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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-19612

IMCLONE SYSTEMS INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 04-2834797
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)

180 VARICK STREET,
NEW YORK, NY 10014
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

(212) 645-1405
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: COMMON STOCK, PAR
VALUE $.001

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]

The aggregate market value of voting and non-voting common equity held
by non-affiliates of the registrant as of March 28, 2001 was $1,942,442,446.

Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.

CLASS OUTSTANDING AS OF MARCH 28, 2001
----- --------------------------------

COMMON STOCK, PAR VALUE $.001 66,489,780

Documents Incorporated by Reference: The registrant's definitive Proxy
Statement for the Annual Meeting of Stockholders scheduled to be held on May 24,
2001 to be filed with the Commission not later than 120 days after the close of
the registrant's fiscal year, has been incorporated by reference, in whole or in
part, into Part III, Items 10, 11, 12 and 13 of this Annual Report on Form 10-K.
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2

IMCLONE SYSTEMS INCORPORATED

2000 FORM 10-K ANNUAL REPORT

TABLE OF CONTENTS

PAGE
----

PART I
Item 1. Business.................................................... 1
Item 2. Properties.................................................. 20
Item 3. Legal Proceedings........................................... 21
Item 4. Submission of Matters to a Vote of Security Holders......... 21
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters......................................... 22
Item 6. Selected Financial Data..................................... 23
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 24
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk........................................................ 32
Item 8. Financial Statements and Supplementary Data................. 32
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................... 32
PART III
Item 10. Directors and Executive Officers of the Registrant.......... 33
Item 11. Executive Compensation...................................... 33
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................. 33
Item 13. Certain Relationships and Related Transactions.............. 33
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K......................................................... 33

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As used in this Form 10-K, "ImClone Systems," "company," "we," "ours,"
and "us" refer to ImClone Systems Incorporated, except where the context
otherwise requires or as otherwise indicated.

PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
SAFE HARBOR CAUTIONARY STATEMENT

This Form 10-K contains "forward-looking" statements, as defined in the
Private Securities Litigation Reform Act of 1995, that are based on current
expectations, estimates and projections. Statements that are not historical
facts, including statements about our and our subsidiary's beliefs and
expectations, are forward-looking statements. These statements involve potential
risks and uncertainties; therefore, actual results may differ materially. You
are cautioned not to place undue reliance on these forward-looking statements,
which speak only as of the date on which they were made. We do not undertake any
obligation to update any forward-looking statements, whether as a result of new
information, future events or otherwise.

Important factors that may affect these expectations include, but are
not limited to: the risks and uncertainties associated with completing
pre-clinical and clinical trials of our compounds that demonstrate such
compounds' safety and effectiveness; obtaining additional financing to support
our operations; obtaining and maintaining regulatory approval for such compounds
and complying with other governmental regulations applicable to our business;
obtaining the raw materials necessary in the development of such compounds;
consummating collaborative arrangements with corporate partners for product
development; achieving milestones under collaborative arrangements with
corporate partners; developing the capacity to manufacture, market and sell our
products, either directly or with collaborative partners; developing market
demand for and acceptance of such products; competing effectively with other
pharmaceutical and biotechnological products; obtaining adequate reimbursement
from third party payers; attracting and retaining key personnel; protecting
proprietary rights; and those other factors set forth in "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Overview and Risk Factors" and those other factors set forth in
"Risk Factors" in the Company's most recent Registration Statement.

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PART I

ITEM 1. BUSINESS.

OVERVIEW

We are a biopharmaceutical company advancing oncology care by developing
a portfolio of targeted biologic treatments designed to address the medical
needs of patients with a variety of cancers. We focus on what we believe are
three promising strategies for treating cancer:

- growth factor blockers

- cancer vaccines and

- angiogenesis inhibitors

Our lead product candidate, IMC-C225, is a therapeutic monoclonal
antibody that inhibits stimulation of a receptor for growth factors upon which
certain solid tumors depend in order to grow. IMC-C225 has been shown in several
Phase I/II trials to have an acceptable safety profile, to be well tolerated
and, when administered with either radiation therapy or chemotherapy, to enhance
tumor reduction. IMC-C225 is currently in potential registration studies for
treating colorectal and head and neck cancers. The FDA has designated as Fast
Track our development program for IMC-C225 for the treatment of refractory
colorectal cancer.

Upon the receipt of regulatory approval, we intend to market IMC-C225 in
the United States and Canada. We will rely on our development and marketing
partner, Merck KGaA, to market IMC-C225 outside the United States and Canada and
to pay us a royalty on all such sales. In Japan, we will share the development
and marketing with Merck KGaA. We are manufacturing IMC-C225 for clinical trials
and eventual commercial sales world-wide.

Our next most advanced product candidate, BEC2, is a cancer vaccine. In
partnership with Merck KGaA, we are testing BEC2 for preventing recurrence or
progression of limited disease small-cell lung cancer in a Phase III pivotal
trial. Upon the receipt of regulatory approval, we intend to co-promote BEC2
with Merck KGaA in North America. Merck KGaA will be responsible for developing
and marketing BEC2 outside North America and will be obligated to pay us
royalties on all such sales. In addition, we intend to be the worldwide
manufacturer of BEC2.

We are also developing inhibitors of angiogenesis, which could be used
to treat various kinds of cancer and other diseases. We have identified IMC-1C11
as our lead clinical candidate for angiogenesis inhibition. IMC-1C11 is an
antibody that binds selectively and with high affinity to KDR, a principal
Vascular Endothelial Growth Factor ("VEGF") receptor, thereby inhibiting
angiogenesis. We initiated a Phase I clinical trial of IMC-1C11 in March 2000
and expect to complete the trial during 2001. We are also developing a fully
human monoclonal antibody candidate for angiogenesis inhibition.

In addition to the development of our lead product candidates, we
continue to conduct research, both independently and in collaboration with
academic and corporate partners, in a number of areas related to our core focus
of growth factor blockers, cancer vaccines and angiogenesis inhibitors. We have
also developed diagnostic products and vaccines for certain infectious diseases,
and we have licensed the rights to these products and vaccines to corporate
partners.

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DEVELOPMENT PROGRAMS

IMC-C225 CANCER THERAPEUTIC

The activation of the Epidermal Growth Factor Receptor, or EGF Receptor,
is believed to play a critical role in the rapid proliferation of certain types
of tumor cells and select normal cells. Certain cancer types are characterized
by the expression of the EGF Receptor. For example, according to the American
Cancer Society, more than 30,000 cases of head and neck cancer are diagnosed in
the United States each year. According to the literature in this area, more than
90% of head and neck cancer cases have been shown to express the EGF Receptor on
the surface of the tumor cells. Similarly, according to the American Cancer
Society, there are approximately 130,000 cases of colorectal cancer diagnosed in
the United States each year. According to the literature in this area, in
roughly half of these cases, the tumor cells express the EGF Receptor. Recent
studies conducted by ImClone Systems have indicated that this percentage may be
as high as 86%. Other types of cancer are also characterized, in certain
patients, by expression of the EGF Receptor including lung, renal and pancreatic
cancer. By preventing the binding of critical growth factors to the EGF
Receptor, we believe it is possible to inhibit the growth of these tumors.

EARLY IMC-C225 CLINICAL TRIALS --

IMC-C225 is a chimerized (part human, part mouse) monoclonal antibody
that selectively binds to the EGF Receptor and thereby inhibits growth of cells
dependent upon activation of the EGF Receptor for replication. We have tested
IMC-C225 in numerous clinical trials. In these studies, we have given IMC-C225
intravenously at selected doses, both alone and in combination with radiation
therapy or chemotherapy. In completed trials to date, we have tested IMC-C225 in
approximately 400 patients with various solid cancers, such as colorectal, head
and neck, lung, renal, breast and prostate cancers.

Results from Phase I/II trials of IMC-C225 completed in 1999 established
an appropriate dosing regimen and provided preliminary evidence of efficacy of
IMC-C225 used in combination with chemotherapy and radiation therapy. While the
data from these early trials was encouraging, the results were not sufficient to
establish that IMC-C225 is safe or effective in treating cancer.

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6

ON-GOING AND PLANNED IMC-C225 CLINICAL TRIALS --

In order to establish whether IMC-C225 is safe and effective in treating
cancer in a large patient population and to continue to determine the types of
tumors on which IMC-C225 is most effective, we are conducting the Phase II and
Phase III clinical trials summarized below. In each of these trials, IMC-C225 is
being used in combination with standard cancer therapies.

NUMBER OF
PATIENTS
ENROLLED
TRIAL/INDICATION TREATMENT IN STUDY COMMENTS
---------------- --------- --------- --------

Phase II - IMC-C225+irinotecan 139 - open-label, stratified, non-
Refractory colorectal cancer - 6-week course of treatment randomized study
(patients previously failed - patients are stratified by
regimen containing disease
irinotecan) progression or stable disease
- study initiated and patient
treatment commenced in
October 1999; closed to
enrollment in July 2000
- 27 sites treated patients
- primary endpoint: response
rate
- data being prepared for FDA
Phase II - IMC-C225+cisplatin 175 - open-label, stratified,
Refractory head and neck - 6-week course of treatment nonrandomized study
cancer (patients previously - 98 patients expected to be
failed regimen containing treated with IMC-C225
cisplatin) - patients are stratified by
disease progression or stable
disease
- study initiated August 1999
- patient treatment commenced
September 1999
- 40+ sites expected
- primary endpoint: response
rate
Phase III - IMC-C225+radiation (vs. 416 - open-label, stratified,
Head and neck cancer radiation alone) randomized study
- 8-week course of treatment - study initiated February 1999
- patient treatment
commenced April 1999
- 50+ sites expected
- primary endpoint: local
regional disease control at one
year
- study expanded outside North
America in December 1999
Phase III - IMC-C225+cisplatin (vs. 114 - double-blinded, placebo
Head and neck cancer placebo+cisplatin) controlled, randomized study
- 8-week course of treatment - conducted in cooperation with
the Eastern Cooperative
Oncology Group
- study initiated August 1999
- patient treatment commenced
December 1999
- 50+ sites expected
- primary endpoint:
progression-free survival

We have favorable preliminary results from our Phase II refractory
colorectal study of IMC-C225 and irinotecan in patients with
irinotecan-refractory colorectal carcinoma described above. The preliminary
findings demonstrated anti-cancer activity of the combined use of IMC-C225 and
irinotecan resulting in tumor shrinkage and a slowing of disease progression.
The data are being prepared as expeditiously as possible for review by the FDA
and we expect to submit a filing in the second quarter of 2001. The FDA has
designated as Fast Track our development program for IMC-C225 for the treatment
of refractory colorectal cancer.

We expect that results will be available from the Phase II refractory
head and neck study during 2001 and the two Phase III studies described above
during 2001-2003.

We are conducting additional Phase II clinical trials, and expect to
conduct several others, to continue to determine whether IMC-C225 may be
effective in treating other types of cancer. We commenced patient treatment in
December 1999 in a Phase II clinical trial of IMC-C225 in combination with
gemcitabine

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in treating pancreatic cancer, which we closed to enrollment in August 2000. We
commenced patient treatment in February 2001 in a Phase II clinical trial of
IMC-C225 in combination with carboplatin and paclitaxel in treating non-small
cell lung carcinoma. We expect to initiate additional Phase II studies in lung,
colorectal and ovarian cancers in 2001. We also expect to initiate Phase III
trials in colorectal and pancreatic cancers in 2001 to study the effect on
survival of the addition of IMC-C225 to standard chemotherapy. In conjunction
with Merck KGaA we have expanded the trial of IMC-C225 plus radiation therapy in
squamous cell carcinoma of the head and neck to countries in Europe, South
Africa, Israel, Australia and New Zealand. We meet regularly with Merck KGaA to
review clinical research efforts and opportunities. There can be no assurance
that we will receive regulatory approval for IMC-C225 based on the results of
our ongoing Phase II clinical trials or any of our other ongoing or anticipated
IMC-C225 clinical trials.

The primary side effect observed in trials to date has been a skin rash,
similar in appearance to acne, that has varied in severity depending on the
patient. The rash subsides following completion of therapy. Additionally, a
review of the data from completed trials relating to the approximately 400
patients who have received IMC-C225 has shown that approximately 2% have
experienced an anaphylactic reaction to the drug. For that reason, we have
established protocols for the initiation of therapy in any patient whereby an
initial dose of limited quantity is administered in the presence of a physician.
If an anaphylactic reaction is experienced, dosing is terminated immediately and
appropriate measures are taken to mollify the symptoms.

We have entered into a development and marketing agreement with Merck
KGaA relating to IMC-C225. Under this agreement, we have retained the right to
develop and market IMC-C225 within the United States and Canada, and we have
granted Merck KGaA the exclusive right, except in Japan (where we will
co-develop and co-market IMC-C225 with Merck KGaA), to develop and market
IMC-C225 outside of the United States and Canada. Under the agreement, we will
manufacture IMC-C225. In return, Merck KGaA has agreed to pay up-front fees and
to make cash milestone payments and equity investments in our business if
specific milestones are achieved. Merck KGaA will also pay us royalties on any
sales of IMC-C225 outside of the United States and Canada. Through March 28,
2001, we have received $28,000,000 in up-front fees and milestone payments from
Merck KGaA. In addition, Merck KGaA is required to provide us with a guaranty of
a $30,000,000 credit facility relating to the construction of our product launch
manufacturing facility for IMC-C225, which is currently under construction. As
of March 28, 2001, we have not utilized this guaranty and we are exploring ways
in which we might alter that portion of the agreement.

As described above, we are testing IMC-C225 in several different types
of cancer. While in certain cancer types, like head and neck cancer, the EGF
Receptor is expressed in nearly every patient with such cancer, in others, many
patients will not be positive for the EGF Receptor. Currently, for the purpose
of testing of patients in the colorectal cancer trial, a diagnostic assay must
be used to determine which patients are positive for the EGF Receptor. Patients
must be positive for the EGF Receptor to be included in this trial. Currently,
such diagnostic tests are being performed in a laboratory setting as there are
no commercialized assays available for such purpose. If IMC-C225 is approved for
treating particular cancer types, standard diagnostic kits will need to be
available commercially. We have an agreement with DAKO Corporation for the
development of an EGF Receptor screening kit. Under the terms of the agreement,
DAKO will develop the kit, which will be used to screen tumors for expression of
EGF Receptor to identify patients that may be receptive to treatment with
IMC-C225. We selected DAKO to develop the screening kit because of its
reputation for quality and its experience in the development of diagnostics for
other oncology-related monoclonal antibody therapeutics.

BEC2 CANCER VACCINE

A cancer vaccine works by the administration of an antigen or the mimic
of an antigen that is found on the surface of certain types of cancer cells and
which activates immune responses to protect against metastasis or recurrence of
the tumor. A cancer vaccine will generally be given after the tumor has
responded to initial treatment. Often, an antigen mimic can produce a stronger
immune response than that produced by the original antigen that it resembles.

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8

BEC2 is a monoclonal antibody that we are developing as a cancer
vaccine. BEC2 mimics GD3, a molecule expressed on the surface of several types
of cancer cells. By mimicking GD3, BEC2 stimulates an immune response against
cells expressing GD3.

We have tested BEC2 in Phase I clinical trials at Memorial Sloan
Kettering Cancer Center ("SLOAN KETTERING") against certain forms of cancer,
including both limited disease and extensive disease small-cell lung carcinoma
and melanoma (skin cancer). Limited disease small-cell lung carcinoma is limited
to the lungs. Extensive disease small-cell lung carcinoma means that the disease
has migrated to other parts of the body. In one such trial, 15 patients with
small-cell lung carcinoma who had previously received chemotherapy and radiation
therapy and achieved a partial or complete response were treated with BEC2. At
the time the results were analyzed, approximately 27% of the patients had
survived nearly five years following diagnosis. These survival rates are longer
than historical survival rates for similar patients receiving conventional
therapy and formed the basis for going forward with Phase III studies. This
trial is not sufficient to establish that BEC2 is safe or effective in treating
cancer.

In conjunction with Merck KGaA, we have initiated a 570-patient
multinational pivotal Phase III trial for BEC2 in the treatment of limited
disease small-cell lung cancer. The trial will examine patient survival two
years after course of therapy. We expect to complete enrollment in the trial in
approximately 2003.

We have entered into a development and marketing agreement with Merck
KGaA relating to BEC2. We have retained the right to co-promote BEC2 with Merck
KGaA within North America, and we have granted Merck KGaA exclusive rights to
develop and market BEC2 outside of North America. Under the agreement, Merck
KGaA is also funding a portion of the Phase III pivotal trial. In addition, we
intend to be the worldwide manufacturer of BEC2.

MONOCLONAL ANTIBODY INHIBITOR OF ANGIOGENESIS

Our general experience with growth factors, particularly the use of
IMC-C225 to block the EGF Receptor, has enabled us to pursue another promising
approach for the treatment of cancer, the inhibition of angiogenesis.
Angiogenesis is the natural process of new blood vessel growth. VEGF is one of a
group of molecules that helps regulate angiogenesis. Tumor cells as well as
normal cells produce VEGF. Once produced by the tumor cells, VEGF stimulates the
production of new blood vessels and ensures an adequate blood supply to the
tumor, enabling the tumor to grow. KDR is a growth factor receptor found almost
exclusively on the surface of human endothelial cells, which are the cells that
line all blood vessels. VEGF must recognize and bind to this KDR receptor in
order to stimulate the endothelial cells to grow and cause new blood vessels to
form. We believe that interference with the binding of VEGF to the KDR receptor
inhibits angiogenesis, and can potentially be used to slow or halt tumor growth.

IMC-1C11 is a chimerized monoclonal antibody, which specifically binds
to the KDR receptor. By doing so, it prevents VEGF from binding to that
receptor, which, in turn, blocks endothelial cell growth and inhibits
angiogenesis. IMC-1C11 therefore helps inhibit or eliminate cancer by preventing
the growth of new blood vessels and depriving the tumor of the blood supply that
it requires to grow. We initiated a Phase I clinical trial of IMC-1C11 in March
2000 and expect to complete the trial during 2001. We are also developing a
human monoclonal antibody candidate for angiogenesis inhibition.

We believe IMC-1C11 will be effective in treating many solid and liquid
tumors and that it may also be useful in treating other diseases such as
diabetic retinopathy, age-related macular degeneration, and rheumatoid arthritis
that, like cancer, depend on the growth of new blood vessels.

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IMCLONE SYSTEMS' RESEARCH PROGRAMS

GENERAL

In addition to concentrating on our products in development, we perform
ongoing research, including research in each of the areas of our ongoing
clinical programs of growth factor blockers, cancer vaccines and angiogenesis
inhibitors. We have assembled a scientific staff with expertise in a variety of
disciplines, including oncology, immunology, molecular and cellular biology,
antibody engineering, protein and medicinal chemistry and high-throughput
screening. In addition to pursuing research programs in-house, we collaborate
with academic institutions and corporations to support our research and
development efforts.

RESEARCH ON GROWTH FACTOR BLOCKERS

We are conducting a research program to develop blockers of the
cell-signal transduction pathways of a class of enzymes referred to as tyrosine
kinases. These pathways have been shown to be involved in the rapid
proliferation of tumor cells. We are developing monoclonal antibodies to block
the binding of growth factors to a number of cellular receptors that trigger
these pathways, thereby potentially inhibiting cell division and tumor growth.
We are also developing small molecule inhibitors to the tyrosine kinase
pathways. Our small molecule program is discussed below.

RESEARCH ON CANCER VACCINES

We are conducting research to discover possible cancer vaccines as
another route to cancer treatment. Cancer vaccines would activate immune
responses to tumors to protect against metastasis or recurrence of cancer. We
are focusing our cancer-vaccine research efforts on developing melanoma
vaccines.

In addition to the development of BEC2, we are conducting research on a
possible melanoma vaccine based on the melanoma antigen gp75. A melanoma is a
tumor or cancerous growth of the skin. Animal studies have shown that a gp75
cancer vaccine is very effective in creating an immune response in the body
against melanoma cells, and may prevent or inhibit growth of experimental
melanoma tumors in mice. Additionally, we are investigating the use of other
melanoma antigens to be used in conjunction with gp75 for the development of an
effective vaccine. We are also investigating various modes of enhancing the
capacity of the vaccine to elicit an immune response. We have retained North
American marketing and manufacturing rights for gp75 and have licensed to Merck
KGaA the rights to manufacture and market gp75 outside North America. We expect
to commence human clinical trials of gp75 alone or in conjunction with other
melanoma antigens in 2002. We are collaborating with Sloan Kettering on BEC2 and
gp75 in both the clinical and research areas.

We are developing a chimeric vaccine consisting of human melanoma
proteins TRP-1, TRP-2 and tyrosinase. The vaccine, referred to as hTRPX3, has
demonstrated the ability to produce antibody and cellular immune responses in
mice. Additionally, preclinical findings have shown that mice vaccinated with
hTRPX3 and challenged with melanoma have a significantly reduced number of lung
metastases as compared with a control group.

RESEARCH ON ANGIOGENESIS INHIBITORS

We are continuing to work with an experimental antibody known as DC101
in animal models. DC101 neutralizes the FLK-1 receptor, which is the mouse
receptor to VEGF that corresponds to KDR in humans. Such models have shown that
DC101 inhibits tumor growth, and we are now focusing on establishing protocols
for combination therapies of DC101 with radiation therapy or chemotherapy.
Preliminary studies have shown that such combination results in better efficacy
than with the DC101 antibody alone. We are supporting research in this area at
Sunnybrook Health Science Center, University of Toronto.

In another approach to angiogenesis inhibition, we are exploring the
therapeutic potential of antibodies against vascular-specific cadherin
("VE-CADHERIN"). Cadherins are a family of cell surface molecules that help
organize tissue structures. Researchers believe that VE-cadherin plays an
important role in angiogenesis by organizing endothelial cells into vascular
tubes, which is a necessary step in the formation

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of new blood vessels. As we stated above, advanced tumor growth is dependent on
the formation of a capillary blood vessel network in the tumor to ensure an
adequate blood supply to the tumor. Therefore, antibodies that inhibit
VE-cadherin may inhibit such capillary formation in tumors, and help fight
cancer by cutting-off an adequate blood supply to the tumor. Preclinical studies
using monoclonal antibodies against VE-cadherin have been shown to inhibit
angiogenesis, tumor growth and metastasis by blocking the ability of VE-cadherin
to form tubular structures. Efforts are underway to select antibodies that are
efficacious in inhibiting angiogenesis and tumor growth without negatively
affecting existing vessels.

In connection with our VE-cadherin research program, we have been
assigned the exclusive rights to VE-cadherin-2, a recently developed form of
VE-cadherin, and to antibodies that inhibit VE-cadherins.

We are also conducting research on small molecules to develop inhibitors
of enzymes important in angiogenesis. Our small molecule program is discussed
below.

SMALL MOLECULE DRUG DISCOVERY

We have embarked on establishing a chemistry department at an off-site
location in New York with capabilities in medicinal, combinatorial and
computational chemistry. We are also establishing our own chemical compound
library for screening, and we are increasing our capacity to perform high
throughput screening.

ImClone Systems will focus on the discovery of small molecule inhibitors
of tyrosine kinases involved in intracellular pathways (signal transduction,
cell cycle, cell survival) activated by cancer-promoting growth factors or
angiogenesis-promoting growth factors.

