that the preclinical data for 853 was more compelling to allow us to make the early decision that we have made to do some of the preliminary work around late stage CMC for 853, so that’s an another decision around 529 that would be pending based on some signals that we see out of the study.

Boris Peaker – Oppenheimer & Co.

Great. Thank you very much for taking my questions.

Daniel M. Junius

You bet.

Operator

And next, we will hear from Yale Jen, Roth Capital.

Yale Jen – Roth Capital Partners LLC

Thank you for taking my questions. I think most of it has been answered, just a quick two, two quick ones. The first one is for SAR3419, do you anticipate any presentations in the ASH Meeting this year or some pretty mostly that will be next year.

Daniel M. Junius

I don’t think we will see anything on SAR3419 at ASH. I think that data will come out over the course of 2013.

Yale Jen – Roth Capital Partners LLC

Okay, great. And just a follow-up on the previous question just want be clear that while the T-DM1 royalties, if – you mentioned two buckets, if in one region you get a $700 million (inaudible) revenue, you get about 5% whereas in the other region you will get, for example, get $500 million in revenue you get 4%, is that how that works or I missed anything on there?

Daniel M. Junius

That was right. If sales are coming in two different regions, one being in the – first being the U.S. and second being rest of world and let’s say just for clarity its $800 million in revenue in the U.S. A revenue from $700 million and $800 million would be generating royalties at 5%. If the rest of the world, the revenue as you know was $500 million, a top gear from $400 million to $500 million would be generating royalties of 4%. And those computations would be applied to the sales aggregated in the dollars and credited to us as royalty revenue.

Yale Jen – Roth Capital Partners LLC

And if you would going forward that Roche would at least reported as separated these two regions as they have done in Herceptin, so we’ll be clear on what the revenue breakdown might be.

Daniel M. Junius

I have no information on how they may choose to report it.

Yale Jen – Roth Capital Partners LLC

Okay, great. Thanks a lot. Appreciate it.

Daniel M. Junius

Yes.

Operator

Next we have a follow-up question from Thomas Wei with Jefferies.

Thomas Wei - Jefferies & Company, Inc.

Thanks. And I will take the rest of my questions off line.

Operator

Thank you very much. And we have a follow-up question from Adnan Butt.

Adnan Butt – RBC Capital Markets

Hey, Dan. We would see efficacy threshold just sort of looking for 901 and with the follow-up on T-DM1 what’s the specific label being so I just you can say same in the U.S. sales and in Europe. Thanks

Daniel M. Junius

On the second, in terms of the label, I think the label becomes there is process there but we’re not probably, but my comments were based on the patient population that we studied and I think which is practical from a physician standpoint if this is being studied in patients first disease as advanced on Herceptin-based regimen and the study designed in Herceptin-based regimen in metastatic or Herceptin-based regimen and because you would have made a difference but they’re advancing the disease that progressed while on Herceptin.

So it would seem illogical but regulators we would restrict the label to patient only whose disease had advanced while on a Herceptin-based regimen in first-line metastatic because they and doing physician what the physician going to do if the patient is advanced well on a Herceptin-based regimen, and they are going to say based regimen in first-line metastatic that would be that would be helping for physicians can follow that type of protocol so it just would make sense that’s what label would include but again I have no inside into the regulatory exchange taken place between Roche and the regulator either in the U.S. or in Europe.

Your first question around the efficacy criteria for 901 we haven’t disclose that we’ve discuss the end points and we discuss what the current standard-of-care as generated in terms of PFS and in terms of OS for that patient population. So I think it’s fair to say that we are looking for a meaningful improvement in the various endpoints that we’ve identified. So PFS, OS, after 12 months and the like and certainly it like to surpass all of your targets for endpoints. But sometimes it becomes a mix have you seen some that surpasses, some that maybe our borderline. So we just have to see what the whole picture looks like as the data develops.

Thomas Wei – Jefferies & Co.

Okay, thanks. Thanks guys.

Operator

And next we’ll take a follow-up question from Jason Kantor with Credit Suisse.

Jason Kantor – Credit Suisse

Hey, thanks for taking the follow-up or its just royalty structure or is it a template that you use for your other deals? Are they similarly structured or those royalties more flat. And then also the royalty that are dependent on where the product is actually made U.S. versus ex-U.S. or is it only relevant where the product is sold?

Daniel M. Junius

To the second question, first Jason that the royalties only tearing only matters where the product is sold, so where it’s manufactured doesn’t have any bearing. To the question of the rest of our licenses, there are that’s not an easy answer a couple of different to mention. And I want to make sure it’s clear. And the question of duration and we spend a fair amount of time on this – on the call last time, the normal structure this particular license is in out layer. The normal structure would be that royalties would continue for the later of as fixed period of time or the IP that applies.

So if we have a patent that’s in place royalties would for the duration of the patent irrespective. But subject to a minimum so if the patents only in place for six years and your royalty period and you’ve got a 12 year period you would get to 12 or if the IP extends for 15 years and you’ve got a 10 or 12 year fix period you would get to 15 years.

So that’s the duration question. I think the other gets to both level and structure, I think that most of the arrangements we have do have some level of caring in them. I think that the levels generally start. I won’t say general I think universally they start above the lower end that we’ve discussed in the context of TDM-1 and they universally end at a higher to a meaningfully higher level, but they [heartiered]. The geographic distinction in terms of two territories is somewhat unique to this license as well.

Jason Kantor – Credit Suisse

Thank you.

Operator

We have no further question at this time.

Carol Hausner

Like to thank everyone for your interest in ImmunoGen, and if you have any subsequent questions, please don’t hesitate to call. Take care.

Operator

And that does conclude today’s conference call. Thank you for your participation.

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