The advances we've made over the past couple of years are striking. Just a short time ago, we had no compounds of our own in clinical testing and only a few companies had licensed our TAP technology. Today, we're conducting four clinical trials with our wholly-owned product candidates, huN901-DM1 and huC242- DM4. Two TAP compounds are in the clinic through our collaborations with sanofi-aventis and Genentech. Six other companies have licensed access to our TAP technology. And several companies have entered into agreements to make use of our expertise as well as our technology.

Our HuN901-DM1 TAP Compound

We're evaluating huN901-DM1 in three clinical trials to gain the information we need to advance it to market as quickly as possible, and we hope to report data from two of these studies in the coming weeks. We've submitted an abstract with Study 002 interim data to the EORTC-NCI-AACR meeting taking place in November 2006. Study 002 evaluates huN901-DM1 in the treatment of small-cell lung cancer (SCLC) and other CD56-expressing solid tumors. We presented initial findings from this study at the EORTC meeting last year. At that time we described one complete remission and several patients with stable disease. Assuming our current abstract is accepted, we'll report additional interim data at the meeting this year.

Then, in December 2006, we plan to report the first findings from our multiple myeloma study, Study 003, at the American Society of Hematology (ASH) annual meeting. We've submitted an abstract with the results to date and - assuming it's accepted - we'll report all of the data we have at the time of the meeting.

We've also made solid progress in our Phase II SCLC trial, Study 001, which was expanded last year to include 35 patients. We've enrolled the majority of these patients, and expect to report additional findings from this trial in 2007.

We believe that huN901-DM1 has tremendous potential for the treatment of CD56-expressing solid and liquid tumors, and we're assessing all possible pathways for rapid advancement of this highly promising compound.

Our HuC242-DM4 TAP Compound

We hope to report the first clinical data from the Phase I study underway with huC242-DM4 at the EORTC meeting in November. This trial is being conducted in patients with various types of CanAg-expressing cancers - colorectal, pancreatic, other gastrointestinal tumors - that have failed treatment with approved therapies.

Our plans are to initiate a Phase II study with huC242-DM4 in a disease-specific patient population during the first half of 2007. Assuming all goes well, this will be followed by a pivotal Phase II study. We expect to provide more information on our plans in the coming months.

Our Collaborations with Other Companies

To further expand the application of our TAP technology and help us fund our own product programs, we've selectively outlicensed our technology to other companies. In recent years, several companies have licensed rights to our TAP technology. On top of this, some of our partners have entered into agreements that additionally provide substantial access to our expertise.

The first such agreement was the discovery, development, and commercialization collaboration that Aventis established with us in 2003. Sanofi-aventis - the successor to Aventis - recently exercised the second of their two options to extend the research part of our collaboration, committing to provide us with significant research support funding through August 31, 2008. In the end, we'll have received over $90 million in non-dilutive funding by August 2008. During and after that time, we'll be entitled to receive significant milestone payments, manufacturing payments, and royalties on the sales of collaboration products and to have certain co-promotion rights.

A number of promising anticancer agents are in development through this collaboration, including three product candidates licensed in 2003 from our preclinical pipeline - AVE9633, AVE1642, and SAR3419 - plus additional compounds ImmunoGen and sanofi-aventis have created together. AVE9633, a CD33-targeting TAP compound, is in Phase I testing in the US and Europe for the treatment of acute myeloid leukemia. Some initial findings from this study may be reported at the upcoming ASH meeting. AVE1642 and SAR3419 are both advancing toward the clinic, and we expect to provide updates in the coming months.

As a result of recent discussions with sanofi-aventis, we no longer have restrictions on the use of promising new targets for our own product programs and on new collaborations with other companies. This significantly enhances our opportunity to build our business by expanding our pipeline and our relationships.

Genentech also has entered into an agreement to access our expertise: in May 2006, they engaged us to develop a commercial-scale manufacturing process for trastuzumab-DM1, providing us in return with research funding and an increase in potential milestone payments and royalties from HER2-targeting TAP compounds such as trastuzumab-DM1. We earned a $2 million milestone payment from Genentech in January 2006 as a result of advances with trastuzumab-DM1, which is now in clinical testing. Trastuzumab-DM1 marks the first use of our TAP technology with an antibody that has demonstrated significant anticancer activity of its own.

In July 2006, a new partner, Biotest AG, licensed the exclusive right to our TAP technology for use with a specific target. Like all of our single-target licenses, this one enables us to receive potentially significant milestone payments, manufacturing payments, and royalties on product sales. But unlike our other deals, it provides us with the right to opt in on the US development and commercialization of resulting product candidates, enabling us to share in the profits, if any, from their US commercialization. We can exercise this right during clinical testing when results in humans are available.

We were disappointed by Millennium's decision to discontinue development of MLN2704. They've disclosed that they faced economic challenges with this program and wanted a compound with a broader therapeutic window. We understand their concerns and were pleased that, in March 2006, they extended the agreement that enables them to test our TAP technology with antibodies to a limited number of other targets.

We expect one more promising collaboration product candidate to advance into clinical testing in the next few weeks as well as an additional TAP compound to enter the clinic by the end of June 2007. And looking even further ahead, we expect two to three more compounds to enter the clinic during fiscal 2008.

Our Company

We ended our 2006 fiscal year with $75 million in cash and marketable securities, and we continue to have no debt. In fiscal 2007, we expect to invest in an expanded clinical program for our own compounds. We also will begin to prepare for manufacturing these compounds for later-stage trials and commercialization. As a result of all of this activity, we expect that the body of clinical data for TAP compounds will increase significantly in the next 12 to 18 months, starting as early as this fall.

We are very excited about our TAP technology and what lies ahead, and I look forward to keeping you apprised of our progress.


Mitchel Sayare, Ph.D.
Chairman, President,
and Chief Executive Officer
September 8, 2006

Chairman, President,
and Chief Executive Officer