MISCELLANEOUS RESEARCH AREAS

We are conducting additional research outside of our principal areas of
clinical focus. These include: (1) a means to induce apoptosis (programmed
cell-death) in order to enhance tumor cell killing, including looking for small
molecules that enhance the apoptosic process; (2) efforts to isolate endothelial
stem cells and to determine the utility of such isolated cells, possibly in
stimulation of wound healing, muscle regeneration or repair of damage to
blood-deprived tissues; and (3) development of a panel of genes potentially
useful for the maintenance and stimulation of stem cells. We are collaborating
with various academic institutions including Princeton University and The
University of Pennsylvania on the latter two projects.

CORPORATE COLLABORATIONS

In addition to our collaborations in the research and clinical areas
with academic institutions, we have a number of collaborations with other
corporations, the most significant of which are discussed below.

COLLABORATIONS WITH MERCK KGAA

IMC-C225 License and Development Agreement. In December 1998, we
entered into an agreement with Merck KGaA relating to the development and
commercialization of IMC-C225. Under this agreement:

- we have retained the rights to market IMC-C225 within the United
States and Canada

- we have granted Merck KGaA exclusive rights, except in Japan, to
market IMC-C225 outside of the United States and Canada

- we are seeking to supply Merck KGaA, and Merck KGaA has agreed to
purchase, IMC-C225 for the conduct of clinical trials and the
commercialization of the product outside the United States and Canada

- we will co-develop and co-market IMC-C225 in Japan with Merck KGaA

- we have granted Merck KGaA an exclusive license outside of the United
States and Canada, without the right to sublicense, to apply certain
of our patents to a humanized EGF Receptor antibody on which Merck
KGaA has performed preclinical studies

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11

In return, Merck KGaA is:

- paying to us $30,000,000 in up-front fees and early cash-based
milestone payments based upon achievement of certain milestones set
forth in the agreement, of which $28,000,000 has been received through
March 28, 2001.

- paying to us an additional $30,000,000 assuming achievement of further
milestones for which Merck KGaA will receive equity (the "milestone
shares") in our company, which will be at prices at varying premiums
to the then market price of the common stock depending upon the timing
of the achievement of the respective milestones

- required to provide to us, subject to certain terms, a $30,000,000
guaranty for the construction of a product launch manufacturing
facility by us for the commercial production of IMC-C225

- funding clinical development of IMC-C225 outside of the United States
and Canada

- required to pay us royalties on its future sales of IMC-C225 outside
of the United States and Canada, if any

The milestone shares, if issued, will be shares of our common stock (or
a non-voting security convertible into our common stock). The number of shares
issued to Merck KGaA will be determined by dividing the particular milestone
payment due by the purchase price of the common stock when the milestone is
achieved. The purchase price will relate to the then market price of our common
stock, plus a premium which varies, depending upon whether the milestone is
achieved early, on-time or late. If issuing shares of common stock to Merck KGaA
would result in Merck KGaA owning greater than 19.9% of our common stock, the
milestone shares will be a non-voting preferred stock, or other non-voting stock
convertible into our common stock. These convertible securities will not have
voting rights. They will be convertible at a price determined in the same manner
as the purchase price for shares of our common stock if shares of common stock
were to be issued. They will not be convertible into common stock if, as a
result of the conversion, Merck KGaA would own greater than 19.9% of our common
stock. This 19.9% limitation is in place through December 2002. After this date,
Merck KGaA must sell shares it receives as a result of conversion to the extent
such shares result in Merck KGaA's owning in excess of 19.9% of our common
stock. We have granted Merck KGaA certain registration rights regarding the
shares of common stock that it may acquire upon conversion of the series A
preferred stock and milestone shares.

This agreement may be terminated by Merck KGaA in various instances,
including (1) at its discretion on any date on which a milestone is achieved (in
which case no milestone payment will be made), or (2) for a one-year period
after first commercial sale of IMC-C225 in Merck KGaA's territory, upon Merck
KGaA's reasonable determination that the product is economically unfeasible (in
which case Merck KGaA is entitled to receive back 50% of the cash-based up-front
fees and milestone payments then paid to date, but only out of revenues
received, if any, based upon a royalty rate applied to the gross profit from
IMC-C225 sales or IMC-C225 license fees in the United States and Canada). Under
the agreement, Merck KGaA is required to provide us with a guaranty of a
$30,000,000 credit facility relating to the construction of the product launch
manufacturing facility. As of March 28, 2001, we have not utilized this guaranty
and we are exploring ways in which we might alter that portion of the agreement.
In the event of termination of the agreement, and in the event Merck KGaA
provided such a guaranty, we would be required to use our best reasonable
efforts to cause the release of Merck KGaA as guarantor. Merck KGaA has also
agreed to pay for one-half of the outside contract service costs incurred with
respect to the multinational Phase III clinical trial of IMC-C225 in combination
with radiation in head and neck cancer patients.

As of December 31, 2000, we had recorded $28,000,000 as fees potentially
refundable to our corporate partner under this agreement and not as revenue due
to the fact that this amount was refundable to Merck KGaA in the event a
condition relating to obtaining certain collateral license agreements was not
satisfied. In March 2001, this condition was satisfied and approximately
$24,000,000 will be recognized as revenue during the first quarter of 2001.

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BEC2 Research and License Agreement. Effective April 1990, we entered
into an agreement with Merck KGaA relating to the development and
commercialization of BEC2 and the recombinant gp75 antigen. Under this
agreement:

- we have granted Merck KGaA a license to develop and market BEC2
worldwide and gp75 outside North America

- we have retained the right to co-promote BEC2 within North America

- it is intended that we will be the bulk product manufacturer of BEC2
to support worldwide sales

- we are required to give Merck KGaA the opportunity to negotiate a
license in North America to gp75 before granting such a license to any
third party

In return, Merck KGaA:

- has made research support payments to us totaling $4,700,000

- is required to make milestone payments to us of up to $22,500,000, of
which $3,000,000 has been received through March 28, 2001, based on
milestones achieved in the product development of BEC2

- is required to make royalty payments to us on all sales of the
licensed products outside North America, if any, with a portion of the
earlier funding received under the agreement being creditable against
the amount of royalties due

Merck KGaA is responsible for conducting the clinical trials and
regulatory submissions outside North America, and we are responsible for
conducting those within North America. Costs worldwide to conduct a multi-site,
multinational Phase III clinical trial to obtain approval for the indication of
the treatment of limited disease small-cell lung carcinoma for BEC2 are the
responsibility of Merck KGaA. These include our out-of-pocket costs (but do not
include costs of establishing a manufacturing facility) for manufacturing
materials for clinical trials, conduct of clinical trials and regulatory
submissions (other than drug approval fees, which are the responsibility of
Merck KGaA or us in our respective territories). If these expenses, including
such expenses of Merck KGaA, exceed DM17,000,000, such excess expenses will be
shared 60% by Merck KGaA and 40% by us. This expense level was reached during
the fourth quarter of 2000 and all expenses from that point forward are being
shared 60% by Merck KGaA and 40% by us. We will negotiate with Merck KGaA the
allocation of costs for the conduct of additional clinical trials for other
indications. We are responsible for providing the supply of the active agent
outside of North America at the expense of Merck KGaA, and the parties intend
that the cost of goods sold in North America be paid out of gross sales of any
licensed product in North America in accordance with a co-promotion agreement to
be negotiated.

The agreement terminates upon the later of (1) the last to expire of any
patents issued and covered by the technology or (2) fifteen years from the date
of the first commercial sale. After termination, the license will survive
without further royalty payment and is irrevocable. The agreement may be
terminated earlier by us in the event Merck KGaA fails to pursue in a timely
fashion regulatory approval or sale of a licensed product in a country in which
it has the right to do so. It also may be terminated earlier by Merck KGaA if
milestones are not achieved.

In connection with the December 1997 amendment to the agreement with
Merck KGaA for BEC2, Merck KGaA purchased from us 400,000 shares of our series A
convertible preferred stock (the "series A preferred stock") for a total price
of approximately $40,000,000. Merck KGaA has converted 200,000 of its 400,000
shares of series A preferred stock into a total of 2,099,220 shares of common
stock. Of its 400,000 shares of series A preferred stock, Merck KGaA converted
100,000 shares in 1999 and 100,000 shares in 2000 into a total of 2,099,220
shares of common stock. In December 2000 we redeemed the remaining 200,000
outstanding shares of series A preferred stock for a total redemption price of
$24,000,000 plus accrued and unpaid dividends of approximately $1,200,000. We
also paid Merck KGaA a dividend of approximately $574,000 in connection with the
100,000 shares of series A preferred stock converted in December 2000.

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OTHER CORPORATE COLLABORATIONS

ABBOTT LABORATORIES

We have licensed some of our diagnostic products and techniques to
Abbott Laboratories ("Abbott") on a worldwide basis. In mid-1995, Abbott
launched its first DNA-based diagnostic test in Europe, using our Repair Chain
Reaction ("RCR") DNA probe technology. Abbott's test is used to diagnose the
sexually transmitted diseases chlamydia and gonorrhea, as well as mycobacteria.
The RCR DNA probe technology uses DNA amplification techniques to detect the
presence of DNA or RNA in biological samples thereby indicating the presence of
disease.

In December 1996, we amended our agreement with Abbott to allow Abbott
to exclusively license our patented DNA signal amplification technology,
Ampliprobe, to Chiron Diagnostics. DNA signal amplification technology such as
Ampliprobe also uses DNA signal amplification techniques in detecting the
presence of DNA or RNA in biological samples, thereby indicating the presence of
disease. Abbott receives a royalty payment from Chiron on all sales of Chiron
branched DNA diagnostic probe technology in countries covered by our patents.
Abbott, in turn, pays any such royalties it receives to us. The Chiron branched
DNA diagnostic probe technology was sold to Bayer Pharmaceutical Corporation in
2000.

Under the agreement Abbott has paid us up-front fees and research
support, and is obligated to pay milestone fees and royalties on sales. In June
1997, we received two milestone payments from Abbott totaling $1,000,000, as a
result of a patent issuance in Europe for our RCR technology. This was partially
credited against royalties. The issuance of the patent also entitles us to
receive royalty payments on sales in covered European countries for products
using our RCR technology. In December 1999, a U.S. patent was issued for the RCR
technology for which we have received a $500,000 milestone payment from Abbott
and are receiving royalties on sales for a two-year period from initiation of
U.S. sales by Abbott for products using the RCR technology. In February 2000, a
Japanese patent was issued on this technology and as a result we received a
$250,000 milestone payment. The agreement terminates upon the later of (1) the
last to expire of any patents issued covered by the technology or (2) if no
patents are granted, twenty years, subject to certain earlier termination
provisions contained in the agreement. We have an exclusive world-wide fully
paid up license to the RCR technology and the patents issued with respect to it.

For the year ended December 31, 2000 we earned total revenues of
$1,211,000 pursuant to our strategic alliance with Abbott which consisted of
milestone payments and royalties.

AMERICAN HOME PRODUCTS

In December 1987, we entered into a vaccine development and licensing
agreement with American Cyanamid Company ("Cyanamid") that provided Cyanamid an
exclusive worldwide license to manufacture and sell vaccines developed during
the research period of the agreement. In connection with the agreement, Cyanamid
purchased 410,001 shares of our common stock. During the three-year research
period of the agreement, which period expired in December 1990, we were engaged
in the development of two vaccine candidates, the first of which was for N.
gonorrhea based on recombinant proteins, and the second of which was for Herpes
Simplex Virus based on recombinant glycoproteins B and D.

In September 1993, Cyanamid's Lederle-Praxis Biologicals division and
ImClone Systems entered into a research collaboration agreement, which by its
terms supersedes the earlier agreement as to N. gonorrhea vaccine candidates,
but not as to Herpes Simplex Virus vaccine candidates. The successor to
Cyanamid, American Home Products Corporation ("American Home"), has the
responsibility under this agreement to pay research support to us, as well as
milestone fees and royalties on sales of any N. gonorrhea vaccine that might
arise from the collaboration. In January 1998, this agreement was extended to
continue annual research funding payable to us in the amount of $300,000 through
September 1999 and to extend the period by which American Home was required to
have filed an IND application to initiate clinical trials with a vaccine
candidate. In October 1999, this milestone was achieved, and American Home made
a $500,000 payment to us.

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American Home has the responsibility under both agreements for
conducting pre-clinical and clinical trials of the vaccine candidates, obtaining
regulatory approval, and manufacturing and marketing the vaccines. American Home
is required to pay royalties to us in connection with sales of the vaccines, if
any.

In the year ended December 31, 2000 we recorded no revenues under the
American Home agreements.

SMITHKLINE BEECHAM

In February 2000, we licensed to SmithKline Beecham certain patents and
patent applications to meningitis antigens along with related know-how and
materials, exclusively for the purpose of developing meningitis vaccines. In
return we will receive license fees, as well as milestone fees should an antigen
or antigens based on our claims be included in its vaccine candidate, and
royalties on sales of such vaccine.

In the year ended December 31, 2000 we recorded revenues of $40,000
under the SmithKline Beecham agreement, which consisted of a license fee.

DAKO CORPORATION

We have an agreement with DAKO Corporation for the development of an EGF
Receptor screening kit. Under the terms of the agreement, DAKO will develop the
kit, which will be used to screen tumors for expression of EGF Receptor to
identify patients that may be receptive to treatment with IMC-C225. We selected
DAKO to develop the screening kit because of its reputation for quality and its
experience in the development of diagnostics for other oncology-related
monoclonal antibody therapeutics. A wholly-owned subsidiary of DAKO A/S of
Denmark, DAKO is a global provider of cancer diagnostics and research products
that use antibodies, nucleic acid probes and proprietary detection technologies
to identify specific disease-associated molecules in tissues and cells.

IMMUNEX CORPORATION

We are the exclusive licensee of a family of patents and patent
applications covering the FLK-2/ FLT-3 receptor. FLK-2/FLT-3 growth factor is a
protein that binds to and activates the FLK-2/FLT-3 receptor. The FLK-2/FLT-3
growth factor is owned by Immunex.

In December 1996, we entered into a non-exclusive license and supply
agreement with Immunex Corporation ("Immunex"), under which we granted Immunex
an exclusive worldwide license to the FLK-2/ FLT-3 receptor for the limited use
of the manufacture of the FLK-2/FLT-3 growth factor. Immunex is currently
testing the growth factor in human trials for stem cell stimulation and for
tumor inhibition. Under this agreement, we receive royalty and licensing fees
from Immunex, and Immunex has granted us a license to use the FLK-2/FLT-3 growth
factor for use in our ex vivo research on stem cells. In addition, Immunex has
granted us a world-wide non-exclusive license to use and sell the FLK-2/FLT-3
growth factor, manufactured by Immunex, for ex vivo stem cell expansion,
together with an exclusive license to distribute the growth factor with our own
proprietary products for ex vivo expansion. Immunex will also supply FLK-2/FLT-3
growth factor to us. Subject to earlier termination provisions contained in the
agreements, our license terminates in December 2001, subject to a five-year
renewal period, and Immunex's license terminates thirteen years after the first
commercial sale of the product.

In the year ended December 31, 2000, we recorded no revenues under this
agreement.

MANUFACTURING

We own and operate a pilot manufacturing facility for biologics in
Somerville, New Jersey for the manufacture of clinical trial materials. At our
pilot facility we manufacture a portion of the IMC-C225 utilized for clinical
trials and are developing the purification process for IMC-1C11 and are in the
early stages of its production for clinical trials. Our pilot facility is
operated in accordance with current Good Manufacturing Practices ("cGMP"), which
is a requirement for product manufactured for use in clinical trials and for
commercial sale.
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Production in commercial quantities will require us to expand our
manufacturing capabilities significantly and hire and train additional people.
We are building our new 80,000 square foot product launch manufacturing facility
adjacent to the pilot facility in Somerville, New Jersey. The product launch
manufacturing facility contains three 10,000 liter (working volume) fermenters
and is dedicated to the commercial production of IMC-C225. The construction of
the product launch manufacturing facility is substantially complete. The
necessary commissioning and validation is expected to be completed by the end of
2001. The launch facility will cost a total of approximately $50,000,000. We
have incurred approximately $35,934,000 in engineering, capitalized interest,
pre-construction and construction costs associated with the product launch
manufacturing facility through December 31, 2000.

To date, under a 1999 development agreement, Boehringer Ingelheim Pharma
KG, commonly known as BI, has supplied us with relatively small quantities of
IMC-C225 to supplement the quantities of IMC-C225 that we produce and that we
and Merck KGaA use in clinical trials that exceed the capacity of our pilot
facility. The total cost under this agreement was approximately DM11,440,000.
This material was provided to Merck KGaA for use in clinical trials in its
territory. Merck KGaA has reimbursed us in full for this amount pursuant to the
terms of our agreement with Merck KGaA.

In December 1999, we entered into a development and manufacturing
services agreement with Lonza Biologics PLC, more commonly known as Lonza. Under
the agreement, Lonza is responsible for process development and scale-up to
manufacture IMC-C225. These steps are being taken to assure that its process
will produce bulk material that conforms with our reference material. As of
December 31, 2000, the Company has incurred approximately $1,677,000 for
services provided under this agreement. In September 2000, we entered into a
three-year commercial manufacturing services agreement with Lonza relating to
IMC-C225. Under the agreements with Lonza, Lonza is manufacturing product at the
5,000 liter scale under cGMP conditions and delivering it to us over a term
ending no later than December 2003. As of December 31, 2000, the Company has
incurred approximately $5,400,000 for services provided under this agreement and
has included this amount as research and development expense. In the event the
commercial manufacturing services agreement is terminated by the Company, the
Company will be required to pay 85% of the stated costs for each of the first
ten batches cancelled, 65% of the stated costs for each of the next ten batches
cancelled and 40% of the stated costs for any remaining batches cancelled. These
amounts are subject to mitigation should Lonza use its manufacturing capacity
caused by such termination for another customer.

If we obtain FDA approval of IMC-C225 prior to the FDA approval required
of our product launch manufacturing facility or if a contract manufacturer
retained for such contingency is unable to deliver approved product to us on a
timely basis, we may have insufficient quantities of IMC-C225 for the product
launch. In any event, we will continue to seek to enter into arrangements with
contract manufacturers in order to provide a second source of supply for our
products as well as additional capacity for the manufacture of our products.

We are reviewing engineering plans relating to a second commercial
manufacturing facility that would be a multi-use facility with capacity of up to
60,000 liters (working volume). Such a facility would be built on property we
recently purchased that is adjacent to our product launch manufacturing
facility. A determination as to whether to proceed with a second commercial
manufacturing facility will be made as IMC-C225 moves further along in the FDA
approval process.

MARKETING AND SALES

We intend to develop the capacity to market our cancer therapeutic
products directly in the U.S. and Canada. As part of this strategy, in our
agreement with Merck KGaA for IMC-C225, we have retained all rights to
commercialize IMC-C225 in the U.S. and Canada. We also have co-promotion rights
for commercialization of our BEC2 cancer vaccine in North America pursuant to
our BEC2 agreement with Merck KGaA. We intend to build an internal sales force
and establish the appropriate promotional campaigns and infrastructure.

We have hired a Vice-President of Marketing and Sales and directors of
marketing, field sales and sales operations, each with experience in the
commercial launch of a monoclonal antibody cancer therapeutic,
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to develop our internal marketing and sales capabilities. We are preparing for
the marketing and sale of IMC-C225 in the U.S. and Canada, and in that regard,
will be hiring regional sales managers and arranging for the hiring or
contracting of a sales force prior to the commencement of IMC-C225 sales. Other
functions related to commercialization will be outsourced, especially those
requiring considerable manpower and infrastructure resources such as inventory
control, distribution, accounts receivable and reimbursement. We are currently
designing our campaign to elicit the active involvement of leaders in the
oncology field to broaden the knowledge of the potential significance of
IMC-C225.

We intend that the sales capability we will build for IMC-C225 will
allow us to directly market other cancer therapeutics that we may develop,
including IMC-1C11 or a successor human antibody anti-angiogenic therapeutic,
when and if we receive such regulatory approval.

We expect that with respect to other cancer therapeutics that we may
develop, we may enter into development agreements with third parties that may
include co-marketing or co-promotion arrangements. In the alternative, we may
grant exclusive marketing rights to our corporate partners in return for
up-front fees, milestone payments, and royalties on sales.

PATENTS AND TRADE SECRETS

GENERALLY

We seek patent protection for our proprietary technology and products in
the United States and abroad. Patent applications have been submitted and are
pending in the United States, Canada, Europe and Japan as well as other
countries. The patent position of biopharmaceutical firms generally is highly
uncertain and involves complex legal and factual questions. Our success will
depend, in part, on whether we can:

- obtain patents to protect our own products

- obtain licenses to use the technologies of third parties, which may be
protected by patents

- protect our trade secrets and know-how

- operate without infringing the intellectual property and proprietary
rights of others

PATENT RIGHTS; LICENSES

We currently have exclusive licenses or assignments to 77 issued patents
worldwide that relate to our proprietary technology in the United States and
foreign countries, 43 of which are issued United States patents. In addition, we
currently have exclusive licenses or assignments to approximately 58 families of
patent applications.

IMC-C225. We have an exclusive license from the University of
California at San Diego to an issued U.S. patent for the murine form of
IMC-C225, our EGF Receptor antibody product. We believe that this patent's scope
should be its literal claim scope as well as other antibodies not literally
embraced but potentially covered under the patent law doctrine of equivalents.
Whether or not a particular antibody is found to be an equivalent to the
antibodies literally covered by the patent can only be determined at the time of
a potential infringement, and in view of the technical details of the
potentially infringing antibody in question. Our licensor of this patent did not
obtain patent protection outside the U.S. for this antibody.

We are pursuing additional patent protection relating to the field of
EGF Receptor antibodies in the treatment of cancer that may limit the ability of
third parties to commercialize EGF Receptor antibodies for such use.
Specifically, we are pursuing patent protection for the use of EGF Receptor
antibodies in combination with chemotherapy to inhibit tumors or tumor growth.
We have exclusively licensed, from Rhone-Poulenc Rorer Pharmaceuticals, now
known as Aventis, patent applications seeking to cover the therapeutic use of
antibodies to the EGF Receptor in conjunction with chemotherapeutic agents. A
Canadian patent was issued in this family, the patent examiner in Europe has
indicated an intent to issue a European patent and a Notice of Allowance has
been issued in the United States. We have filed additional patent applications
based on our own research that would cover the use of IMC-C225 as well as other
EGF Receptor
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inhibitors in conjunction with radiation therapy, and the use of IMC-C225 as
well as other EGF Receptor antibodies in refractory patients, either alone or in
combination with chemotherapy or radiation therapy. We have also filed patent
applications that include claims on the use of IMC-C225 to significantly inhibit
the growth of tumor cells, and humanized forms of the antibody and fragments. We
have also obtained a non-exclusive license from Celltech Therapeutics Limited,
which relates to aspects of the production of IMC-C225.

Our license agreements with the University of California, San Diego,
Aventis and Celltech require us to pay royalties on sales of IMC-C225 that are
covered by these licenses.

There can be no assurance that patent applications related to the field
of antibodies in the treatment of cancer to which our company holds rights will
result in the issuance of patents, that any patents issued or licensed to our
company related to IMC-C225 or its use will not be challenged and held to be
invalid or of a scope of coverage that is different from what we believe the
patent's scope to be, or that our company's present or future patents related to
these technologies will ultimately provide adequate patent coverage for or
protection of our company's present or future EGF Receptor antibody
technologies, products or processes. Since patent applications are secret until
patents are issued in the U.S., or corresponding applications are published in
foreign countries, and since publication of discoveries in the scientific or
patent literature often lags behind actual discoveries, we cannot be certain
that we were the first to make our inventions, or that we were the first to file
patent applications for such inventions. In addition, patents do not give the
holder the right to commercialize technology covered by the patents, should our
production or its use be found by a court to be embraced by the patent of
another.

In the event that we are called upon to defend and/or prosecute patent
suits and/or related legal or administrative proceedings, such proceedings are
costly and time consuming and could result in loss of our patent rights.
Litigation and patent interference proceedings could result in substantial
expense to us and significant diversion of efforts by our technical and
management personnel. An adverse determination in any such interference or in
patent litigation, particularly with respect to IMC-C225, to which we may become
a party could subject us to significant liabilities to third parties or require
us to seek licenses from third parties. If required, the necessary licenses may
not be available on acceptable financial or other terms or at all. Adverse
determinations in a judicial or administrative proceeding or failure to obtain
necessary licenses could prevent us, in whole or in part, from commercializing
our products, which could have a material adverse effect on our business,
financial conditions and results of operations.

In the event that there is patent litigation involving one or more of
the patents issued to our company, there can be no guarantee that the patents
will be held valid and enforceable. The scope of patents are expected to be
called into question and could result in a decision by a court that the claims
have a different scope than we believe them to have. Further, the outcome of
patent litigation is subject to intangibles that cannot be adequately quantified
in advance, including the demeanor and credibility of witnesses that will be
called to testify, the identity of the adverse party, etc. This is especially
true in biotechnology related patent cases that may turn on the testimony of
experts as to technical facts upon which experts may reasonably disagree.

We are aware of a U.S. patent issued to a third party that includes
claims covering the use, subject to certain restrictions, of antibodies to the
EGF Receptor and cytotoxic factors to inhibit tumor growth. Our patent counsel
has advised us that in its opinion, subject to the assumptions and
qualifications set forth in such opinion, no valid claim of this third party
patent is infringed by reason of our manufacture or sale, or medical
professionals' use of IMC-C225 alone or in combination with chemotherapy or
radiation therapy and, therefore, in the event of litigation for infringement of
this third party patent, a court should find that no valid claim of this third
party patent is infringed. Based upon this opinion, as well as our review, in
conjunction with our patent counsel, of other relevant patents, we believe that
we will be able to commercialize IMC-C225 alone and in combination with
chemotherapy and radiation therapy provided we successfully complete our
clinical trials and receive the necessary FDA approvals. This opinion of
counsel, however, is not binding on any court or the U.S. Patent and Trademark
Office. In addition, there can be no assurance that we will not in

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the future, in the U.S. or any other country, be subject to patent infringement
claims, patent interference proceedings or adverse judgments in patent
litigation.

There can be no assurance that our company will not be subject to claims
in patent suits, that one or more of our products or processes infringe their
patents or violate the proprietary rights of third parties. Defense and
prosecution of such patent suits can result in the diversion of substantial
financial, management and other resources from our company's other activities.
An adverse outcome could subject our company to significant liability to third
parties, require our company to obtain licenses from third parties, or require
our company to cease any related product development activities or product
sales.

An adverse determination by a court in any such patent litigation, or
the U.S. Patent and Trademark Office in a patent interference proceeding
particularly with respect to IMC-C225, to which we may become a party would
subject us to significant liabilities to third parties or require us to seek
licenses from third parties, or loss in whole or part of our ability to continue
to sell our product. If required, the necessary licenses may not be available on
acceptable terms or at all. Adverse determinations in a judicial or
administrative proceeding or failure to obtain necessary licenses could prevent
us, in whole or in part, from commercializing our products, which could have a
material adverse effect on our business, financial condition and results of
operations.

IMC-C225 is a "chimerized" monoclonal antibody, which means it is made
of antibody fragments derived from more than one type of animal. Patents have
been issued to other biotechnology companies that relate to chimerized
antibodies or their manufacture. Therefore, we may be required to obtain
licenses under these patents before we can commercialize our own chimerized
monoclonal antibodies, including IMC-C225.

We cannot be certain that we will ever be able to obtain such patent
licenses related to chimerized monoclonal antibodies in the U.S. or in other
territories of the world where we would want to commercialize IMC-C225. Even if
we are able to obtain other licenses as requested, there can be no assurance
that our company would be able to obtain a license on financial or other terms
acceptable to our company or that we would be able to successfully redesign our
products or processes to avoid the scope of such patents. In either such case,
such inability would have a material adverse effect on our business, financial
condition and results of operations. We cannot guarantee that the cost of such
licenses would not materially affect the ability to commercialize IMC-C225.

BEC2. We have exclusively licensed from Sloan Kettering a family of
patents and patent applications relating to our BEC2 monoclonal anti-idiotypic
antibody. We know that others have been issued patents in the U.S. and Europe
relating to anti-idiotypic antibodies or their use for the treatment of tumors.
These patents could be alleged by the third party patent holders in a suit for
patent infringement to be valid and to cover BEC2 or certain uses of BEC2. We
have entered into a license agreement with Merck KGaA, which entitles Merck KGaA
to market BEC2 world-wide with the exception of North America, while we are
entitled to co-promote BEC2 in North America. Merck KGaA, our licensee of BEC2,
has informed us that it has obtained non-exclusive, worldwide licenses to some
of these patents in order for Merck KGaA to market BEC2 within its territory.

Our license from Sloan Kettering requires us to pay royalties on sales
of BEC2.

Even if the BEC2 related patent applications mature into issued patents,
there can be no assurance that others will not be, or have not been, issued
patents that may prevent the sale of one or more of our company's products or
the practice of one or more of our company's processes, or require licensing and
the payment of significant fees or royalties by our company to third parties in
order to enable us to conduct its business.

There can be no assurance that our company will not be subject to claims
that one or more of its products or processes infringe other patents or violate
the proprietary rights of third parties. In the event that we are called upon to
defend and/or prosecute patent suits the related legal and administrative
proceedings are costly and time consuming and could result in loss of patent
rights. In addition, defense and prosecution of patent suits can result in the
diversion of substantial financial, management and other resources from our
company's other activities. An adverse outcome could subject our company to
significant liability to third

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parties, require our company to obtain licenses from third parties, or require
our company to cease any related product development activities or product
sales.

In the event we are required to seek other patent licenses related to
BEC2, we cannot be certain that we will ever be able to obtain such patent
licenses in the U.S. or other parts of the world where we would want to
commercialize BEC2. Even if we are able to obtain other licenses as requested,
there can be no assurance that our company would be able to obtain a license on
financial or other terms acceptable to our company or that we would be able to
successfully redesign its products or processes to avoid such patents. In either
such case, such inability could have a material adverse effect on our business,
financial condition and results of operations. We cannot guarantee that the cost
of such licenses would not materially affect the ability to commercialize BEC2.

ANGIOGENESIS INHIBITORS. With respect to our research on inhibitors to
angiogenesis based on the FLK-1 receptor, we are the exclusive licensee from
Princeton University of a family of patents and patent applications covering
recombinant nucleic acid molecules that encode the FLK-1 receptor and antibodies
to extracellular portions of the receptor and its human homolog, KDR. We are
also the assignee of a family of patents and patent applications filed by our
scientists generally related to angiogenesis-inhibiting antibodies to receptors
that bind VEGF as covered by the claim language, which is not presented herein.
One of the patents licensed from Princeton University claims the use of FLK-1
receptor antibodies to isolate cells expressing the FLK-1 receptor on their cell
surfaces. Additionally, we are a co-owner of a patent application claiming the
use of FLK-1/KDR receptor antibodies to isolate endothelial stem cells that
express FLK-1/KDR on their cell surfaces. At present, we are seeking exclusive
rights to this invention from the co-owners.

Our license from Princeton University requires us to pay royalties on
sales that would otherwise infringe the licensed patents, which cover antibodies
to the FLK-1/KDR receptor including IMC-1C11.

IMC-1C11 is a "chimerized" monoclonal antibody, which means it is made
of antibody fragments derived from more than one type of animal. Patents have
been issued to other biotechnology companies that relate to chimerized
antibodies or their manufacture. Therefore, we may be required to obtain
licenses under these patents before we can commercialize our own chimerized
monoclonal antibodies, including IMC-1C11.

We cannot be certain that we will ever be able to obtain such patent
licenses related to chimerized monoclonal antibodies in the U.S. or in other
territories of the world where we would want to commercialize IMC-1C11. Even if
we are able to obtain other licenses as requested, there can be no assurance
that our company would be able to obtain a license on financial or other terms
acceptable to our company or that we would be able to successfully redesign our
products or processes to avoid the scope of such patents. In either such case,
such inability would have a material adverse effect on our business, financial
condition and results of operations. We cannot guarantee that the cost of such
licenses would not materially affect the ability to commercialize IMC-1C11.

There can be no assurance that others will not be, or have not been,
issued patents that may prevent the sale of one or more of our company's
products or the practice of one or more of our company's processes, or require
licensing and the payment of significant fees or royalties by us to third
parties in order to enable us to conduct business.

There can be no assurance that our company will not be subject to claims
that one or more of our products or processes infringe other patents or violate
the proprietary rights of third parties. In the event that we are called upon to
defend and/or prosecute patent suits the related legal and administrative
proceedings are costly and time consuming and could result in loss of patent
rights. In addition, defense and prosecution of patent suits can result in the
diversion of substantial financial, management and other resources from our
company's other activities. An adverse outcome could subject our company to
significant liability to third parties, require our company to obtain licenses
from third parties, or require our company to cease any related product
development activities or product sales.

VE CADHERIN. We have an assignment of a family of patent applications
covering cadherin molecules that are involved in endothelial cell interactions.
These interactions are believed to be involved in

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angiogenic processes. The subject patent applications also cover antibodies that
bind to, and affect, the cadherin molecules.

DIAGNOSTICS. Our diagnostics program has been licensed for commercial
development to Abbott. The program includes target amplification technology and
detection methods, such as RCR technology, signal amplification technology, such
as Ampliprobe, and p53 mutation detection for assisting in cancer diagnosis. We
have pending patent applications and have obtained patents that relate to our
diagnostics program. We have either an assignment from our own scientists or
exclusive licenses from academic institutions to these families of patents and
patent applications. We have an exclusive license to an issued patent assigned
to Princeton University related to the underlying technology for our Ampliprobe
signal amplification and detection system. We are aware that patent applications
have been filed by, and that patents have been issued to, third parties in the
field of DNA amplification technology. This could affect Abbott's ability to
commercialize our diagnostic products, and our ability to collect royalties for
such commercialization.

Even if the diagnostics related patent applications mature into issued
patents, there can be no assurance that others will not be, or have not been,
issued patents that may prevent the commercial development of one or more of the
technologies included in the diagnostics program or practice of one or more of
the technologies included in the diagnostics program, or require licensing and
the payment of significant fees or royalties by our company to third parties in
order to enable us to conduct our business.

TRADE SECRETS. With respect to certain aspects of our technology, we
rely, and intend to continue to rely, on our confidential trade secrets,
unpatented proprietary know-how and continuing technological innovation to
protect our competitive position. Such aspects of our technology include methods
of isolating and purifying antibodies and other proteins, collections of
plasmids in viable host systems, and antibodies that are specific for proteins
that are of interest to us. We cannot be certain that others will not
independently develop substantially equivalent proprietary information or
techniques, or that we are free of the patent or other rights of third parties
to commercialize this technology.

Relationships between us and our employees, scientific consultants and
collaborators provide these persons with access to our trade secrets, know-how
and technological innovation under confidentiality agreements with the parties
involved. Similarly, our employees and consultants enter into agreements with us
that require that they do not disclose confidential information of ours and they
assign to us all rights to any inventions made while in our employ relating to
our activities.

GOVERNMENT REGULATION

The research and development, manufacture and marketing of human
therapeutic and diagnostic products are subject to regulation primarily by the
FDA in the United States and by comparable authorities in other countries. These
national agencies and other federal, state and local entities regulate, among
other things, research and development activities (including testing in animals
and in humans) and the testing, manufacturing, handling, labeling, storage,
record keeping, approval, advertising and promotion of the products that we are
developing. Noncompliance with applicable requirements can result in refusal to
approve product licenses or other applications, or revocation of approvals
previously granted. Noncompliance also can result in fines, criminal
prosecution, recall or seizure of products, total or partial suspension of
production or refusal to allow a company to enter into governmental supply
contracts.

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The process of obtaining requisite FDA approval has historically been
costly and time consuming. Current FDA requirements for a new human drug or
biological product to be marketed in the United States include: (1) the
successful conclusion of pre-clinical laboratory and animal tests, if
appropriate, to gain preliminary information on the product's safety; (2) filing
with the FDA of an Investigational New Drug Application, commonly known as an
IND, to conduct human clinical trials for drugs or biologics; (3) the successful
completion of adequate and well-controlled human clinical investigations to
establish the safety and efficacy of the product for its recommended use; and
(4) filing by a company and approval by the FDA of a New Drug Application
("NDA") for a drug product or a Biological License Application ("BLA") for a
biological product to allow commercial distribution of the drug or biologic.

Pre-clinical tests include the evaluation of the product in the
laboratory and in animal studies to assess the potential safety and efficacy of
the product and its formulation. The results of the pre-clinical tests are
submitted to the FDA as part of an IND application to support the evaluation of
the product in human subjects or patients.

Clinical trials involve administration of the product to patients under
supervision of a qualified principal investigator. Such trials are typically
conducted in three sequential phases, although the phases may overlap. In Phase
I, the initial introduction of the drug into human subjects, the product is
tested for safety, dosage tolerance, absorption, metabolism, distribution, and
excretion. Phase II involves studies in a limited patient population to: (1)
determine the biological or clinical activity of the product for specific,
targeted indications; (2) determine dosage tolerance and optimal dosage; and (3)
identify possible adverse effects and safety risks. If Phase II evaluations
indicate that a product is effective and has an acceptable benefit-to-risk
relationship, Phase III trials may be undertaken to further evaluate clinical
efficacy and to further test for safety within an expanded patient population.
Phase IV studies, or post-marketing studies, may also be required to provide
additional data on safety or efficacy.

The FDA reviews the results of the clinical trials and may order the
temporary or permanent discontinuation of clinical trials at any time if it
believes the product candidate exposes clinical subjects to an unacceptable
health risk. Investigational products used in clinical studies must be produced
in compliance with cGMP pursuant to FDA regulations.

On November 21, 1997, President Clinton signed into law the Food and
Drug Administration Modernization Act. That act codified the FDA's policy of
granting "fast track" approval for cancer therapies and other therapies intended
to treat serious or life threatening diseases and that demonstrate the potential
to address unmet medical needs. The fast track program emphasizes close, early
communications between FDA and the sponsor to improve the efficiency of
preclinical and clinical development, and to reach agreement on the design of
the major clinical efficacy studies that will be needed to support approval.
Under the fast track program, a sponsor also has the option to submit and
receive review of parts of the NDA or BLA on a rolling schedule approved by FDA,
which expedites the review process.

The FDA's Guidelines for Industry Fast Track Development Programs
require that a clinical development program must continue to meet the criteria
for Fast Track designation for an application to be reviewed under the Fast
Track Program. Previously, the FDA approved cancer therapies primarily based on
patient survival rates or data on improved quality of life. The FDA considered
evidence of partial tumor shrinkage, while often part of the data relied on for
approval, insufficient by itself to warrant approval of a cancer therapy, except
in limited situations. Under the FDA's new policy, which became effective on
February 19, 1998, fast track designation ordinarily allows a product to be
considered for accelerated approval through the use of surrogate endpoints to
demonstrate effectiveness. As a result of these provisions, FDA has broadened
authority to consider evidence of partial tumor shrinkage or other surrogate
endpoints of clinical benefit for approval. This new policy is intended to
facilitate the study of cancer therapies and shorten the total time for
marketing approvals. Under accelerated approval, the manufacturer must continue
with the clinical testing of the product after marketing approval to validate
that the surrogate endpoint did predict meaningful clinical benefit. We intend
to take advantage of the fast track programs; however, it is too early to tell
what effect, if any, these provisions may have on the approval of our product
candidates.

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The orphan drug provisions of the Federal Food, Drug, and Cosmetic Act
provide incentives to drug and biologics manufacturers to develop and
manufacture drugs for the treatment of rare diseases, currently defined as
diseases that exist in fewer than 200,000 individuals in the U.S. or, for a
disease that affects more than 200,000 individuals in the U.S., where the
sponsor does not realistically anticipate that its product will become
profitable. Under these provisions, a manufacturer of a designated orphan
product can seek tax benefits, and the holder of the first FDA approval of a
designated orphan product will be granted a seven-year period of marketing
exclusivity for that product for the orphan indication. While the marketing
exclusivity of an orphan drug would prevent other sponsors from obtaining
approval of the same compound for the same indication, it would not prevent
other types of drugs from being approved for the same indication.

Some of our cancer treatments require the use of in vitro diagnostic
products to test patients for particular traits. In vitro diagnostic products
are generally regulated by the FDA as medical devices. Before a medical device
may be marketed in the United States, the manufacturer generally must obtain
either clearance through a 510(k) premarket notification ("510(K)") process or
approval through the premarket approval application ("PMA") process. Section
510(k) notifications may be filed only for those devices that are "substantially
equivalent" to a legally marketed predicate device. If a device is not
"substantially equivalent" to a legally marketed predicate device, a PMA must be
filed. The premarket approval procedure generally involves more complex and
lengthy testing, and a longer review process than the 510(k) process.

Under current law, each domestic and foreign drug and device
product-manufacturing establishment must be registered with the FDA before
product approval. Domestic and foreign manufacturing establishments must meet
strict standards for compliance with cGMP regulations and licensing
specifications after the FDA has approved an NDA, BLA or PMA. The FDA and
foreign regulatory authorities periodically inspect domestic and foreign
manufacturing facilities where applicable.

Sales outside the United States of products we develop will also be
subject to regulatory requirements governing human clinical trials and marketing
for drugs and biological products and devices. The requirements vary widely from
country to country, but typically the registration and approval process takes
several years and requires significant resources. In most cases, if the FDA has
not approved a product for sale in the United States the product may be exported
for sale outside of the United States only if it has been approved in any one of
the following: the European Union, Canada, Australia, New Zealand, Japan,
Israel, Switzerland and South Africa. There are specific FDA regulations that
govern this process.

Our ability to earn sufficient returns on our products may depend in
part on the extent to which government health administration authorities,
private health coverage insurers and other organizations will provide
reimbursement for the costs of such products and related treatments. Significant
uncertainty exists as to the reimbursement status of newly approved health care
products, and there can be no assurance that adequate third-party coverage will
be available.

ENVIRONMENTAL AND SAFETY MATTERS

We use hazardous materials, chemicals, viruses and various radioactive
compounds in our research and development activities. Accordingly, we are
subject to regulations under federal, state and local laws regarding work force
safety, environmental protection and hazardous substance control, and to other
present and possible future federal, state and local regulations. We have in
place safety procedures for storing, handling and disposing of these materials.
However, we cannot completely eliminate the risk of contamination or injury. We
could be held liable for any resulting damages, injuries or civil penalties, and
our trials could be suspended. In addition, environmental laws or regulations
may impose liability for the clean-up of contamination at properties we own or
operate, regardless of fault.

These environmental laws and regulations do not currently materially
adversely affect our operations, business or assets. However, these laws may
become more stringent, other facts may emerge, and our processes may change, and
therefore the amount and timing of expenditures in the future may vary
substantially from those currently anticipated.

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COMPETITION

Competition in the biopharmaceutical industry is intense and based
significantly on scientific and technological factors. These factors include the
availability of patent and other protection for technology and products, the
ability to commercialize technological developments and the ability to obtain
governmental approval for testing, manufacturing and marketing. We compete with
specialized biopharmaceutical firms in the United States, Europe and elsewhere,
as well as a growing number of large pharmaceutical companies that are applying
biotechnology to their operations. Many biopharmaceutical companies have focused
their development efforts in the human therapeutics area, including cancer. Many
major pharmaceutical companies have developed or acquired internal biotechnology
capabilities or made commercial arrangements with other biopharmaceutical
companies. These companies, as well as academic institutions, governmental
agencies and private research organizations, also compete with us in recruiting
and retaining highly qualified scientific personnel and consultants. Our ability
to compete successfully with other companies in the pharmaceutical field will
also depend to a considerable degree on the continuing availability of capital
to us.

We are aware of certain products under development or manufactured by
competitors that are used for the prevention, diagnosis, or treatment of certain
diseases we have targeted for product development. Various companies are
developing biopharmaceutical products that potentially directly compete with our
product candidates. These include areas such as (1) the use of small molecules
to the receptor or antibodies to those receptors to treat cancer, (2) the use of
anti-idiotypic antibody or recombinant antigen approaches to cancer vaccine
therapy, (3) the development of inhibitors to angiogenesis, and (4) the use of
hematopoietic growth factors to treat blood system disorders to or for stem cell
or gene therapy. Some of these product candidates are in advanced stages of
clinical trials.

We expect that our products under development and in clinical trials
will address major markets within the cancer sector. Our competition will be
determined in part by the potential indications for which drugs are developed
and ultimately approved by regulatory authorities. Additionally, the timing of
market introduction of some of our potential products or of competitors'
products may be an important competitive factor. Accordingly, the relative speed
with which we can develop products, complete pre-clinical testing, clinical
trials and approval processes and supply commercial quantities to market are
expected to be important competitive factors. We expect that competition among
products approved for sale will be based on various factors, including product
efficacy, safety, reliability, availability, price, and patent position.

HUMAN RESOURCES

We initiated our in-house research and development in 1986. We have
assembled a scientific staff with a variety of complementary skills in a broad
base of advanced research technologies, including oncology, immunology,
molecular and cell biology, antibody engineering, protein and medicinal
chemistry and high-throughput screening. We have also recruited a staff of
technical and professional employees to carry out manufacturing of clinical
trial materials at our Somerville, New Jersey facility. Of our 272 full-time
personnel on February 28, 2001, 149 were employed in our product development,
clinical and manufacturing programs, 55 in research, and 68 in administration.
Our staff includes 25 persons with Ph.D.s and four with M.D.s.

ITEM 2. PROPERTIES

RESEARCH FACILITY -- NEW YORK, NEW YORK

We have occupied two contiguous leased floors at 180 Varick Street in
New York City since 1986. The current lease for the two floors was effective as
of January 1, 1999 and expires in December 2004. The rent under the lease
increases by 3% per year. Rent expense for the New York facility was
approximately $838,000, $817,000 and $574,000 for the years ended December 31,
2000, 1999 and 1998, respectively. During 2000, we completed renovations of this
facility to better fit our needs at a cost of approximately $2,800,000. In
December 2000, we modified our lease to provide for another approximately 1,800
square feet on a contiguous floor for an initial annual rent of $63,000, which
increases annually by 3%.

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The original acquisition, construction and installation of our New York
research and development facilities were financed principally through the sale
of Industrial Development Agency Revenue Bonds (the "IDA Bonds") issued by the
New York Industrial Development Agency ("NYIDA"). Equipment at these facilities
purchased with the proceeds of the bond secure the payment of debt service on
the outstanding IDA Bond.

MANUFACTURING FACILITIES -- SOMERVILLE, NEW JERSEY

In 1992, we acquired certain property and a building in Somerville, New
Jersey at a cost to us of approximately $4,665,000, including expenses. We have
retrofitted the building to serve as our pilot facility for clinical trial
manufacturing. When purchased, the facility had in place various features,
including clean rooms, air handling, electricity, and water for injection
systems and administrative offices. The cost for completion of facility
modifications was approximately $5,400,000. We currently operate the facility to
develop and manufacture materials for a portion of our clinical trials. Under
certain circumstances, we also may use the facility for the manufacturing of
commercial products. In January 1998, we completed the construction and
commissioning of a 1,750 square foot process development center at this facility
dedicated to manufacturing process optimization for existing products and the
pre-clinical and Phase I development of new biological therapeutics.

We are building our new 80,000 square foot product launch manufacturing
facility adjacent to the pilot facility in Somerville, New Jersey. The product
launch manufacturing facility contains three 10,000 liter (working volume)
fermenters and is dedicated to the commercial production of IMC-C225. The
construction of the product launch manufacturing facility is substantially
complete. The necessary commissioning and validation is expected to be completed
by the end of 2001. The launch facility will cost a total of approximately
$50,000,000. We have incurred approximately $35,934,000 in engineering,
capitalized interest, pre-construction and construction costs associated with
the product launch manufacturing facility through December 31, 2000.

In September 2000, we entered into a one-year lease with GM Stainless,
Inc. for approximately 7,600 square feet of office space in a building across
the street from the launch facility in order to house the additional personnel
being hired in connection with our expansion of our clinical, medical and
regulatory affairs functions. The lease will automatically renew each year for
up to three additional years unless terminated three months prior to the
expiration of that year. The current annual rent of $91,200 will be adjusted for
inflation in any subsequent years.

ITEM 3. LEGAL PROCEEDINGS

There are currently no material legal proceedings pending against us or
any of our property.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

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PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

MARKET INFORMATION

Our common stock is traded in the over-the-counter market and prices are
reported on the Nasdaq National Market tier of The Nasdaq Stock Market under the
symbol "IMCL."

The following table sets forth, for the periods indicated, the range of
high and low sale prices for the common stock on the Nasdaq National Market, as
reported by The Nasdaq Stock Market. The quotations shown represent inter-dealer
prices without adjustment for retail mark-ups, mark downs or commissions, and
may not necessarily reflect actual transactions. Share prices shown are adjusted
for our 2-for-1 stock split effected in the form of a dividend in October 2000.

HIGH LOW
---- ---

Year ended December 31, 2000
First Quarter............................................. $85.99 $17.00
Second Quarter............................................ $52.41 $30.19
Third Quarter............................................. $62.94 $30.75
Fourth Quarter............................................ $69.13 $30.81

HIGH LOW
---- ---

Year ended December 31, 1999
First Quarter............................................. $ 8.47 $ 4.38
Second Quarter............................................ $13.00 $ 7.75
Third Quarter............................................. $19.75 $10.66
Fourth Quarter............................................ $21.63 $ 8.13

STOCKHOLDERS

As of the close of business on March 28, 2001, there were approximately
352 holders of record of our common stock. We estimate that there are
approximately 26,500 beneficial owners of our common stock.

DIVIDENDS

We have never declared cash dividends on our common stock and have no
present intention of declaring such cash dividends in the foreseeable future.
The holder of our series A preferred stock was entitled to receive cumulative
dividends at the annual rate of $6.00 per share, compounded annually. Of its
400,000 shares of series A preferred stock, Merck KGaA converted 100,000 shares
in 1999 and 100,000 shares in 2000 into a total of 2,099,220 shares of common
stock. In December 2000 we redeemed the remaining 200,000 outstanding shares of
series A preferred stock for a total redemption price of $24,000,000 plus
accrued and unpaid dividends of approximately $1,200,000. We also paid Merck
KGaA a dividend of approximately $574,000 in connection with the 100,000 shares
of series A preferred stock converted in December 2000.

RECENT SALES BY THE COMPANY OF UNREGISTERED SECURITIES

In 2000, we issued an aggregate of 2,491,740 shares of unregistered
common stock to holders of warrants upon exercise of such warrants for a total
purchase price of $2,211,149, which were consummated as private sales under
Section 4(2) of the Securities Act of 1933, as amended.

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ITEM 6. SELECTED FINANCIAL DATA

YEAR ENDED DECEMBER 31,
----------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

STATEMENT OF OPERATIONS DATA:
Revenues............................... $ 1,413 $ 2,143 $ 4,193 $ 5,348 $ 600
Operating expenses:
Research and development............... 57,384 30,027 21,049 16,455 11,482
Marketing, general and
administrative....................... 16,651 9,354 7,145 5,356 3,961
-------- -------- -------- -------- --------
Total operating expenses............. 74,035 39,381 28,194 21,811 15,443
-------- -------- -------- -------- --------
Operating loss.................... (72,622) (37,238) (24,001) (16,463) (14,843)
-------- -------- -------- -------- --------
Net interest and other (income)
expense(1)........................... (4,867) (2,627) (2,619) (972) (95)
-------- -------- -------- -------- --------
Loss before extraordinary item and
cumulative effect of change in
accounting
policy................................. (67,755) (34,611) (21,382) (15,491) (14,748)
Extraordinary loss on extinguishment of
debt................................. -- -- -- -- (1,267)
Cumulative effect of change in
accounting
policy for the recognition of upfront
non-refundable fees.................... (2,596) -- -- -- --
-------- -------- -------- -------- --------
Net loss............................... (70,351) (34,611) (21,382) (15,491) (16,015)
Preferred dividends.................... 6,773 3,713 3,668 163 --
-------- -------- -------- -------- --------
Net loss to common stockholders........ $(77,124) $(38,324) $(25,050) $(15,654) $(16,015)
======== ======== ======== ======== ========
Net loss per common share:
Basic and diluted:
Loss before extraordinary loss and
cumulative effect of change
in accounting policy.............. $ (1.18) $ (0.75) $ (0.52) $ (0.33) $ (0.38)
Extraordinary loss on
extinguishment of debt.......... -- -- -- -- (0.03)
Cumulative effect of change in
accounting policy...................... (0.04) -- -- -- --
-------- -------- -------- -------- --------
Net loss............................. $ (1.22) $ (0.75) $ (0.52) $ (0.33) $ (0.41)
======== ======== ======== ======== ========
Weighted average shares outstanding.... 63,030 50,894 48,602 46,914 38,742

DECEMBER 31,
---------------------------------------------------------
2000 1999 1998 1997 1996
--------- --------- --------- --------- ---------
(IN THOUSANDS)

BALANCE SHEET DATA:
Cash and securities.................... $ 297,169 $ 119,368 $ 46,739 $ 59,610 $ 13,514
Working capital........................ 221,846 97,064 35,073 56,671 7,695
Total assets........................... 371,491 145,694 62,252 75,780 25,885
Long-term obligations.................. 242,688 3,335 3,746 3,430 2,775
Accumulated deficit.................... (243,808) (173,457) (138,846) (117,464) (101,973)
Stockholders' equity................... $ 43,432 $ 112,298 $ 45,174 $ 68,226 $ 16,589

- ---------------
(1) Net interest and other income is presented net of interest income, interest
expense and realized and unrealized gains and losses on securities and
investments.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following discussion and analysis by our management is provided to
identify certain significant factors that affected our financial position and
operating results during the periods included in the accompanying financial
statements.

OVERVIEW AND RISK FACTORS

We are a biopharmaceutical company advancing oncology care by developing
a portfolio of targeted biologic treatments, which address the unmet medical
needs of patients with a variety of cancers. Our three programs include growth
factor blockers, cancer vaccines and anti-angiogenesis therapeutics. Since our
inception in April 1984, we have devoted substantially all of our efforts and
resources to research and development conducted on our own behalf and through
collaborations with corporate partners and academic research and clinical
institutions. We have not derived any commercial revenue from product sales. As
a result of our substantial research and development costs, we have incurred
significant operating losses and we have generated a cumulative net loss of
approximately $244,000,000 for the period from our inception to December 31,
2000. We expect to incur additional operating losses, which could be
substantial.

Substantially all of our revenues were generated from license and
research arrangements with collaborative partners. Such revenues, as well as our
results of operations, have fluctuated and are expected to continue to fluctuate
significantly from period to period due to:

- the status of development of our various product candidates

- the time at which we enter into research and license agreements with
corporate partners that provide for payments to us, and the timing and
accounting treatment of payments to us under these agreements

- whether or not we achieve specified research or commercialization
milestones

- timely payment by our corporate partners of amounts payable to us

- the addition or termination of research programs or funding support

- variations in the level of expenses related to our proprietary product
candidates during any given period

In order for them to be commercialized, our product candidates will
require additional development and clinical testing, which will require
significant additional funds. Generally, to make a profit we will need to
successfully develop, test, introduce and market our products. It is not certain
that any of our products will be successfully developed or that required
regulatory approvals to commercialize them can be obtained. Further, even if we
successfully develop a product, there is no assurance that we will be able to
successfully manufacture or market that product or that customers will buy it.

In December 1998, we entered into an agreement with Merck KGaA, a
German-based drug company, relating to the development, marketing and sale of
IMC-C225. Under this agreement: (1) we have retained the rights to develop and
market IMC-C225 within the United States and Canada; (2) we have granted Merck
KGaA exclusive rights, except in Japan, to develop and market IMC-C225 outside
of the United States and Canada; (3) we have agreed to seek to supply Merck
KGaA, and Merck KGaA will purchase from us, IMC-C225 for the conduct of clinical
trials and the commercialization of the product outside of the United States and
Canada; (4) we will co-develop and co-market IMC-C225 in Japan with Merck KGaA;
and (5) we have granted Merck KGaA an exclusive license outside of the United
States and Canada, without the right to sublicense, to certain of our patents to
apply to a humanized antibody to the EGF Receptor on which Merck KGaA has
performed preclinical studies.

In return, Merck KGaA has agreed, subject to the terms of the agreement,
to (1) pay us $30,000,000 in up-front fees and early cash-based milestone
payments based upon our achievement of the milestones set forth in the
agreement, (2) pay us an additional $30,000,000 if further milestones are
achieved
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for which Merck KGaA will receive equity in ImClone Systems that will be priced
at varying premiums to the then-market price of the common stock depending upon
the timing of the achievement of the respective milestones, (3) provide us,
subject to certain terms, a guaranty of a $30,000,000 credit facility relating
to the construction of a new IMC-C225 product launch manufacturing facility, (4)
fund clinical development of IMC-C225 outside of the United States and Canada,
and (5) pay us royalties on future sales of IMC-C225 in its territory, if any.

Through December 31, 2000, Merck KGaA has paid us $28,000,000 in
up-front and milestone fees which have been recorded as fees potentially
refundable to corporate partner and not as revenue due to the fact that they
were refundable to Merck KGaA in the event a condition relating to obtaining
certain collateral license agreements was not satisfied. In March 2001, this
condition was satisfied and approximately $24,000,000 will be recognized as
revenue during the first quarter of 2001. Under the agreement, we are entitled
to Merck KGaA's guaranty of a $30,000,000 credit facility. As of March 28, 2001,
we have not utilized this guaranty and are exploring ways in which we might
alter that portion of the agreement. Merck has also agreed to pay for one-half
of the outside contract service costs incurred with respect to our multinational
Phase III clinical trial using IMC-C225 with radiation in head and neck cancer
patients.

We have also granted Merck KGaA a license to develop and market BEC2
worldwide. We have retained the right to co-promote BEC2 with Merck KGaA within
North America and it is intended that we will be the bulk manufacturer of BEC2
for worldwide production. In return, Merck KGaA has made research support
payments to us totaling $4,700,000 and is required to make milestone payments to
us of up to $22,500,000, of which $3,000,000 has been received through December
31, 2000. In addition, Merck KGaA is required to make royalty payments to us on
any sales of BEC2 outside North America, with a portion of the milestone and
research support payments received under the agreement being creditable against
the amount of royalties due.

25
29

RESULTS OF OPERATIONS

YEARS ENDED DECEMBER 31, 2000 AND 1999.

Revenues. Revenues for the years ended December 31, 2000 and 1999 were
$1,413,000 and $2,143,000, respectively, a decrease of $730,000, or 34%.
Revenues for the year ended December 31, 2000 primarily consisted of (1)
$250,000 in milestone revenue and $961,000 in royalty revenue from our strategic
corporate alliance with Abbott in diagnostics and (2) $162,000 in license fee
revenue from our strategic corporate alliance with Merck KGaA for our principal
cancer vaccine product candidate, BEC2. The license fee revenue related to the
BEC2 agreement has been recognized as a direct result of a change in accounting
policy with respect to revenue recognition (see notes 2(f) and 8 to the
accompanying consolidated financial statements). Effective January 1, 2000, a
portion of the previously recognized revenue from upfront payments received
under the BEC2 research and license agreement was deferred and is now being
recognized over the life of the related patents. Revenues for the year ended
December 31, 1999 primarily consisted of (1) $500,000 in milestone revenue and
$225,000 in research support from our strategic corporate alliance with American
Home in infectious disease vaccines, (2) $533,000 in research and support
payments from our strategic corporate alliance with Merck KGaA for BEC2, (3)
$500,000 in milestone revenue and $305,000 in royalty revenue from our strategic
corporate alliance with Abbott in diagnostics, and (4) $75,000 in license fees
from our cross-licensing agreement with Immunex for novel hematopoietic growth
factors. The decrease in revenues for the year ended December 31, 2000 was
primarily attributable to the decrease in research and support revenue as a
result of the completion of all research and support payments due from our
research and license agreement with Merck KGaA for BEC2 and our strategic
corporate alliance with American Home in infectious disease vaccines. The
decrease was partially offset by the increase in royalties from our strategic
corporate alliance with Abbott in diagnostics.

Operating Expenses: Research and Development. Total operating expenses
for the years ended December 31, 2000 and 1999 were $74,035,000 and $39,381,000,
respectively, an increase of $34,654,000, or 88%. Research and development
expenses for the years ended December 31, 2000 and 1999 were $57,384,000 and
$30,027,000, respectively, an increase of $27,357,000 or 91%. Such amounts for
the years ended December 31, 2000 and 1999 represented 78% and 76%,
respectively, of total operating expenses. Research and development expenses
include costs associated with our in-house and collaborative research programs,
product and process development expenses, costs to manufacture our product
candidates, particularly IMC-C225, quality assurance and quality control costs,
costs to conduct our clinical trials and associated regulatory activities.
Research and development expenses for the years ended December 31, 2000 and 1999
have been reduced by $4,817,000 and $6,473,000, respectively, for clinical trial
and contract manufacturing costs that are reimbursable by Merck KGaA. The
increase in research and development expenses for the year ended December 31,
2000 was primarily attributable to (1) the costs associated with newly initiated
and ongoing clinical trials of IMC-C225, (2) costs related to the commercial
manufacturing services agreements with Lonza, (3) expenditures in the functional
areas of product development, manufacturing, clinical and regulatory affairs
associated with IMC-C225, (4) non-cash expenses recognized in connection with
the issuance of options granted to scientific consultants and (5) increased
expenditures associated with discovery research. We expect research and
development costs to increase in future periods as we continue to expand our
efforts in product development and clinical trials. Research and development
costs will also continue to increase due to our now being required to pay for
40% of the costs of our Phase III BEC2 trial as a result of our reaching the DM
17,000,000 threshold at which point such costs are required by the agreement to
be shared by Merck KGaA and us.

Operating Expenses: Marketing, General and Administrative. Marketing,
general and administrative expenses include marketing and administrative
personnel costs, including related occupancy costs, additional costs to develop
internal marketing and sales capabilities, costs to pursue arrangements with
strategic corporate partners and technology licensors, and expenses associated
with applying for patent protection for our technology and products. Such
expenses for the years ended December 31, 2000 and 1999 were $16,651,000 and
$9,354,000, respectively, an increase of $7,297,000, or 78%. The increase in
marketing, general and administrative expenses primarily reflected (1) costs
associated with our marketing efforts, (2) additional administrative staffing
required to support our expanding research, development, clinical, marketing and
manufacturing efforts, particularly with respect to IMC-C225 and (3) expenses
associated with

26
30

the pursuit of strategic corporate alliances and other corporate development
efforts. We expect marketing, general and administrative expenses to increase in
future periods to support our planned increases in research, development,
clinical, marketing and manufacturing efforts.

Interest and Other (Income) Expense and Interest Expense. Interest and
other (income) expense was $20,819,000 for the year ended December 31, 2000
compared with $2,842,000 for the year ended December 31, 1999, an increase of
$17,977,000. The increase was primarily attributable to the increase in our
investment portfolio as a result of the November 1999 public common stock
offering and the February 2000 private placement of 5 1/2% convertible
subordinated notes. Interest expense was $12,085,000 and $292,000 for the years
ended December 31, 2000 and 1999, respectively, an increase of $11,793,000 which
was primarily attributable to the convertible subordinated notes. Interest
expense for both periods also included (1) interest on an outstanding Industrial
Development Revenue Bond issued in 1990 (THE "1990 IDA BOND") with a principal
amount of $2,200,000 and (2) interest recorded on various capital lease
obligations under a 1996 financing agreement and a 1998 financing agreement with
Finova Technology Finance, Inc. ("FINOVA"). Interest expense for the years ended
December 31, 2000 and 1999 were offset by capitalizing interest costs of
$846,000 and $204,000, respectively, during the construction period of the
Company's new product launch manufacturing facility. We recorded losses on
securities available for sale for the year ended December 31, 2000 in the amount
of $3,273,000 as compared with gains of $77,000 for the year ended December 31,
1999. The net losses on securities available for sale for the year ended
December 31, 2000 included a $5,125,000 write-down of our investment in ValiGen
N.V., which was partially offset by gains associated with our investment
portfolio. The net gain for the year ended December 31, 1999 included an
$828,000 write-down of our investment in CombiChem Inc. ("COMBICHEM") as a
result of an other than temporary impairment. In November 1999, we disposed of
our investment in CombiChem resulting in a net gain of $109,000 for the year
ended December 31, 1999.

Net Losses. We had a net loss to common stockholders of $77,124,000 or
$1.22 per share for the year ended December 31, 2000 compared with $38,324,000
or $0.75 per share for the year ended December 31, 1999. Included in the loss
for the year ended December 31, 2000 was a non-cash charge of $2,596,000 related
to the cumulative effect of a change in accounting policy (see notes 2(f) and 8
to the accompanying consolidated financial statements). Excluding the effect of
this change in accounting policy, the net loss to common stockholders for the
year ended December 31, 2000 would have been $74,528,000 or $1.18 per share. The
increase in the net losses and per share net loss to common stockholders was due
to the premium associated with the redemption of the series A preferred stock
and the factors noted above.

YEARS ENDED DECEMBER 31, 1999 AND 1998

Revenues. Revenues for the years ended December 31, 1999 and 1998 were
$2,143,000 and $4,193,000, respectively, a decrease of $2,050,000, or 49%.
Revenues for the year ended December 31, 1999 primarily consisted of (1)
$500,000 in milestone revenue and $225,000 in research support from our
partnership with American Home in infectious disease vaccines, (2) $533,000 in
research and support payments from our research and license agreement with Merck
KGaA for BEC2, (3) $500,000 in milestone revenue and $305,000 in royalty revenue
from our strategic alliance with Abbott in diagnostics, and (4) $75,000 in
license fees from our cross-licensing agreement with Immunex for novel
hematopoietic growth factors. Revenues for the year ended December 31, 1998
consisted of (1) $300,000 in research support from our partnership with American
Home in infectious disease vaccines, (2) $1,000,000 in milestone revenue and
$2,500,000 in research and support payments from our agreement with Merck KGaA
for BEC2, (3) $295,000 in royalty revenue from our strategic alliance with
Abbott in diagnostics and (4) $98,000 from a Phase I Small Business Innovation
Research grant from the NCI for a program in cancer-related angiogenesis. The
decrease in revenues for the year ended December 31, 1999 was primarily
attributable to the decrease in research and support revenue as a result of the
completion of all research and support payments due from our research and
license agreement with Merck KGaA for BEC2.

Operating Expenses: Research and Development. Total operating expenses
for the years ended December 31, 1999 and 1998 were $39,381,000 and $28,194,000,
respectively, an increase of $11,187,000, or 40%. Research and development
expenses for the years ended December 31, 1999 and 1998 were $30,027,000
27
31

and $21,049,000, respectively, an increase of $8,978,000 or 43%. Such amounts
for the years ended December 31, 1999 and 1998 represented 76% and 75%,
respectively, of total operating expenses. Research and development expenses
include costs associated with our in-house and collaborative research programs,
product and process development expenses, costs to manufacture our product
candidates, particulary IMC-c225, quality assurance and quality control costs,
costs to conduct our clinical trials and associated regulatory activities. The
increase in research and development expenses for the year ended December 31,
1999 was primarily attributable to (1) the costs associated with the initiation
of two pivotal Phase III clinical trials of IMC-C225 in treating head and neck
cancer, one in combination with radiation and one in combination with cisplatin,
(2) the costs associated with the initiation of two additional Phase II clinical
trials of IMC-C225, one in refractory head and neck cancer in combination with
cisplatin and one in refractory colorectal cancer in combination with
irinotecan, (3) expenditures in the functional areas of product development,
manufacturing, clinical and regulatory affairs associated with IMC-C225, (4)
non-cash expenses recognized in connection with the issuance of options granted
to scientific consultants and collaborators and (5) expenditures associated with
additional staffing in the area of discovery research. We expect research and
development costs to increase in future periods as we continue to expand our
efforts in product development and clinical trials.

Operating Expenses: Marketing, General and Administrative
Expenses. Marketing, general and administrative expenses include marketing and
administrative personnel costs, including related occupancy costs, costs
incurred in connection with pursuing arrangements with corporate partners and
technology licensors, and expenses associated with applying for patent
protection for our technology and products. Such expenses for the years ended
December 31, 1999 and 1998 were $9,354,000 and $7,145,000, respectively, an
increase of $2,209,000, or 31%. The increase in general and administrative
expenses primarily reflected (1) additional support staffing for expanding our
research, development, clinical, manufacturing and marketing efforts,
particularly with respect to IMC-C225 and (2) expenses associated with the
pursuit of strategic corporate alliances and other corporate development
expenses. We expect marketing, general and administrative expenses to increase
in future periods to support our planned increases in research, development,
clinical, manufacturing and marketing and sales efforts.

Interest and Other (Income) Expense and Interest Expense. Interest
income was $2,842,000 for the years ended December 31, 1999 compared with
$3,016,000 for the year ended December 31, 1998, a decrease of $174,000, or 6%.
Interest expense was $292,000 and $435,000 for the years ended December 31, 1999
and 1998, respectively, a decrease of $143,000 or 33%. Interest expense for both
periods primarily included (1) interest on the outstanding 1990 IDA Bond with a
principal amount of $2,200,000 and (2) interest recorded on various capital
lease obligations under a 1996 financing agreement and a 1998 financing
agreement with Finova. Interest expense for the year ended December 31, 1999 was
offset by capitalizing interest costs of $204,000 during the construction period
of the Company's new manufacturing facility. The decrease in interest expense
was primarily attributable to capitalizing the interest costs. This decrease was
partially offset by interest arising from entering into additional capital
leases. We recorded gains on securities available for sale for the year ended
December 31, 1999 in the amount of $77,000 as compared with gains of $34,000 for
the year ended December 31, 1998. The net gain for the year ended December 31,
1999 included an $828,000 write-down of our investment in CombiChem as a result
of an other than temporary impairment. In November 1999, we disposed of our
investment in CombiChem resulting in a net gain of $109,000 for the year ended
December 31, 1999.

Net Losses. We had net losses to common stockholders of $38,324,000 or
$.75 per share for the year ended December 31, 1999 compared with $25,050,000 or
$.51 per share for the year ended December 31, 1998. The increase in the net
loss and per share net loss to common stockholders was due primarily to the
factors noted above.

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32

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 2000, our principal sources of liquidity consisted of
cash and cash equivalents and securities available for sale of approximately
$297,200,000. From inception through December 31, 2000 we have financed our
operations through the following means:

- Public and private sales of equity securities and convertible notes in
financing transactions have raised approximately $489,400,000 in net
proceeds

- We have earned approximately $34,000,000 from license fees, contract
research and development fees and royalties from collaborative
partners. Additionally, we have received $28,000,000 in potentially
refundable fees from our IMC-C225 development and license agreement
with Merck KGaA. This amount was not recognized as revenue due to the
fact that it was refundable to Merck KGaA in the event a condition
relating to obtaining certain collateral license agreements was not
satisfied. In March 2001, this condition was satisfied and
approximately $24,000,000 will be recognized as revenue during the
first quarter of 2001.

- We have earned approximately $32,100,000 in interest income

- The sale of the IDA Bonds in each of 1985, 1986 and 1990 raised an
aggregate of $6,300,000, the proceeds of which have been used for the
acquisition, construction and installation of our research and
development facility in New York City, and of which $2,200,000 is
outstanding

We may from time to time consider a number of strategic alternatives
designed to increase shareholder value, which could include joint ventures,
acquisitions and other forms of alliances as well as the sale of all or part of
the Company.

The 1990 IDA Bond in the outstanding principal amount of $2,200,000
becomes due in 2004. We incur annual interest on the 1990 IDA Bond aggregating
$248,000. In order to secure our obligations to the New York Industrial
Development Agency ("NYIDA") under the 1990 IDA Bond, we have granted the NYIDA
a security interest in facility equipment purchased with the bond proceeds.

In February 2000, we completed a private placement of $240,000,000 in
5 1/2% convertible subordinated notes due March 1, 2005. We received net
proceeds of approximately $231,500,000, after deducting expenses associated with
the offering. Accrued interest on the notes was approximately $4,400,000 at
December 31, 2000. A holder may convert all or a portion of a note into common
stock at any time on or before March 1, 2005 at a conversion price of $55.09 per
share, subject to adjustment under certain circumstances. We may redeem some or
all of the notes prior to March 6, 2003 if specified common stock price
thresholds are met. On or after March 6, 2003, we may redeem some or all of the
notes at specified redemption prices.

In December 1999, we entered into a development and manufacturing
services agreement with Lonza. Under the agreement, Lonza is responsible for
process development and scale-up to manufacture IMC-C225. These steps are being
taken to assure that its process will produce bulk material that conforms with
our reference material. As of December 31, 2000, we have incurred approximately
$1,677,000 for services provided under this agreement, which is included as a
component of research and development expenses. In September 2000, we entered
into a three-year commercial manufacturing services agreement with Lonza
relating to IMC-C225. Under the agreements with Lonza, Lonza is manufacturing
IMC-C225 at the 5,000 liter scale under cGMP conditions and will deliver it to
us over a term ending no later than December 2003. As of December 31, 2000, we
incurred approximately $5,400,000 for services provided under this agreement and
have included this amount as research and development expense in the year ended
December 31, 2000. In the event the commercial manufacturing services agreement
is terminated by the Company, the Company will be required to pay 85% of the
stated costs for each of the first ten batches cancelled, 65% of the stated
costs for each of the next ten batches cancelled and 40% of the stated costs for
any remaining batches cancelled. These amounts are subject to mitigation should
Lonza use its manufacturing capacity caused by such termination for another
customer.

We cannot be certain that we will be able to enter into agreements for
commercial supply with third party manufacturers on terms acceptable to us. Even
if we are able to enter into such agreements, we cannot

29
33

be certain that we will be able to produce or obtain sufficient quantities for
commercial sale of our products. Any delays in producing or obtaining commercial
quantities of our products could have a material effect on our business,
financial condition and results of operations.

We have obligations under various capital leases for certain laboratory,
office and computer equipment and also certain building improvements, primarily
under 1996 and 1998 financing agreements with Finova. These agreements allowed
us to finance the lease of equipment and make certain building and leasehold
improvements to existing facilities. Each lease has a fair market value purchase
option at the expiration of its 42- or 48-month term. Pursuant to the financing
agreement entered into in 1996, we issued to Finova a warrant to purchase 46,440
shares of our common stock at an exercise price of $4.85 per share, which was
exercised in November 1999. We recorded a non-cash debt discount of
approximately $125,000 in connection with this financing. This discount has been
amortized over the 42-month term of the first lease. We have entered into twelve
individual leases under the financing agreements aggregating a total cost of
$3,695,000. These financing arrangements are now expired. In January and
February 2000, we entered into capital lease arrangements, subject to final
document negotiation, with Finova and Transamerica Business Credit Corporation
under which we may obtain at our option up to an aggregate of $25,000,000 in
financing. Under the arrangements, funds may be obtained from time to time to
finance equipment and certain pre-construction costs associated with the
build-out of our product launch manufacturing facility. We paid $100,000 in
application fees associated with these agreements which may be applied against
future principal and interest payments. As of December 31, 2000, we have not
drawn any funds under these arrangements.

We rent our New York facility under an operating lease that expires in
December 2004. We have substantially completed renovations of the facility to
better suit our needs at a cost of approximately $2,800,000.

Under our agreement with Merck KGaA for IMC-C225, we developed, in
consultation with Merck KGaA, a production concept for our new product launch
manufacturing facility for the commercial production of IMC-C225. The agreement
provides that Merck KGaA is to provide us, subject to certain conditions, a
guaranty of a $30,000,000 credit facility for the build-out of this facility. As
of March 28, 2001, this guaranty has not been put in place, and we are exploring
ways in which we might alter that portion of the agreement. We are currently
erecting this facility adjacent to our pilot manufacturing facility in New
Jersey, which supplies IMC-C225 to support our clinical trials. We broke ground
on the facility in January 2000 and estimate that the total cost will be
approximately $50,000,000. We have incurred approximately $35,934,000 in
engineering, capitalized interest, pre-construction and construction costs
associated with the product launch manufacturing facility through December 31,
2000. We are funding the cost of this facility through a combination of cash on
hand and, if advisable, equipment financing transactions.

Total capital expenditures made during the year ended December 31, 2000
were $37,761,000 of which (1) $1,942,000 primarily related to the purchase of
equipment for and costs associated with the retrofit of our corporate office and
research laboratories in our New York facility; (2) $35,934,000 related to
engineering, pre-construction and construction costs of the product launch
manufacturing facility being erected adjacent to our pilot manufacturing
facility in New Jersey, (3) $2,383,000 related to the purchase of land adjacent
to our product launch manufacturing facility to accommodate parking facilities
for our increased number of employees and the cost of conceptual design and
preliminary engineering plans for a second commercial manufacturing facility,
which we may build on the land in the future and (4) the remaining $815,000
related to improving and equipping our pilot manufacturing facility.

To prepare for the marketing and sale of IMC-C225 in the U.S. and Canada
we hired a Vice President of Marketing and Sales in 1998 and have hired
directors of marketing, field sales and sales operations, each with experience
in the commercial launch of a monoclonal antibody cancer therapeutic. We expect
to hire regional sales managers and to arrange for the hiring or contracting of
a sales force prior to the commencement of IMC-C225 sales, if any.

The holder of the series A preferred stock was entitled to receive
cumulative dividends at an annual rate of $6.00 per share. Dividends accrue from
the issuance date of the series A preferred stock and are payable on the
outstanding series A preferred stock in cash on December 31 of each year
beginning
30
34

December 31, 1999 or at the time of conversion or redemption of the series A
preferred stock on which the dividend is to be paid, whichever is sooner. Of its
400,000 shares of series A preferred stock, Merck KGaA converted 100,000 shares
in 1999 and 100,000 shares in 2000 into a total of 2,099,220 shares of common
stock. In December 2000 we redeemed the remaining 200,000 outstanding shares of
series A preferred stock for a total redemption price of $24,000,000 plus
accrued and unpaid dividends of approximately $1,200,000. We also paid Merck
KGaA a dividend of approximately $574,000 in connection with the 100,000 shares
of series A preferred stock converted in December 2000.

We believe that our existing cash on hand and amounts expected to be
available under our credit facilities should enable us to maintain our current
and planned operations through at least 2002. We are also entitled to
reimbursement for certain research and development expenditures and to certain
milestone payments, including $2,000,000 in cash-based milestone payments and
$30,000,000 in equity-based milestone payments from our IMC-C225 development and
license agreement with Merck KGaA, which are to be paid subject to our attaining
research and development milestones, and certain other conditions. There can be
no assurance that we will achieve the unachieved milestones. Our future working
capital and capital requirements will depend upon numerous factors, including,
but not limited to:

- progress and cost of our research and development programs,
pre-clinical testing and clinical trials

- our corporate partners fulfilling their obligations to us

- timing and cost of seeking and obtaining regulatory approvals

- timing and cost of manufacturing scale-up and effective
commercialization activities and arrangements

- level of resources that we devote to the development of marketing and
sales capabilities

- costs involved in filing, prosecuting and enforcing patent claims

- technological advances

- status of competitors

- our ability to maintain existing and establish new collaborative
arrangements with other companies to provide funding to support these
activities

In order to fund our capital needs after 2002, we will require
significant levels of additional capital and we intend to raise the capital
through additional arrangements with corporate partners, equity or debt
financings, or from other sources including the proceeds of product sales, if
any. There is no assurance that we will be successful in consummating any such
arrangements. If adequate funds are not available, we may be required to
significantly curtail our planned operations.

At December 31, 2000, we had net operating loss carryforwards for United
States federal income tax purposes of approximately $303,000,000, which expire
at various dates from 2001 through 2020. At December 31, 2000 we had research
credit carryforwards of approximately $8,000,000, which expire at various dates
from 2009 through 2020. Under Section 382 of the Internal Revenue Code of 1986,
as amended, a corporation's ability to use net operating loss and research
credit carryforwards may be limited if the corporation experiences a change in
ownership of more than 50 percentage points within a three-year period. Since
1986, we have experienced at least two such ownership changes. As a result, we
are only permitted to use in any one year approximately $5,200,000 of our
available net operating loss carryforwards that relate to periods before these
ownership changes. Similarly, we are limited in using our research credit
carryforwards. We are in the process of determining whether the November 1999
public stock offering and the February 2000 private placement of convertible
subordinated notes will be viewed as additional ownership changes that would
further limit the use of our net operating losses and research credit
carryforwards.

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35

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Our holdings of financial instruments comprise a mix of securities that
may include U.S. corporate debt, foreign corporate debt, U.S. government debt,
foreign government/agency guaranteed debt and commercial paper. All such
instruments are classified as securities available for sale. Generally, we do
not invest in portfolio equity securities or commodities or use financial
derivatives for trading purposes. Our debt security portfolio represents funds
held temporarily pending use in our business and operations. We manage these
funds accordingly. We seek reasonable assuredness of the safety of principal and
market liquidity by investing in investment grade fixed income securities while
at the same time seeking to achieve a favorable rate of return. Our market risk
exposure consists principally of exposure to changes in interest rates. Our
holdings are also exposed to the risks of changes in the credit quality of
issuers. We invest in securities that have a range of maturity dates. Typically,
those with a short-term maturity are fixed-rate, highly liquid, debt instruments
and those with longer-term maturities are highly liquid debt instruments with
fixed interest rates or with periodic interest rate adjustments. We also have
certain foreign exchange currency risk. See note 2 of the consolidated financial
statements. The table below presents the principal amounts and related weighted
average interest rates by year of maturity for our investment portfolio as of
December 31, 2000:

2006 AND
2001 2002 2003 2004 2005 THEREAFTER TOTAL
----------- ---------- -------- ----------- ----------- ------------ ------------

Fixed Rate............ $11,898,000 $1,537,000 $242,000 $10,227,000 $ -- $ 81,030,000 $104,934,000
Average Interest
Rate................. 6.55% 7.82% 6.00% 6.58% -- 6.47% 6.51%
Variable Rate......... -- -- -- 15,031,000(1) 33,326,000(1) 79,155,000(1) 127,512,000
Average Interest
Rate................. -- -- -- 6.82 6.79% 7.02% 6.93%
----------- ---------- -------- ----------- ----------- ------------ ------------
$11,898,000 $1,537,000 $242,000 $25,258,000 $33,326,000 $160,185,000(1) $232,446,000
=========== ========== ======== =========== =========== ============ ============

FAIR VALUE
------------

Fixed Rate............ $109,364,000
Average Interest
Rate................. --
Variable Rate......... 127,480,000
Average Interest
Rate................. --
------------
$236,844,000
============

- ---------------
(1) These holdings consist of U.S. corporate and foreign corporate floating rate
notes. Interest on the securities is adjusted monthly, quarterly or
semi-annually, depending on the instrument, using prevailing interest rates.
These holdings are highly liquid and we consider the potential for loss of
principal to be minimal.

Our 5 1/2% convertible subordinated notes in the principal amount of
$240,000,000 due March 1, 2005 and other long-term debt have fixed interest
rates. The subordinated notes are convertible into the Company's common stock at
a conversion price of $55.09 per share. The fair value of fixed interest rate
instruments are affected by changes in interest rates and in the case of the
convertible notes by changes in the price of the Company's common stock. The
fair value of the 5 1/2% convertible subordinated notes (which have a carrying
value of $240,000,000) was approximately $234,000,000 at December 31, 2000.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The response to this item is submitted as a separate section of this
report commencing on Page F-1.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

Not applicable.

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36

PART III

The information required by "Item 10. -- Directors and Executive
Officers of the Registrant"; "Item 11. -- Executive Compensation"; "Item
12. -- Security Ownership of Certain Beneficial Owners and Management"; and
"Item 13. -- Certain Relationships and Related Transactions" is incorporated
into Part III of this Annual Report on Form 10-K by reference to our Proxy
Statement for the Annual Meeting of Stockholders scheduled to be held on May 24,
2001.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

(a)(1) and (2) The response to this portion of Item 14. is submitted as a
separate section of this report commencing on page F-1.
(a)(3) Exhibits (numbered in accordance with Item 601 of Regulation
S-K).

EXHIBIT INCORPORATION
NO. DESCRIPTION BY REFERENCE
------- ----------- -------------

3.1 Certificate of Incorporation, as amended through December
31, 1998.................................................... O (3.1)
3.1A Amendment dated June 4, 1999 to the Company's Certificate of
Incorporation, as amended................................... U (3.1A)
3.1B Amendment dated June 12, 2000 to the Company's Certificate
of Incorporation as amended................................. Y (3.1A)
3.2 Amended and Restated By-Laws of the Company................. N (3.2)
4.1 Form of Warrant issued to the Company's officers and
directors under Warrant Agreements.......................... A (4.1)
4.2 Stock Purchase Agreement between Erbamont Inc. and the
Company, dated May 1, 1989.................................. A (4.2)
4.3 Stock Purchase Agreement between American Cyanamid Company
(Cyanamid) and the Company dated December 18, 1987.......... A (4.3)
4.4 Form of Subscription Agreement entered into in connection
with September 1991 private placement....................... A (4.4)
4.5 Form of Warrant issued in connection with September 1991
private placement........................................... A (4.5)
4.6 Preferred Stock Purchase Agreement between the Company and
Merck KGaA ("Merck") dated December 3, 1997................. P (4.6)
4.7 Certificate of Designations, Preferences and Rights of
Series A Convertible Preferred Stock........................ P (4.7)
10.1 Company's 1986 Employee Incentive Stock Option Plan,
including form of Incentive Stock Option Agreement.......... F (10.1)
10.2 Company's 1986 Non-qualified Stock Option Plan, including
form of Non-qualified Stock Option Agreement................ F (10.2)
10.3 Company's 401(k) Plan....................................... F (10.3)
10.4 Research and License Agreement between Merck and the Company
dated December 19, 1990..................................... B (10.4)
10.5 Hematopoietic Growth Factors License Agreement between
Erbamont, N.V. and the Company, dated May 1, 1989, and
Supplemental Amendatory Agreement between Erbamont, N.V. and
the Company dated September 28, 1990........................ B (10.6)

33
37

EXHIBIT INCORPORATION
NO. DESCRIPTION BY REFERENCE
------- ----------- -------------

10.6 Agreement between Cyanamid and the Company dated December
18, 1987 and supplemental letter agreement between Cyanamid
and the Company dated September 6, 1991..................... B (10.7)
10.7 Agreement between Hadasit Medical Research Services &
Development, Ltd. and the Company........................... B (10.8)
10.8 Agreement between Hadasit Medical Research Services &
Development, Ltd. and the Company dated September 21,
1989........................................................ B (10.9)
10.9 Supported Research Agreement between Memorial Sloan
Kettering Cancer Center (MSKCC) and the Company dated March
26, 1990.................................................... A (10.10)
10.10 License Agreement between MSKCC and the Company, dated March
26, 1990.................................................... B (10.11)
10.11 License Agreement between MSKCC and the Company, dated March
26, 1990.................................................... B (10.12)
10.12 License Agreement between MSKCC and the Company, dated March
26, 1990.................................................... B (10.13)
10.13 Research Agreement between the Trustees of Princeton
University (Princeton) and the Company dated January 1,
1991........................................................ B (10.14)
10.14 Research Agreement between Princeton and the Company dated
May 1, 1991................................................. B (10.15)
10.15 Research Agreement between Princeton and the Company dated
May 1, 1991................................................. B (10.16)
10.16 License Agreement between Princeton and the Company dated
March 20, 1991.............................................. B (10.17)
10.17 License Agreement between Princeton and the Company dated
May 29, 1991................................................ B (10.18)
10.18 License Agreement between Princeton and Oncotech, Inc. dated
September 3, 1987........................................... B (10.19)
10.19 Supported Research Agreement between The University of North
Carolina at Chapel Hill ("UNC") and the Company effective
July 5, 1988................................................ B (10.20)
10.20 License Agreement between UNC and the Company dated July 5,
1988........................................................ B (10.21)
10.21 License Agreement between UNC and the Company dated July 27,
1988........................................................ B (10.22)
10.22 Supported Research Agreement between UNC and the Company
effective April 1, 1989..................................... B (10.23)
10.23 License Agreement between UNC and the Company dated July 1,
1991........................................................ B (10.24)
10.24 Agreement between Celltech Limited and the Company dated May
23, 1991.................................................... B (10.25)
10.25 Form of Non-disclosure and Discovery Agreement between
employees of the Company and the Company.................... A (10.30)
10.26 Industrial Development Bond Documents:...................... A (10.31)
10.26.1 Industrial Development Revenue Bonds (1985 ImClone Systems
Incorporated Project)....................................... A (10.31.1)
10.26.1.1 Lease Agreement, dated as of October 1, 1985, between the
New York City Industrial Development Agency (NYCIDA) and the
Company, as Lessee.......................................... A (10.31.1.3)
10.26.1.2 Indenture of Trust, dated as of October 1, 1985, between
NYCIDA and United States Trust Company of New York (US
Trust), as Trustee.......................................... A (10.31.1.2)
10.26.1.3 Company Sublease Agreement, dated as of October 1, 1985,
between the Company and NYCIDA.............................. A (10.31.1.3)
10.26.1.4 Tax Regulatory Agreement, dated October 9, 1985, from NYCIDA
and the Company to US Trust, as Trustee..................... A (10.31.1.4)
10.26.1.5 Lessee Guaranty Agreement, dated as of October 1, 1985,
between the Company and US Trust, as Trustee................ A (10.31.1.5)

34
38

EXHIBIT INCORPORATION
NO. DESCRIPTION BY REFERENCE
------- ----------- -------------

10.26.1.6 First Supplemental Indenture of Trust, dated as of November
1, 1985 from the NYCIDA to US Trust......................... A (10.31.1.6)
10.26.1.7 Third Supplemental Indenture of Trust, dated as of October
12, 1990 from NYCIDA to US Trust............................ A (10.31.1.7)
10.26.2 Industrial Development Revenue Bonds (1986 ImClone Systems
Incorporated Project)....................................... A (10.31.2)
10.26.2.1 First Amendment to Company Sublease Agreement, dated as of
December 1, 1986, between the Company, as Sublessor, and
NYCIDA as Sublessee......................................... A (10.31.2.1)
10.26.2.2 First Amendment to Lease Agreement, dated as of December 1,
1986, between NYCIDA and the Company, as Lessee............. A (10.31.2.2)
10.26.2.3 Second Supplement Indenture of Trust, dated as of December
1, 1986 between NYCIDA and US Trust, as Trustee............. A (10.31.2.3)
10.26.2.4 Tax Regulatory Agreement, dated December 31, 1986, from
NYCIDA and the Company to US Trust, as Trustee.............. A (10.31.2.4)
10.26.2.5 First Amendment to Lessee Guaranty Agreement, dated as of
December 1, 1986, between the Company and US Trust, as
Trustee..................................................... A (10.31.2.5)
10.26.2.6 Bond Purchase Agreement, dated as of December 31, 1986,
between NYCIDA and New York Muni Fund, Inc., as Purchaser... A (10.31.2.6)
10.26.2.7 Letter of Representation and Indemnity Agreement, dated as
of December 31, 1986, from the Company to NYCIDA and New
York Muni Fund, Inc., as Purchaser.......................... A (10.31.2.7)
10.26.3 Industrial Development Revenue Bonds (1990 ImClone Systems
Incorporated Project)....................................... A (10.31.3)
10.26.3.1 Lease Agreement, dated as of August 1, 1990, between NYCIDA
and the Company, as lessee.................................. A (10.31.3.1)
10.26.3.2 Company Sublease Agreement, dated as of August 1, 1990,
between the Company, as Sublessor, and NYCIDA............... A (10.31.3.2)
10.26.3.3 Indenture of Trust, dated as of August 1, 1990, between
NYCIDA and US Trust, as Trustee............................. A (10.31.3.3)
10.26.3.4 Guaranty Agreement, dated as of August 1, 1990, from the
Company to US Trust, as Trustee............................. A (10.31.3.4)
10.26.3.5 Tax Regulatory Agreement, dated August 1, 1990, from the
Company and NYCIDA to US Trust, as Trustee.................. A (10.31.3.5)
10.26.3.6 Agency Security Agreement, dated as of August 1, 1990, from
the Company, as Debtor, and the NYCIDA to US Trust, as
Trustee..................................................... A (10.31.3.6)
10.26.3.7 Letter of Representation and Indemnity Agreement, dated as
of August 14, 1990, from the Company to NYCIDA, New York
Mutual Fund, Inc., as the Purchaser and Chase Securities,
Inc., as Placement Agent Company to NYCIDA.................. A (10.31.3.7)
10.27 Lease Agreement between 180 Varick Street Corporation and
the Company, dated October 8, 1985, and Additional Space and
Modification Agreement between 180 Varick Street Corporation
and the Company, dated June 13, 1989........................ A (10.32)
10.28 License Agreement between The Board of Trustees of the
Leland Stanford Junior University and the Company effective
May 1, 1991................................................. A (10.33)
10.29 License Agreement between Genentech, Inc. and the Company
dated December 28, 1989..................................... A (10.34)

35
39

EXHIBIT INCORPORATION
NO. DESCRIPTION BY REFERENCE
------- ----------- -------------

10.30 License Agreement between David Segev and the Company dated
December 28, 1989........................................... B (10.35)
10.31 Letter of Intent between the Company and Dr. David Segev
dated November 18, 1991..................................... C (10.40)
10.32 Agreement between the Company and Celltech Limited dated
March 11, 1992.............................................. C (10.42)
10.33 Agreement of Sale dated June 19, 1992 between the Company
and Korsch Tableting Inc. .................................. D (10.45)
10.34 Research and License Agreement, having an effective date of
December 15, 1992, between the Company and Abbott
Laboratories................................................ E (10.46)
10.35 Research and License Agreement between the Company and
Chugai Pharmaceutical Co., Ltd. dated January 25, 1993...... E (10.47)
10.36 License Agreement between the Company and the Regents of the
University of California dated April 9, 1993................ G (10.48)
10.37 Contract between the Company and John Brown, a division of
Trafalgar House, dated January 19, 1993..................... H (10.49)
10.38 Collaboration and License Agreement between the Company and
the Cancer Research Campaign Technology, Ltd., signed April
4, 1994, with an effective date of April 1, 1994............ G (10.50)
10.39 Termination Agreement between the Company and Erbamont Inc.
dated July 21, 1993......................................... H (10.51)
10.40 Research and License Agreement between the Company and
Cyanamid dated September 15, 1993........................... G (10.52)
10.41 Clinical Trials Agreement between the Company and the
National Cancer Institute dated November 23, 1993........... H (10.53)
10.42 License Agreement between the Company and UNC dated December
1, 1993..................................................... G (10.54)
10.43 Notice of Termination for the research collaboration between
the Company and Chugai Pharmaceutical Co., Ltd. dated
December 17, 1993........................................... H (10.55)
10.44 License Agreement between the Company and Rhone-Poulenc
Rorer dated June 13, 1994................................... I (10.56)
10.45 Offshore Securities Subscription Agreement between ImClone
Systems Incorporated and GFL Ultra Fund Limited dated August
12, 1994.................................................... I (10.57)
10.46 Offshore Securities Subscription Agreement between ImClone
Systems Incorporated and GFL Ultra Fund Limited dated
November 4, 1994............................................ I (10.58)
10.47 Offshore Securities Subscription Agreement between ImClone
Systems Incorporated and Anker Bank Zuerich dated November
10, 1994.................................................... I (10.59)
10.48 Option Agreement, dated as of April 27, 1995, between
ImClone Systems Incorporated and High River Limited
Partnership relating to capital stock of Cadus
Pharmaceutical Corporation.................................. J (10.60)
10.49 Option Agreement, dated as of April 27, 1995, between
ImClone Systems Incorporated and High River Limited
Partnership relating to 300,000 shares of common stock of
ImClone Systems Incorporated................................ J (10.61)
10.50 Option Agreement, dated as of April 27, 1995, between
ImClone Systems Incorporated and High River Limited
Partnership relating to 150,000 shares common stock of
ImClone Systems Incorporated................................ J (10.62)

36
40

EXHIBIT INCORPORATION
NO. DESCRIPTION BY REFERENCE
------- ----------- -------------

10.51 Stock Purchase Agreement, dated as of August 10, 1995, by
and between ImClone Systems Incorporated and the members of
the Oracle Group............................................ J (10.63)
10.52 Form of Warrant issued to the members of the Oracle Group... J (10.64)
10.53 Loan Agreement, dated as of August 10, 1995, by and between
ImClone Systems Incorporated and the members of the Oracle
Group....................................................... J (10.65)
10.54 Security Agreement, dated as of August 10, 1995, by and
between ImClone Systems Incorporated and the members of the
Oracle Group................................................ J (10.66)
10.55 Mortgage, dated August 10, 1995, made by ImClone Systems
Incorporated for the benefit of Oracle Partners, L.P., as
Agent....................................................... J (10.67)
10.56 Financial Advisory Agreement entered into between the
Company and Genesis Merchant Group Securities dated November
2, 1995..................................................... K (10.68)
10.57 Repayment Agreement (with Confession of Judgment, and
Security Agreement) entered into between the Company and
Pharmacia, Inc. on March 6, 1996............................ K (10.69)
10.58 License Amendment entered into between the Company and
Abbott Laboratories on August 28, 1995, amending the
Research and License Agreement between the parties dated
December 15, 1992........................................... K (10.70)
10.59 Amendment of September 1993 to the Research and License
Agreement between the Company and Merck of April 1, 1990.... K (10.71)
10.60 Amendment of October 1993 to the Research and License
Agreement between the Company and Merck of April 1, 1990.... K (10.72)
10.61 Employment agreement dated May 17, 1996 between the Company
and Carl S. Goldfischer..................................... L (10.73)
10.62 Financial Advisory Agreement dated February 26, 1997 between
the Company and Hambrecht & Quist LLC....................... L (10.74)
10.63 Exchange Agreement exchanging debt for common stock dated as
of April 15, 1996 among the Company and members of The
Oracle Group................................................ L (10.75)
10.64 Collaborative Research and License Agreement between the
Company and CombiChem, Inc. dated October 10, 1997.......... M (10.76)
10.65 Amendment of May 1996 to Research and License Agreement
between the Company and Merck of April 1, 1990.............. P (10.65)
10.66 Amendment of December 1997 to Research and License Agreement
between the Company and Merck of April 1, 1990.............. P (10.66)
10.67 Equipment Leasing Commitment from Finova Technology Finance,
Inc. ....................................................... Q (10.67)
10.68 Development and License Agreement between the Company and
Merck KGaA dated December 14, 1998.......................... R (10.70)
10.69 Lease dated as of December 15, 1998 for the Company's
premises at 180 Varick Street, New York, New York........... T (10.69)
10.70 Engagement Agreement, as amended between the Company and
Diaz & Altschul Capital LLC................................. T (10.70)
10.71 Amendment dated March 2, 1999 to Development and License
Agreement between the Company and Merck KGaA................ T (10.71)
10.72 Agreement for Supply of Material dated as of January 1, 1997
between the Company, Connaught Laboratories Limited, a
Pasteur Merieux Company and Merck KGaA...................... U (10.72)

37
41

EXHIBIT INCORPORATION
NO. DESCRIPTION BY REFERENCE
------- ----------- -------------

10.73 Development and Supply Agreement dated as of April 30, 1999
between the Company and Beohringer Ingelheim Pharma KG...... V (10.73)
10.74 Indenture dated as of February 29, 2000 by and between the
Company and The Bank of New York, as Trustee................ W
10.75 Form of 5 1/2% Convertible Subordinated Notes Due 2005...... W
10.76 Stock Purchase Agreement between the Company and Valigen NV
dated May 31, 2000.......................................... Z(10.76)
12.1 Ratio of Earnings to Fixed Charges.......................... AA
21.1 Subsidiaries................................................ T (21.1)
23.1 Consent of KPMG LLP......................................... AA
99.1 1996 Incentive Stock Option Plan, as amended................ Y (99.7)
99.2 1996 Non-Qualified Stock Option Plan, as amended............ Y (99.8)
99.3 ImClone Systems Incorporated 1998 Non-Qualified Stock Option
Plan........................................................ AA
99.4 ImClone Systems Incorporated 1998 Employee Stock Purchase
Plan........................................................ W
99.5 Option Agreement, dated as of September 1, 1998, between the
Company and Ron Martell..................................... S (99.3)
99.6 Option Agreement, dated as of January 4, 1999, between the
Company and S. Joseph Tarnowski............................. X (99.4)

- ---------------

(A) Previously filed with the Commission; incorporated by reference to
Registration Statement on Form S-1, File No. 33-43064.

(B) Previously filed with the Commission; incorporated by reference to
Registration Statement on Form S-1, File No. 33-43064. Confidential
treatment was granted for a portion of this exhibit.

(C) Previously filed with the Commission; incorporated by reference to
Registration Statement on Form S-1, File No. 33-48240. Confidential
treatment was granted for a portion of this exhibit.

(D) Previously filed with the Commission; incorporated by reference to the
Company's Annual Report on Form 10-K, filed June 26, 1992.

(E) Previously filed with the Commission; incorporated by reference to the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1992. Confidential treatment was granted for a portion of this Exhibit.

(F) Previously filed with the Commission; incorporated by reference to Amendment
No. 1 to Registration Statement on to Form S-1, File No. 33-61234.

(G) Previously filed with the Commission; incorporated by reference to the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1993. Confidential Treatment was granted for a portion of this Exhibit.

(H) Previously filed with the Commission; incorporated by reference to the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1993.

(I) Previously filed with the Commission; incorporated by reference to the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1994.

(J) Previously filed with the Commission; incorporated by reference to
Registration Statement on Form S-2, File No. 33-98676.

(K) Previously filed with the Commission, incorporated by reference to the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1995.

(L) Previously filed with the Commission, incorporated by reference to the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1996.

38
42

(M) Previously filed with the Commission; incorporated by reference to the
Company's Quarterly Report on Form 10-Q for the quarter ended September 30,
1997, as amended. Confidential treatment was granted for a portion of this
Exhibit.

(N) Previously filed with the Commission; incorporated by reference to the
Company's Current Report on Form 8-K dated January 21, 1998.

(O) Previously filed with the Commission; incorporated by reference to the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997.

(P) Previously filed with the Commission; incorporated by reference to the
Company's Annual Report on Form 10-K for the year ended December 31, 1997.
Confidential treatment was granted for a portion of this Exhibit.

(Q) Previously filed with the Commission; incorporated by reference to the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998.

(R) Previously filed with the Commission; incorporated by reference to the
Company's Registration Statement on Form S-3, File No. 333-67335.
Confidential treatment was granted for a portion of this Exhibit.

(S) Previously filed with the Commission; incorporated by reference to the
Company's Registration Statement on Form S-8, File No. 333-64827.

(T) Previously filed with the Commission; incorporated by reference to the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1998.

(U) Previously filed with the Commission; incorporated by reference to the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999.

(V) Previously filed with the Commission; incorporated by reference to the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999.
Confidential Treatment has been granted for a portion of this exhibit.

(W) Previously filed with the Commission; incorporated by reference to the
Company's Annual Report on Form 10-K for the year ended December 31, 1999.

(X) Previously filed with the Commission; incorporated by reference to the
Company's Registration Statement on Form S-8; File No. 333-30172.

(Y) Previously filed with the Commission; incorporated by reference to the
Company's Quarterly Report on Form 10-Q for the Quarter ended June 30, 2000.

(Z) Previously filed with the Commission; incorporated by reference to the
Company's Quarterly Report on Form 10-Q for the Quarter ended September 30,
2000.

(AA) Filed herewith.

(b) Reports on Form 8-K None.

39
43

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.

IMCLONE SYSTEMS INCORPORATED
March 29, 2001
By /s/ SAMUEL D. WAKSAL
------------------------------------
SAMUEL D. WAKSAL
PRESIDENT AND CHIEF EXECUTIVE
OFFICER

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934,
THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATE INDICATED.

SIGNATURE TITLE DATE
- --------- ----- ----

/s/ ROBERT F. GOLDHAMMER Chairman of the Board of March 29, 2001
- --------------------------------------------------- Directors
(ROBERT F. GOLDHAMMER)

/s/ SAMUEL D. WAKSAL President, Chief Executive March 29, 2001
- --------------------------------------------------- Officer and Director (Principal
(SAMUEL D. WAKSAL) Executive Officer)

/s/ HARLAN W. WAKSAL Executive Vice President, Chief March 29, 2001
- --------------------------------------------------- Operating Officer and Director
(HARLAN W. WAKSAL)

/s/ PAUL A. GOLDSTEIN Vice President, Financial March 29, 2001
- --------------------------------------------------- Operations (Principal Financial
(PAUL A. GOLDSTEIN) Officer)

/s/ RICHARD BARTH Director March 29, 2001
- ---------------------------------------------------
(RICHARD BARTH)

/s/ VINCENT T. DEVITA, JR. Director March 29, 2001
- ---------------------------------------------------
(VINCENT T. DEVITA, JR.)

/s/ DAVID M. KIES Director March 29, 2001
- ---------------------------------------------------
(DAVID M. KIES)

/s/ PAUL B. KOPPERL Director March 29, 2001
- ---------------------------------------------------
(PAUL B. KOPPERL)

/s/ ARNOLD LEVINE Director March 29, 2001
- ---------------------------------------------------
(ARNOLD LEVINE)

/s/ JOHN MENDELSOHN Director March 29, 2001
- ---------------------------------------------------
(JOHN MENDELSOHN)

/s/ WILLIAM R. MILLER Director March 29, 2001
- ---------------------------------------------------
(WILLIAM R. MILLER)

40
44

INDEX TO FINANCIAL STATEMENTS

AUDITED FINANCIAL STATEMENTS:

Independent Auditors' Report................................ F-2
Consolidated Balance Sheets at December 31, 2000 and 1999... F-3
Consolidated Statements of Operations for the Years Ended
December 31, 2000, 1999 and 1998.......................... F-4
Consolidated Statements of Stockholders' Equity for the
Years Ended December 31, 2000, 1999 and 1998.............. F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 2000, 1999 and 1998.......................... F-6
Notes to Consolidated Financial Statements.................. F-7

F-1
45

INDEPENDENT AUDITORS' REPORT

THE BOARD OF DIRECTORS AND STOCKHOLDERS
IMCLONE SYSTEMS INCORPORATED:

We have audited the consolidated financial statements of ImClone Systems
Incorporated and subsidiary as listed in the accompanying index. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of ImClone
Systems Incorporated and subsidiary as of December 31, 2000 and 1999, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States of America.

As discussed in Notes 2(f) and 8 to the consolidated financial
statements, the Company changed its method of revenue recognition for certain
upfront non-refundable fees in 2000.

KPMG LLP

Princeton, New Jersey
March 13, 2001

F-2
46

IMCLONE SYSTEMS INCORPORATED

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE DATA)

DECEMBER 31, DECEMBER 31,
2000 1999
------------ ------------

ASSETS
Current assets:
Cash and cash equivalents................................. $ 60,325 $ 12,016
Securities available for sale............................. 236,844 107,352
Prepaid expenses.......................................... 2,628 158
Note receivable -- officer................................ 282 --
Other current assets...................................... 7,138 7,599
--------- ---------
Total current assets............................... 307,217 127,125
--------- ---------
Property and equipment:
Land...................................................... 2,111 1,087
Building and building improvements........................ 10,989 10,810
Leasehold improvements.................................... 7,863 4,891
Machinery and equipment................................... 9,995 9,049
Furniture and fixtures.................................... 1,311 898
Construction in progress.................................. 37,436 5,209
--------- ---------
Total cost......................................... 69,705 31,944
Less accumulated depreciation and amortization............ (17,105) (14,729)
--------- ---------
Property and equipment, net........................ 52,600 17,215
--------- ---------
Patent costs, net........................................... 1,168 1,013
Deferred financing costs, net............................... 7,114 37
Investment in equity securities and other assets............ 3,392 304
--------- ---------
$ 371,491 $ 145,694
========= =========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 12,729 $ 3,987
Accrued expenses.......................................... 11,374 5,123
Interest payable.......................................... 4,444 45
Deferred revenue.......................................... 2,434 --
Fees potentially refundable to corporate partner.......... 28,000 20,000
Current portion of long-term liabilities.................. 626 906
Preferred stock called for redemption and dividends
payable................................................. 25,764 --
--------- ---------
Total current liabilities.......................... 85,371 30,061
--------- ---------
Long-term debt.............................................. 242,200 2,200
Other long-term liabilities, less current portion........... 488 1,135
--------- ---------
Total liabilities.................................. 328,059 33,396
--------- ---------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $1.00 par value; authorized 4,000,000
shares; 200,000 Series A Convertible shares called for
redemption and classified as a current liability at
December 31, 2000, issued and outstanding Series A
Convertible: 300,000 at December 31, 1999............... -- 300
Common stock, $.001 par value; authorized 120,000,000
shares; issued 65,818,362 and 29,703,090 at December 31,
2000 and December 31, 1999, respectively (59,355,363 at
December 31, 1999, as adjusted for the stock split),
outstanding 65,767,545, and 29,652,273 at December 31,
2000 and December 31, 1999, respectively (59,304,546 at
December 31, 1999, as adjusted for the stock split)..... 66 30
Additional paid-in capital................................ 283,268 286,038
Accumulated deficit....................................... (243,808) (173,457)
Treasury stock, at cost; 50,817 shares at December 31,
2000 and December 31, 1999.............................. (492) (492)
Note receivable -- officer and stockholder................ -- (142)
Accumulated other comprehensive income:
Unrealized gain on securities available for sale........ 4,398 21
--------- ---------
Total stockholders' equity......................... 43,432 112,298
--------- ---------
$ 371,491 $ 145,694
========= =========

See accompanying notes to consolidated financial statements
F-3
47

IMCLONE SYSTEMS INCORPORATED

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

YEAR ENDED DECEMBER 31,
--------------------------------
2000 1999 1998
-------- -------- --------

Revenues:
License fees and milestone revenue....................... $ 452 $ 1,080 $ 1,000
Research and development funding and royalties........... 961 1,063 3,193
-------- -------- --------
Total revenues................................... 1,413 2,143 4,193
-------- -------- --------
Operating expenses:
Research and development................................. 57,384 30,027 21,049
Marketing, general and administrative.................... 16,651 9,354 7,145
-------- -------- --------
Total operating expenses......................... 74,035 39,381 28,194
-------- -------- --------
Operating loss............................ (72,622) (37,238) (24,001)
-------- -------- --------
Other:
Interest income.......................................... (20,819) (2,842) (3,016)
Interest expense......................................... 12,085 292 435
Loss (gain) on securities and investment................. 3,867 (77) (38)
-------- -------- --------
Net interest and other (income) expense.......... (4,867) (2,627) (2,619)
-------- -------- --------
Loss before cumulative effect of change in
accounting policy...................... (67,755) (34,611) (21,382)
Cumulative effect of change in accounting policy for the
recognition of upfront non-refundable fees............... (2,596) -- --
-------- -------- --------
Net loss.................................. (70,351) (34,611) (21,382)
Preferred dividends (including redemption premium of $4,000
for the year ended December 31, 2000 and assumed
incremental yield attributable to beneficial conversion
feature of $1,009, $1,331 and $1,268 for the years ended
December 31, 2000, 1999, and 1998, respectively)......... 6,773 3,713 3,668
-------- -------- --------
Net loss to common stockholders........... $(77,124) $(38,324) $(25,050)
======== ======== ========
Net loss per common share:
Basic and diluted:
Loss before cumulative effect of change in
accounting policy.............................. $ (1.18) $ (0.75) $ (0.52)
Cumulative effect of change in accounting
policy......................................... (0.04) -- --
-------- -------- --------
Net loss.................................. $ (1.22) $ (0.75) $ (0.52)
======== ======== ========
Weighted average shares outstanding........................ 63,030 50,894 48,602
======== ======== ========
Proforma information assuming new revenue recognition
policy had been applied retroactively:
Net loss.................................. $(67,755) $(34,449) $(21,220)
======== ======== ========
Net loss to common stockholders........... $(74,528) $(38,162) $(24,888)
======== ======== ========
Basic and diluted net loss per common
share.................................. $ (1.18) $ (0.75) $ (0.51)
======== ======== ========

See accompanying notes to consolidated financial statements
F-4
48

IMCLONE SYSTEMS INCORPORATED

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE
PREFERRED STOCK COMMON STOCK ADDITIONAL RECEIVABLE
----------------- ------------------- PAID-IN ACCUMULATED TREASURY OFFICER AND
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT STOCK STOCKHOLDER
-------- ------ ---------- ------ ---------- ----------- -------- -----------

Balance at December 31, 1997.......... 400,000 $ 400 24,265,072 $24 $185,706 $(117,464) $(492) $ --
-------- ----- ---------- --- -------- --------- ----- -----
Options exercised..................... 154,097 1 613
Warrants exercised.................... 143,755 200
Issuance of shares through employee
stock purchase plan.................. 4,388 33
Options granted to non-employees...... 540
Options granted to employees.......... 150
Note receivable -- officer and
stockholder.......................... (131)
Interest on note receivable -- officer
and stockholder...................... 11 (11)
Preferred stock dividends............. (2,400)
Comprehensive loss:
Net loss.............................. (21,382)
Other comprehensive income (loss)
Unrealized holding loss arising
during the period..................
Less: Reclassification adjustment for
realized gain included in net
loss...............................
Total other comprehensive
loss..........................
Comprehensive loss....................
-------- ----- ---------- --- -------- --------- ----- -----
Balance at December 31, 1998.......... 400,000 400 24,567,312 25 184,853 (138,846) (492) (142)
-------- ----- ---------- --- -------- --------- ----- -----
Conversion of preferred stock......... (100,000) (100) 800,000 1 99
Issuance of common stock.............. 3,162,500 3 94,122
Options exercised..................... 671,305 1 5,315
Warrants exercised.................... 495,220 1,257
Issuance of shares through employee
stock purchase plan.................. 6,753 177
Options granted to non-employees...... 2,411
Options granted to employees.......... 175
Interest received on note
receivable -- officer and
stockholder.......................... 11
Interest accrued on note receivable --
officer and stockholder.............. 11 (11)
Preferred stock dividends............. (2,382)
Comprehensive loss:
Net loss.............................. (34,611)
Other comprehensive income (loss)
Unrealized holding gain arising
during the period..................
Less: Reclassification adjustment for
realized gain included in net
loss...............................
Total other comprehensive
income........................
Comprehensive loss....................
-------- ----- ---------- --- -------- --------- ----- -----
Balance at December 31, 1999.......... 300,000 300 29,703,090 30 286,038 (173,457) (492) (142)
-------- ----- ---------- --- -------- --------- ----- -----
Conversion of preferred stock......... (100,000) (100) 499,220 1 99
Preferred stock called for
redemption........................... (200,000) (200) (19,800)
Stock split in the form of a stock
dividend............................. 32,446,614 32 (32)
Options exercised..................... 2,009,569 2 14,154
Warrants exercised.................... 1,152,350 1 3,653
Issuance of shares through employee
stock purchase plan.................. 7,519 420
Options granted to non-employees...... 4,425
Options granted to employees.......... 72
Repayment of note
receivable -- officer, including
interest............................. 145
Interest accrued on note
receivable -- officer and
stockholder.......................... 3 (3)
Preferred stock dividends, including
redemption premium................... (5,764)
Comprehensive loss:
Net loss.............................. (70,351)
Other comprehensive income (loss)
Unrealized holding gain arising
during the period..................
Less: Reclassification adjustment for
realized gain included in net
loss...............................
Total other comprehensive
income........................
Comprehensive loss....................
-------- ----- ---------- --- -------- --------- ----- -----
Balance at December 31, 2000.......... -- $ -- 65,818,362 $66 $283,268 $(243,808) $(492) $ --
======== ===== ========== === ======== ========= ===== =====

ACCUMULATED
OTHER
COMPREHENSIVE
INCOME
(LOSS) TOTAL
------------- --------

Balance at December 31, 1997.......... $ 52 $ 68,226
------ --------
Options exercised..................... 614
Warrants exercised.................... 200
Issuance of shares through employee
stock purchase plan.................. 33
Options granted to non-employees...... 540
Options granted to employees.......... 150
Note receivable -- officer and
stockholder.......................... (131)
Interest on note receivable -- officer
and stockholder...................... --
Preferred stock dividends............. (2,400)
Comprehensive loss:
Net loss.............................. (21,382)
Other comprehensive income (loss)
Unrealized holding loss arising
during the period.................. (638) (638)
Less: Reclassification adjustment for
realized gain included in net
loss............................... 38 38
------ --------
Total other comprehensive
loss.......................... (676) (676)
--------
Comprehensive loss.................... (22,058)
------ --------
Balance at December 31, 1998.......... (624) 45,174
------ --------
Conversion of preferred stock......... --
Issuance of common stock.............. 94,125
Options exercised..................... 5,316
Warrants exercised.................... 1,257
Issuance of shares through employee
stock purchase plan.................. 177
Options granted to non-employees...... 2,411
Options granted to employees.......... 175
Interest received on note
receivable -- officer and
stockholder.......................... 11
Interest accrued on note receivable --
officer and stockholder.............. --
Preferred stock dividends............. (2,382)
Comprehensive loss:
Net loss.............................. (34,611)
Other comprehensive income (loss)
Unrealized holding gain arising
during the period.................. 722 722
Less: Reclassification adjustment for
realized gain included in net
loss............................... 77 77
------ --------
Total other comprehensive
income........................ 645 645
--------
Comprehensive loss.................... (33,966)
------ --------
Balance at December 31, 1999.......... 21 112,298
------ --------
Conversion of preferred stock......... --
Preferred stock called for
redemption........................... (20,000)
Stock split in the form of a stock
dividend............................. --
Options exercised..................... 14,156
Warrants exercised.................... 3,654
Issuance of shares through employee
stock purchase plan.................. 420
Options granted to non-employees...... 4,443
Options granted to employees.......... 54
Repayment of note
receivable -- officer, including
interest............................. 145
Interest accrued on note
receivable -- officer and
stockholder.......................... --
Preferred stock dividends, including
redemption premium................... (5,764)
Comprehensive loss:
Net loss.............................. (70,351)
Other comprehensive income (loss)
Unrealized holding gain arising
during the period.................. 5,635 5,635
Less: Reclassification adjustment for
realized gain included in net
loss............................... 1,258 1,258
------ --------
Total other comprehensive
income........................ 4,377 4,377
--------
Comprehensive loss.................... (65,974)
------ --------
Balance at December 31, 2000.......... $4,398 $ 43,432
====== ========

See accompanying notes to consolidated financial statements
F-5
49

IMCLONE SYSTEMS INCORPORATED

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

YEAR ENDED DECEMBER 31,
----------------------------------
2000 1999 1998
--------- --------- --------

Cash flows from operating activities:
Net loss.................................................. $ (70,351) $ (34,611) $(21,382)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization........................... 2,501 1,959 1,760
Amortization of deferred financing costs................ 1,435 9 9
Expense associated with issuance of options and
warrants.............................................. 4,497 2,586 690
Write-off of patent costs............................... 48 86 235
Gain on securities and investments...................... (1,258) (77) (38)
Write-down of investment in Valigen N.V. ............... 5,125 -- --
Changes in:
Prepaid expenses...................................... (2,470) 312 126
Other current assets.................................. 461 (6,505) (607)
Due from officer and stockholder...................... -- 102 --
Other assets.......................................... (712) (128) (62)
Interest payable...................................... 4,399 -- (23)
Accounts payable...................................... 8,742 2,878 (622)
Accrued expenses...................................... 6,251 276 3,407
Deferred revenue...................................... 2,434 (75) (133)
Fees potentially refundable to corporate partner...... 8,000 16,000 4,000
--------- --------- --------
Net cash used in operating activities.............. (30,898) (17,188) (12,640)
--------- --------- --------
Cash flows from investing activities:
Acquisitions of property and equipment.................... (37,761) (7,118) (472)
Purchases of securities available for sale................ (405,514) (105,520) (62,779)
Sales and maturities of securities available for sale..... 281,656 40,980 76,996
Investment in Valigen N.V. ............................... (7,500) -- --
Sale of investment in CombiChem, Inc. .................... -- 2,109 --
Additions to patents...................................... (328) (346) (254)
Proceeds from repayment of note receivable -- officer and
stockholder............................................. 142 -- --
Interest received on note receivable -- officer and
stockholder............................................. 3 11 --
Note receivable from officer and stockholder.............. (282) -- --
--------- --------- --------
Net cash (used in) provided by investing
activities....................................... (169,584) (69,884) 13,491
--------- --------- --------
Cash flows from financing activities:
Net proceeds from issuance of common stock................ -- 94,125 --
Proceeds from exercise of stock options and warrants...... 17,810 6,573 682
Proceeds from issuance of common stock under the employee
stock purchase plan..................................... 420 177 33
Proceeds from equipment and building improvement
financings.............................................. -- 94 594
Proceeds from issuance of 5 1/2% convertible subordinated
notes................................................... 240,000 -- --
Deferred financing costs.................................. (8,512) -- --
Payment of preferred stock dividends...................... -- (4,893) --
Payments of other liabilities............................. (927) (876) (830)
--------- --------- --------
Net cash provided by financing activities.......... 248,791 95,200 479
--------- --------- --------
Net increase in cash and cash equivalents.......... 48,309 8,128 1,330
Cash and cash equivalents at beginning of year.............. 12,016 3,888 2,558
--------- --------- --------
Cash and cash equivalents at end of year.................... $ 60,325 $ 12,016 $ 3,888
========= ========= ========

See accompanying notes to consolidated financial statements
F-6
50

IMCLONE SYSTEMS INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) ORGANIZATION AND BASIS OF PREPARATION

ImClone Systems Incorporated (the "Company") is a biopharmaceutical
company advancing oncology care by developing a portfolio of targeted biologic
treatments, which address the unmet medical needs of patients with a variety of
cancers. The Company's three programs include growth factor blockers, cancer
vaccines and anti-angiogenesis therapeutics. A substantial portion of the
Company's efforts and resources are devoted to research and development
conducted on its own behalf and through collaborations with corporate partners
and academic research and clinical institutions. The Company has not derived any
commercial revenue from product sales. The Company is operated as one business
and is comprehensively managed by a single management team that reports to the
Chief Operating Officer. The Company does not operate separate lines of business
or separate business entities with respect to any of its product candidates. In
addition, the Company does not conduct any of its operations outside of the
United States. Accordingly, the Company does not prepare discrete financial
information with respect to separate product areas or by location and does not
have separately reportable segments. The Company employs accounting policies
that are in accordance with accounting principles generally accepted in the
United States of America.

The biopharmaceutical industry is subject to rapid and significant
technological change. The Company has numerous competitors, including major
pharmaceutical and chemical companies, specialized biotechnology firms,
universities and other research institutions. These competitors may succeed in
developing technologies and products that are more effective than any that are
being developed by the Company or that would render the Company's technology and
products obsolete and non-competitive. Many of these competitors have access to
substantially greater financial and technical resources and production and
marketing capabilities than the Company. In addition, many of the Company's
competitors have significantly greater experience than the Company in
pre-clinical testing and human clinical trials of new or improved pharmaceutical
products. The Company is aware of various products under development or
manufactured by competitors that are used for the prevention, diagnosis or
treatment of certain diseases the Company has targeted for product development,
some of which use therapeutic approaches that compete directly with certain of
the Company's product candidates. The Company has limited experience in
conducting and managing pre-clinical testing necessary to enter clinical trials
required to obtain government approvals and has limited experience in conducting
clinical trials. Accordingly, the Company's competitors may succeed in obtaining
Food and Drug Administration ("FDA") approval for products more rapidly than the
Company, which could adversely affect the Company's ability to further develop
and market its products. If the Company commences significant commercial sales
of its products, it will also be competing with respect to manufacturing
efficiency and marketing capabilities, areas in which the Company has limited or
no experience.

On October 16, 2000, the Company effected a 2-for-1 stock split in the
form of a stock dividend. Accordingly, shareholders of record as of September
29, 2000 of the Company's approximately 32.4 million shares of common stock
outstanding each received one additional share of common stock for each share of
common stock they owned on the record date. Common stock issued and common stock
outstanding as of December 31, 1999 have not been restated to reflect the stock
split. The stock split was recorded in the December 31, 2000 consolidated
balance sheet as a transfer of $32,000 from additional paid-in capital to common
stock. All references to number of shares, per share amounts, weighted average
shares, option and warrant shares and related exercise prices for all periods
presented in the accompanying consolidated statements of operations and notes to
the consolidated financial statements have been retroactively adjusted to give
effect to the stock split.

F-7
51

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the financial statements
of ImClone Systems Incorporated and its wholly-owned subsidiary, EndoClone
Incorporated. All significant intercompany balances and transactions have been
eliminated in consolidation.

(b) CASH EQUIVALENTS

Cash equivalents consist primarily of U.S. Government instruments,
commercial paper, master notes and other readily marketable debt instruments.
The Company considers all highly liquid debt instruments with original
maturities not exceeding three months to be cash equivalents.

The Company classifies its investments in debt and marketable equity
securities as available-for-sale.

Available-for-sale securities are recorded at fair value. Unrealized
holding gains and losses, net of related tax effect, on available-for-sale
securities are excluded from earnings and are reported as a separate component
of accumulated comprehensive income (loss) until realized. Realized gains and
losses from the sale of available-for-sale securities are determined on a
specific identification basis.

A decline in the market value of any available-for-sale security below
cost that is deemed to be other than temporary results in a reduction in
carrying amount to fair value. The impairment is charged to earnings and a new
cost basis for the security is established. Dividend and interest income are
recognized when earned.

The Company accounts for its investments in non-marketable equity
securities using the cost method of accounting for investments where the
Company's ownership is less than 20% and the equity method of accounting for
investments where the Company's ownership is between 20% and 50%. The Company
utilizes these methods of accounting for its investments in non-marketable
equity securities unless there is an other than temporary impairment at which
point the Company writes the investment down to its estimated net realizable
value.

(d) LONG-LIVED ASSETS

Property and equipment are stated at cost. Equipment under capital
leases is stated at the present value of minimum lease payments. Depreciation of
fixed assets is provided by straight-line methods over estimated useful lives of
three to fifteen years, and leasehold improvements are being amortized over the
related lease term or the service lives of the improvements, whichever is
shorter.

Patent and patent application costs are capitalized and amortized on a
straight-line basis over their respective expected useful lives, up to a 15-year
period.

The Company reviews long-lived assets for impairment when events or
changes in business conditions indicate that their full carrying value may not
be recovered. Assets are considered to be impaired and are written down to fair
value if expected associated undiscounted cash flows are less than the carrying
amounts. Fair value is generally the present value of the expected associated
cash flows.

(e) DEFERRED FINANCING COSTS

Costs incurred in issuing the 5 1/2% Convertible Subordinated Notes and
in obtaining the Industrial Development Revenue Bond (see Note 6) are amortized
using the straight-line method over the terms of the related instrument.

F-8
52

(f) REVENUE RECOGNITION

In December 1999, the staff of the Securities and Exchange Commission
("SEC") issued Staff Accounting Bulletin No. 101, "Revenue Recognition in
Financial Statements" ("SAB 101"). SAB 101 summarizes certain of the staff's
views in applying generally accepted accounting principles to revenue
recognition in financial statements. The Company adopted SAB 101 in the fourth
quarter of its fiscal year ended December 31, 2000, implementing a change in
accounting policy effective January 1, 2000 with respect to revenue recognition
associated with non-refundable fees received upon entering into research and
licensing arrangements. Beginning January 1, 2000, non-refundable fees received
upon entering into license and other collaborative agreements where the Company
has continuing involvement are recorded as deferred revenue and recognized
ratably over the estimated service period. In previous years, prior to SAB 101,
non-refundable upfront fees from licensing and other collaborative agreements
were recognized as revenue when received, provided all contractual obligations
of the Company relating to such fees had been fulfilled.

Non-refundable milestone payments pursuant to collaborative agreements
are recognized as revenue upon the achievement of the specified milestone.

Research and development funding revenue is derived from collaborative
agreements and is recognized in accordance with the terms of the respective
contracts.

Royalty revenue is recognized when earned and collection is probable.
Royalty revenue is derived from sales of products by corporate partners using
licensed Company technology.

Revenue recognized in the accompanying consolidated statements of
operations is not subject to repayment. Amounts received that are subject to
repayment if certain specified goals are not met are classified as fees
potentially refundable to corporate partner; revenue recognition of such amounts
will commence upon the achievement of such specified goals. Payments received
that are related to future performance are classified as deferred revenue and
recognized when the revenue is earned.

(g) FOREIGN CURRENCY TRANSACTIONS

Gains and losses from foreign currency transactions, such as those
resulting from the translation and settlement of receivables and payables
denominated in foreign currencies, are included in the consolidated statements
of operations. The Company does not currently use derivative financial
instruments to manage the risks associated with foreign currency fluctuations.
The Company recorded gains on foreign currency transactions of approximately
$25,000 for the year ended December 31, 2000 and losses on foreign currency
transactions of approximately $7,000 and $153,000 for the years ended December
31, 1999 and 1998, respectively. Gains and losses from foreign currency
transactions are included as a component of operating expenses.

(h) STOCK-BASED COMPENSATION PLANS

The Company has two types of stock-based compensation plans; stock
option plans and a stock purchase plan. The Company accounts for its stock-based
compensation plans in accordance with the provisions of Accounting Principles
Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and
related interpretations. As such, compensation expense would be recorded on the
date of grant of an option only if the market price of the underlying stock on
the date of grant exceeded the exercise price. The Company provides the pro
forma net income and pro forma earnings per share disclosures for employee and
director stock option grants made in 1995 and future years as if the
fair-value-based method defined in Statement of Financial Accounting Standards
("SFAS") No. 123 had been applied.

In April 2000, the Financial Accounting Standards Board Interpretation
No. 44, "Accounting for Certain Transactions Involving Stock Compensation -- An
Interpretation of APB Opinion No. 25" ("FIN 44"), was issued. FIN 44 clarifies
the application of APB No. 25 for certain issues. Among other issues, FIN 44
clarifies the definition of employee for purposes of applying APB No. 25, the
criteria for determining whether a plan qualifies as a non-compensatory plan and
the accounting consequences of various

F-9
53

modifications to the term of a previously fixed stock option or award. FIN 44
became effective July 1, 2000. The adoption of FIN 44 did not have an effect on
the Company's financial position or results of operations.

(i) RESEARCH AND DEVELOPMENT

Research and development expenditures are expensed as incurred. The
Company is currently producing commercial grade product under a third-party
manufacturing arrangement the cost of which is being recognized as research and
development expense until regulatory approval is received.

(j) INCOME TAXES

Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect of a change in tax rates on deferred tax assets
and liabilities is recognized in income or expense in the period that includes
the enactment date of the rate change.

(k) USE OF ESTIMATES

Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these consolidated financial
statements in conformity with generally accepted accounting principles in the
United States of America. Actual results could differ from those estimates.

(l) NET LOSS PER COMMON SHARE

Basic and diluted loss per common share is based on the net loss for the
relevant period, adjusted for series A convertible preferred stock ("series A
preferred stock") dividends, redemption premiums and the assumed incremental
yield attributable to the beneficial conversion feature aggregating $6,773,000,
$3,713,000 and $3,668,000 for the years ended December 31, 2000, 1999 and 1998,
respectively, divided by the weighted average number of shares issued and
outstanding during the period. For purposes of the diluted loss per share
calculation, the exercise or conversion of all potential common shares is not
included since their effect would be anti-dilutive for all years presented. As
of December 31, 2000, 1999 and 1998, the Company had approximately 19,143,000,
19,501,000 and 21,867,000, respectively, potential common shares outstanding
which represent new shares which could be issued under convertible preferred
stock, convertible debt, stock options and stock warrants. The potential new
shares of common stock into which the series A preferred stock was convertible
was based on the future market price of the Company's common stock. In December
2000, the Company called for redemption the remaining 200,000 shares of series A
convertible preferred stock. The potential common stock outstanding relating to
series A preferred stock conversion for the years ended December 31, 1999 and
1998 was estimated based on the respective closing prices of the common stock at
December 31, 1999 and 1998.

(m) COMPREHENSIVE INCOME (LOSS)

SFAS No. 130, "Reporting Comprehensive Income," establishes standards
for reporting and presentation of comprehensive income and its components in a
full set of financial statements. Comprehensive income (loss) consists of net
income (loss) and net unrealized gains (losses) on securities and is presented
in the consolidated statements of stockholders' equity.

(n) RECLASSIFICATION

Certain amounts previously reported have been reclassified to conform to
the current year's presentation.

F-10
54

(o) ACCOUNTING FOR DERIVATIVE AND HEDGING ACTIVITIES

Effective January 1, 2001, the Company was required to adopt the
provisions of Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative Instruments and Hedging Activities" ("SFAS No. 133"), which
establishes new accounting and reporting guidelines for derivative instruments,
including certain derivative instruments embedded in other contracts, and
hedging activities. SFAS No. 133 was subsequently amended by SFAS Nos. 137 and
138. SFAS No. 133 requires the recognition of all derivative financial
instruments as either assets or liabilities in the consolidated balance sheet
and measurement of those derivatives at fair value. The Company has reviewed
SFAS No. 133 and its operations relative to SFAS No. 133 and concluded that it
does not have or use derivative instruments. Accordingly, the adoption of SFAS
No. 133 did not and is not expected to have an effect on the results of
operations or the financial position of the Company.

(3) SECURITIES AVAILABLE FOR SALE

The amortized cost, gross unrealized holding gains, gross unrealized
holding losses and fair value for available-for-sale securities by major
security type at December 31, 2000 and 1999 were as follows:

At December 31, 2000:

GROSS GROSS
UNREALIZED UNREALIZED
AMORTIZED COST HOLDING GAINS HOLDING LOSSES FAIR VALUE
-------------- ------------- -------------- ------------

U.S. Government agency debt........ $ 99,262,000 $4,387,000 $ -- $103,649,000
U.S. corporate debt................ 33,860,000 7,000 (100,000) 33,767,000
Foreign corporate debt............. 97,890,000 178,000 (74,000) 97,994,000
Foreign government/agency
guaranteed debt.................. 1,434,000 -- -- 1,434,000
------------ ---------- --------- ------------
$232,446,000 $4,572,000 $(174,000) $236,844,000
============ ========== ========= ============

At December 31, 1999:

GROSS GROSS
UNREALIZED UNREALIZED
AMORTIZED COST HOLDING GAINS HOLDING LOSSES FAIR VALUE
-------------- ------------- -------------- ------------

U.S. Government agency debt........ $ 997,000 $ -- $ -- $ 997,000
U.S. corporate debt................ 30,710,000 57,000 (9,000) 30,758,000
Foreign corporate debt............. 68,215,000 29,000 (56,000) 68,188,000
Foreign government/agency
guaranteed debt.................. 7,409,000 -- -- 7,409,000
------------ ------- -------- ------------
$107,331,000 $86,000 $(65,000) $107,352,000
============ ======= ======== ============

Maturities of debt securities classified as available-for-sale were as
follows at December 31, 2000:

Years ended December 31,

AMORTIZED COST FAIR VALUE
-------------- ------------

2001....................................... $ 11,898,000 $ 11,901,000
2002....................................... 1,537,000 1,539,000
2003....................................... 242,000 250,000
2004....................................... 25,258,000 25,504,000
2005....................................... 33,326,000 33,274,000
2006 and thereafter........................ 160,185,000 164,376,000
------------ ------------
$232,446,000 $236,844,000
============ ============

F-11
55

Proceeds from the sale of investment securities available-for-sale were
$110,772,000, $25,081,000 and $35,604,000 for the years ended December 31, 2000,
1999 and 1998, respectively. Gross realized gains included in income in the
years ended December 31, 2000, 1999 and 1998 were $1,280,000, $33,000 and
$41,000, respectively, and gross realized losses included in income in the years
ended December 31, 2000, 1999 and 1998 were $22,000, $65,000 and $3,000,
respectively.

(4) INVESTMENT IN EQUITY SECURITIES

In May 2000, the Company made an equity investment in ValiGen N.V.
("ValiGen"), a private biotechnology company specializing in therapeutic target
identification and validation using the tools of genomics and gene expression
analysis. The Company purchased 705,882 shares of ValiGen's series A preferred
stock and received a five-year warrant to purchase 388,235 shares of ValiGen's
common stock at a per share purchase price of $12.50 for an aggregate purchase
price of $7,500,000, which represents ownership in ValiGen of approximately 6%.
The Company has assigned a value of $594,000 to the warrant based on the
Black-Scholes Price Model. The ValiGen preferred stock contains voting rights
identical to holders of ValiGen's common stock. Each share of ValiGen preferred
stock is convertible into one share of ValiGen common stock. The Company may
elect to convert the ValiGen preferred stock at any time; provided, that the
ValiGen preferred stock will automatically convert into ValiGen common stock
upon the closing of an initial public offering of ValiGen's common stock with
gross proceeds not less than $20,000,000. The Company recorded its original
investment in ValiGen using the cost method of accounting. In December 2000, the
Company recognized a write-down of its investment in ValiGen of approximately
$5,125,000 determined based on the modified equity method of accounting; such
write-down is included in loss (gain) on securities and investment in the
consolidated statement of operations. The investment is classified as a
long-term asset included in Investment in equity securities and other assets in
the consolidated balance sheet. The Company's Chief Executive Officer is a
member of ValiGen's Board of Directors.

In October 1997, the Company entered into a Collaborative Research and
License Agreement with CombiChem, Inc. ("CombiChem") to discover and develop
novel small molecules for use against selected targets for the treatment of
cancer. The Company provided CombiChem with research funding through October
1999 in the amount of $500,000. Concurrent with the execution of the
Collaborative Research and License Agreement, the Company entered into a Stock
Purchase Agreement pursuant to which the Company purchased 312,500 shares of
common stock of CombiChem, as adjusted, for aggregate consideration of
$2,000,000. This investment was included in Investment in equity securities and
other assets. In 1999, the Company disposed of its investment in CombiChem
resulting in a net gain of $109,000 which is included in loss (gain) on
securities and investment in the consolidated statement of operations.

(5) ACCRUED EXPENSES

The following items are included in accrued expenses:

DECEMBER 31, DECEMBER 31,
2000 1999
------------ ------------

Salaries and other payroll related
expenses.................................. $ 2,436,000 $1,558,000
Research and development contract services... 6,747,000 2,291,000
Other........................................ 2,191,000 1,274,000
----------- ----------
$11,374,000 $5,123,000
=========== ==========

F-12
56

(6) LONG-TERM DEBT

Long-term debt consists of the following:

DECEMBER 31, DECEMBER 31,
2000 1999
------------ ------------

5 1/2% Convertible Subordinated Notes due
March 1, 2005............................. $240,000,000 $ --
11 1/4% Industrial Development Revenue Bond
due May 1, 2004........................... 2,200,000 2,200,000
------------ ----------
$242,200,000 $2,200,000
============ ==========

In February 2000, the Company completed a private placement of
$240,000,000 in convertible subordinated notes due March 1, 2005. The Company
received net proceeds from this offering of approximately $231,500,000, after
deducting costs associated with the offering. The notes bear interest at an
annual rate of 5 1/2%. Accrued interest on the notes was approximately
$4,400,000 at December 31, 2000. The holders may convert all or a portion of the
notes into common stock at any time on or before March 1, 2005 at a conversion
price of $55.09 per share, subject to adjustment under certain circumstances.
The notes are subordinated to all existing and future senior indebtedness. The
Company may redeem any or all of the notes at any time prior to March 6, 2003,
at a redemption price equal to 100% of the principal amount plus accrued and
unpaid interest to the redemption date if the closing price of the common stock
has exceeded 150% of the conversion price for at least 20 trading days in any
consecutive 30-trading day period, provided the Company makes an additional
payment of $152.54 per $1,000 aggregate principal amount of notes, minus the
amount of any interest actually paid thereon prior to the redemption notice
date. On or after March 6, 2003, the Company may redeem any or all of the notes
at specified redemption prices, plus accrued and unpaid interest to the day
preceding the redemption date. The Company was required to file with the SEC and
obtain the effectiveness of a shelf registration statement covering resales of
the notes and the common stock. Such registration statement was declared
effective in July 2000. Upon the occurrence of a "fundamental change" as defined
in the agreement, holders of the notes may require the Company to redeem the
notes at a price equal to 100% of the principal amount to be redeemed.

In August 1990, the NYIDA issued $2,200,000 principal amount of its
11.25% Industrial Development Revenue Bond due 2004 (the "1990 Bond"). The
proceeds from the sale of the 1990 Bond were used by the Company for the
acquisition, construction and installation of the Company's research and
development facility in New York City. The Company has granted a security
interest in all equipment located in its New York City facility purchased with
the proceeds from the 1990 bond to secure the obligation of the Company to the
NYIDA relating to the 1990 Bond. Interest expense on the 1990 Bond was
approximately $248,000 for each of the years ended December 31, 2000, 1999 and
1998.

(7) OTHER LONG-TERM LIABILITIES

Other long-term liabilities consisted of the following:

DECEMBER 31, DECEMBER 31,
2000 1999
------------ ------------

Liability under capital lease obligations.... $1,089,000 $2,010,000
Liability under license agreement............ 25,000 31,000
---------- ----------
1,114,000 2,041,000
Less current portion......................... (626,000) (906,000)
---------- ----------
$ 488,000 $1,135,000
========== ==========

The Company has obligations under various capital leases for certain
laboratory, office and computer equipment and also certain building improvements
primarily under 1996 and 1998 financing agreements with Finova Technology
Finance, Inc. ("Finova"). The financing agreements allowed the Company to
finance the lease of equipment and make certain building and leasehold
improvements to existing facilities. Each lease has

F-13
57

a fair market value purchase option at the expiration of its 42-month or
48-month term. Pursuant to the financing agreement entered into in 1996, the
Company issued to Finova a warrant to purchase 46,440 shares of common stock at
an exercise price of $4.85 per share which was exercised in November 1999. The
Company recorded a non-cash debt discount of approximately $125,000 in
connection with this financing. This discount has been amortized over the
42-month term of the first lease. The Company has entered into twelve individual
leases under the financing agreements aggregating a total cost of $3,695,000.
There is no further funding available under these agreements. During 2000, the
Company elected to exercise the fair market value purchase option at the
expiration of the 42-month term of the first two leases under the 1996
agreement. There are no covenants associated with these financing agreements
that materially restrict the Company's activities. See Notes 15 and 17.

In January and February 2000, the Company entered into capital lease
arrangements, subject to final negotiation of the master lease and other related
agreements, with Finova and Transamerica Business Credit Corporation
("Transamerica") under which it may obtain at its option up to an aggregate of
$25,000,000 in financing. Under the arrangements, funds may be obtained from
time to time to finance equipment and certain pre-construction costs associated
with the build-out of its new product launch manufacturing facility. During the
first quarter of 2000 the Company paid $100,000 in application fees associated
with these agreements, which may be applied against future principal and
interest payments. As of December 31, 2000, the Company has not drawn any funds
under these arrangements.

At December 31, 2000 and 1999, the amounts of laboratory equipment,
office equipment, building improvements and furniture and fixtures and the
related accumulated depreciation and amortization recorded under all capital
leases were as follows:

DECEMBER 31, DECEMBER 31,
2000 1999
------------ ------------

Laboratory, office and computer equipment.... $ 2,213,000 $2,583,000
Building improvements........................ 632,000 963,000
Furniture and fixtures....................... 170,000 170,000
----------- ----------
3,015,000 3,716,000
Less accumulated depreciation and
amortization.............................. (1,218,000) (947,000)
----------- ----------
$ 1,797,000 $2,769,000
=========== ==========

(8) CHANGE IN ACCOUNTING POLICY FOR REVENUE RECOGNITION

The Company adopted SAB 101 in the fourth quarter of 2000 with an
effective date of January 1, 2000, implementing a change in accounting policy
with respect to revenue recognition. See Note 2(f). The adoption of SAB 101.
resulted in a $2,596,000 cumulative effect of a change in accounting policy
related to nonrefundable upfront licensing fees received from Merck KGaA in
connection with the development and commercialization agreement with Merck KGaA
with respect to its principal cancer vaccine product candidate BEC2. The
cumulative effect represents revenue originally recorded upon receipt of such
payments that now is recorded as deferred revenue and will be recognized over
the life of the related patent(s). During the year ended December 31, 2000, the
impact of the change in accounting policy increased net loss by $2,434,000, or
$0.04 per share, comprising the $2,596,000 cumulative effect of the change
described above, net of $162,000 of related deferred revenue that was recognized
during the period. Had the change in accounting policy been applied
retroactively, net loss would have been reduced by $162,000 for each of the
years ended December 31, 1999 and 1998.

(9) COLLABORATIVE AGREEMENTS

In December 1990, the Company entered into a development and
commercialization agreement with Merck KGaA with respect to BEC2 and the
recombinant gp75 antigen (collectively "BEC2"). The agreement has been amended a
number of times, most recently in December 1997. The agreement grants Merck KGaA
a license, with the right to sublicense, to manufacture and market BEC2 outside
of North
F-14
58

America for all indications. Merck KGaA has also been granted a license, without
the right to sublicense, to market but not manufacture BEC2 in North America.
The Company has the right to co-promote BEC2 in North America. In return, the
Company is entitled to and has recognized research support payments totaling
$4,700,000 and is entitled to no further research support payments under the
agreement. The Company recognized research support revenue of $533,000 in the
year ended December 31, 1999 and $2,500,000 in the year ended December 31, 1998.
Merck KGaA is also required to make payments of up to $22,500,000, of which
$3,000,000 has been recognized, based on milestones achieved in the licensed
products' development. The Company recognized milestone revenue of $1,000,000 in
the year ended December 31, 1999 and $2,000,000 in the year ended December 31,
1998. Merck KGaA is also responsible for worldwide costs of up to DM17,000,000
associated with a multi-site, multinational Phase III clinical trial for BEC2 in
limited disease small-cell lung carcinoma. This expense level was reached during
the fourth quarter of 2000 and all expenses incurred from that point forward are
being shared 60% by Merck KGaA and 40% by the Company. Merck KGaA is also
required to pay royalties on the eventual sales of BEC2 outside of North
America, if any. Revenues from sales, if any, of BEC2 in North America will be
distributed in accordance with the terms of a co-promotion agreement to be
negotiated by the parties.

In December 1998, the Company entered into a development and license
agreement with Merck KGaA with respect to its lead interventional therapeutic
product candidate for cancer, IMC-C225. In exchange for exclusive rights to
market IMC-C225 outside of North America and co-development rights in Japan, the
Company can receive $30,000,000, of which $28,000,000 has been received as of
December 31, 2000, in up-front fees and early cash-based milestone payments
assuming achievement of defined milestones. An additional $30,000,000 can be
received assuming the achievement of further milestones for which Merck KGaA
will receive equity in the Company. The equity underlying these milestone
payments will be priced at varying premiums to the then market price of the
common stock depending upon the timing of the achievement of the respective
milestones. Merck KGaA will pay the Company a royalty on future sales of
IMC-C225 outside of North America, if any. Merck KGaA has also agreed not to own
greater than 19.9% of the Company's voting securities through December 3, 2002.
This agreement may be terminated by Merck KGaA in various instances, including
(1) at its discretion on any date on which a milestone is achieved (in which
case no milestone payment will be made), or (2) for a one-year period after
first commercial sale of IMC-C225 in Merck KGaA's territory, upon Merck KGaA's
reasonable determination that the product is economically unfeasible (in which
case Merck KGaA is entitled to receive back 50% of the cash-based milestone
payments then paid to date, but only out of revenues received, if any, based
upon a royalty rate applied to the gross profit from IMC-C225 sales or IMC-C225
license fees in the United States and Canada). Under the agreement, the Company
is entitled to Merck KGaA's guaranty of the Company's obligations under a $30
million credit facility relating to the construction of the product launch
manufacturing facility for the commercial production of IMC-C225. To date, the
Company has not utilized this guaranty. In the event of termination of the
agreement, and in the event the guaranty is utilized, the Company will be
required to use its best reasonable efforts to cause the release of Merck KGaA
as guarantor. The $28,000,000 in payments received through December 31, 2000
have been recorded as fees potentially refundable to corporate partner and not
as revenue due to the fact that they were refundable to Merck KGaA in the event
a condition relating to obtaining certain collateral license agreements was not
satisfied. In March 2001, this condition was satisfied and approximately
$24,000,000 will be recognized as revenue by the Company during the first
quarter of 2001.

In conjunction with Merck KGaA, the Company has expanded the trial of
IMC-C225 plus radiotherapy in squamous cell carcinoma of the head and neck into
Europe, South Africa, Israel, Australia and New Zealand. In order to support
these clinical trials, Merck KGaA has taken possession of and reimbursed the
Company for all of the IMC-C225 manufactured under its contract manufacturing
agreement with Boehringer Ingelheim Pharma KG ("BI Pharma"). See Note 15. All
reimbursements due from Merck KGaA under this agreement were received during the
year ended December 31, 2000. Merck has further agreed to reimburse the Company
for one-half of the outside contract service costs incurred with respect to the
Phase III clinical trial of IMC-C225 for the treatment of head and neck cancer
in combination with radiation. Amounts due from Merck KGaA related to this
agreement totaled approximately $2,560,000 and $1,112,000 at December 31, 2000
and 1999, respectively. The aforementioned reimbursements from Merck KGaA for
manufacturing and clinical trial costs were recorded as reductions to research
and development expenses and
F-15
59

totaled approximately $4,476,000 and $5,554,000 for the years ended December 31,
2000 and 1999, respectively. The aforementioned amounts due from Merck KGaA as
of December 31, 2000 and 1999 are included in other current assets.

Revenues for the years ended December 31, 2000, 1999 and 1998 were
$1,413,000, $2,143,000, and $4,193,000, respectively. Revenues for the year
ended December 31, 2000 primarily consisted of (1) $250,000 in milestone revenue
and $961,000 in royalty revenue from our strategic corporate alliance with
Abbott Laboratories ("Abbott") in diagnostics and (2) $162,000 in license fee
revenue from our strategic corporate alliance with Merck KGaA for BEC2. The
revenue related to the BEC2 agreement is being recognized as a direct result of
a change in accounting policy with respect to revenue recognition. See Note
2(f). Revenues for the year ended December 31, 1999 primarily included (1)
$500,000 in milestone revenue and $225,000 in research support from the
Company's partnership with the Wyeth/Lederle Vaccine and Pediatrics Division of
American Home Products Corporation ("American Home") in infectious disease
vaccines, (2) $533,000 in research and support payments from the Company's
research and license agreement with Merck KGaA for BEC2, and (3) $500,000 in
milestone revenue and $305,000 in royalty revenue from the Company's strategic
alliance with Abbott in diagnostics. Revenues for the year ended December 31,
1998 included (1) $300,000 in research support from the Company's partnership
with American Home in infectious disease vaccines, (2) $1,000,000 in milestone
revenue and $2,500,000 in research and support payments from the Company's
research and license agreement with Merck KGaA for BEC2 and (3) $295,000 in
royalty revenue from the Company's strategic alliance with Abbott in
diagnostics.

Revenues were derived from the following geographic areas:

YEAR ENDED DECEMBER 31,
--------------------------------------
2000 1999 1998
---------- ---------- ----------

United States... $1,251,000 $1,610,000 $ 693,000
Germany......... 162,000 533,000 3,500,000
---------- ---------- ----------
$1,413,000 $2,143,000 $4,193,000
========== ========== ==========

(10) COMMON STOCK

In May 2000, the stockholders approved the amendment of the Company's
certificate of incorporation to increase the total number of shares of common
stock the Company is authorized to issue from 60,000,000 shares to 120,000,000
shares.

(11) PREFERRED STOCK

In connection with the December 1997 amendment to the research and
license agreement between them, Merck KGaA purchased from the Company 400,000
shares of the Company's series A preferred stock for total consideration of
$40,000,000. Cumulative annual dividends of $6.00 per share were accrued on the
outstanding series A preferred stock. In 1999, Merck KGaA converted 100,000
shares of series A preferred stock into 1,600,000 shares of common stock at a
conversion price of $6.25 per share. In 2000, Merck KGaA converted another
100,000 shares of the series A preferred stock into 499,220 shares of common
stock at a conversion price of $20.03 per share.

On December 28, 2000, the Company exercised its redemption right for the
remaining 200,000 outstanding shares of series A preferred stock at the stated
redemption price of $120 per share. The above mentioned redemption price and the
accrued dividends on the 100,000 shares of series A preferred stock converted on
December 15, 2000 and the 200,000 shares of series A preferred stock called for
redemption on December 28, 2000 both were paid in January 2001. This amount
totaled approximately $25,764,000 and is included as a component of current
liabilities in the consolidated balance sheet as of December 31, 2000. The
redemption premium of $4,000,000 has been included as preferred dividends in the
year ended December 31, 2000.

F-16
60

In accordance with the terms of the series A preferred stock, the
Company calculated an assumed incremental yield of $5,455,000 at the date of
issuance based on a beneficial conversion feature included in the terms of the
security. Such amount was being amortized as a preferred stock dividend over the
four-year period beginning with the day of issuance. The assumed incremental
yield and related amortization period for the respective period after the
December 2000 and 1999 conversions and the December 2000 redemption of the
series A preferred stock has been adjusted to reflect a decrease in the
aggregate assumed incremental yield of $1,796,000 as a result of the
aforementioned conversions and redemption prior to the period in which the
beneficial conversion feature was available. The assumed incremental yield
associated with the shares of series A preferred stock converted has been
amortized through each respective conversion date and the assumed incremental
yield associated with the shares of series A preferred stock redeemed has been
amortized through the call for redemption date. The Company has recognized a
total incremental yield attributable to the beneficial conversion feature of
$3,659,000 for the period from the date of issuance through December 31, 2000
and there is no remaining unamortized amount.

(12) STOCK OPTIONS AND WARRANTS

(a) STOCK OPTION PLANS:

In February 1986, the Company adopted and the shareholders thereafter
approved an Incentive Stock Option Plan and a Non-Qualified Stock Option Plan
(the "86 Plans"). In February 1996, the Company's Board of Directors adopted and
the shareholders thereafter approved an additional Incentive Stock Option Plan
and Non-Qualified Stock Option Plan (the "96 Plans"). In May 1998, the Company's
Board of Directors adopted an additional Non-Qualified Stock Option Plan (the
"98 Plan"), which shareholders were not required to approve. Combined, the 86
Plans, the 96 Plans, as amended, and the 98 Plan, as amended provide as of
December 31, 2000 for the granting of options to purchase up to 20,000,000
shares of common stock to employees, directors, consultants and advisors of the
Company. Subsequent to year-end, the number of shares which may be granted under
the 98 Plan was increased by 4,000,000 shares. Incentive stock options may not
be granted at a price less than the fair market value of the stock at the date
of grant and may not be granted to non-employees. Options may not be granted
under the 98 Plan to officers or directors. Options under all the plans, unless
earlier terminated, expire ten years from the date of grant. Options granted
under these plans vest over one-to-five-year periods. At December 31, 2000,
options to purchase 13,568,188 shares of common stock were outstanding and
3,598,524 shares were available for grant. Options may no longer be granted
under the 86 Plans pursuant to the terms of the 86 Plans.

A summary of stock option activity follows:

WEIGHTED AVERAGE
NUMBER OF EXERCISE PRICE
SHARES PER SHARE
---------- ----------------

Balance at December 31, 1997................................ 4,754,190 $ 3.10
Granted................................................ 4,865,952 5.10
Exercised.............................................. (308,194) 1.99
Canceled............................................... (493,700) 5.52
----------
Balance at December 31, 1998................................ 8,818,248 4.10
Granted................................................ 7,028,520 12.22
Exercised.............................................. (1,342,610) 3.96
Canceled............................................... (117,556) 5.39
----------
Balance at December 31, 1999................................ 14,386,602 8.07
Granted................................................... 3,021,694 40.30
Exercised................................................. (3,634,486) 3.88
Canceled.................................................. (205,622) 24.06
----------
Balance at December 31, 2000................................ 13,568,188 $16.12
==========

F-17
61

The following table summarizes information concerning stock options
outstanding at December 31, 2000:

WEIGHTED
AVERAGE
REMAINING WEIGHTED NUMBER WEIGHTED
NUMBER CONTRACTUAL AVERAGE EXERCISABLE AVERAGE
RANGE OF OUTSTANDING TERM EXERCISE AT EXERCISE
EXERCISE PRICES AT 12/31/00 (YEARS) PRICE 12/31/00 PRICE
- --------------- ----------- ----------- -------- ----------- --------

$0.28-5.44.......................... 2,290,064 6.12 $ 3.68 1,939,064 $ 3.60
5.69-6.63........................... 2,099,712 7.51 5.81 1,621,212 5.85
6.88-9.13........................... 3,374,350 8.40 9.12 3,303,600 9.12
9.50-27.94.......................... 3,109,868 8.92 17.62 697,776 17.14
30.94-70.69......................... 2,694,194 9.63 41.79 -- --
---------- ---------
13,568,188 8.24 $16.12 7,561,652 $ 7.74
========== =========

In May 1996, the Company granted an officer a non-qualified stock option
to purchase 450,000 shares of the Company's common stock at an exercise price
below the market price of the stock on the date of grant. The Company recorded
compensation expense of $150,000 in each of the years ended December 31, 1999
and 1998, as prescribed under APB Opinion No. 25.

In September 1998 and January 1999, the Company granted options to each
of its Vice President of Marketing and Vice President of Product and Process
Development to purchase 120,000 shares of common stock. These options were not
granted under any of the above mentioned Incentive Stock Option or Non-
Qualified Stock Option Plans. The terms of these options are substantially
similar to those granted under the 98 Plan.

During the years ended December 31, 2000, 1999 and 1998, the Company
granted options to purchase 95,000, 168,000 and 248,000 shares, respectively, of
its common stock to certain Scientific Advisory Board members and outside
consultants in consideration for future services. At December 31, 2000,
outstanding options to purchase 135,000 shares of the Company's common stock
related to these grants remain unvested and the fair value of such options are
subject to remeasurement through the vesting date. The fair value of these
grants was calculated using the Black-Scholes option pricing model using
assumptions generally comparable to those disclosed in item (c) below. During
the years ended December 31, 2000, 1999 and 1998, the Company recognized
approximately $4,425,000, $2,411,000 and $540,000, respectively, in compensation
expense relating to the options granted to Scientific Advisory Board members and
outside consultants. During the years ended December 31, 2000, 1999 and 1998,
the Company granted options to outside members of its Board of Directors to
purchase approximately 341,474, 310,000 and 88,000 shares, respectively, of its
common stock. No compensation expense was recorded for these option grants.

In May 1999, the Company's stockholders approved the grant of an option
to the President and Chief Executive Officer and Executive Vice President and
Chief Operating Officer to purchase 2,000,000 and 1,300,000 shares,
respectively, of common stock at a per share exercise price equal to $9.125, the
last reported sale price of the common stock on the date shareholder approval
was obtained. The original terms of the options provided that they vest in their
entirety seven years from the date of grant, but may vest earlier as to 20% of
the shares annually if certain targets in the Company's common stock price are
achieved. In May 2000, the Company's stockholders approved an amendment to these
options to provide that each tranche vests immediately upon achievement of the
relevant target stock price associated with such tranche without regard to the
passage of time, which was a requirement in the original options. The options
became fully vested and exercisable upon the approval of the amendments.

During April 1995, the Company completed the sale of the remaining
one-half of its shares of capital stock of Cadus Pharmaceutical Corporation
("Cadus") for $3.0 million to High River Limited Partnership ("High River"). In
exchange for receiving a now-expired right to repurchase all outstanding shares
of capital stock of Cadus held by High River, the Company granted to High River
two options to purchase shares of common stock. One option is for 300,000 shares
at an exercise price per share equal to $1.00, subject to

F-18
62

adjustment under certain circumstances, and the other option is for 600,000
shares at an exercise price per share equal to $0.34, subject to adjustment
under certain circumstances. Both options were exercised in March 2000.

(b) WARRANTS

As of December 31, 2000, a total of 1,218,600 shares of common stock
were issuable upon exercise of outstanding warrants. Such warrants have been
issued to certain officers, directors and other employees of the Company,
certain Scientific Advisory Board members, certain investors and certain credit
providers and investors.

A summary of warrant activity follows:

WEIGHTED AVERAGE
NUMBER OF EXERCISE PRICE
SHARES PER SHARE
---------- ----------------

Balance at December 31, 1997................................ 4,814,690 $1.36
Granted................................................ -- --
Exercised.............................................. (287,510) .70
Canceled............................................... -- --
----------
Balance at December 31, 1998................................ 4,527,180 1.40
Granted................................................ -- --
Exercised.............................................. (990,440) 1.27
Canceled............................................... -- --
----------
Balance at December 31, 1999................................ 3,536,740 1.43
Granted................................................ -- --
Exercised.............................................. (2,318,140) 1.60
Canceled............................................... -- --
----------
Balance at December 31, 2000................................ 1,218,600 $1.13
==========

The outstanding warrants (which are all currently exercisable) expire
and are exercisable for the number of shares of common stock as shown below:

March 2001.............................................. 2,000
May 2001................................................ 1,192,000
December 2004........................................... 24,600
---------
Total.............................................. 1,218,600
=========

F-19
63

The following table summarizes the weighted average fair value of stock
options and warrants granted to employees and directors during the years ended
December 31, 2000, 1999 and 1998:

OPTION PLANS
------------------------------------------------------------
2000 1999 1998
------------------ ------------------- -----------------
SHARES(1) $ SHARES(1) $ SHARES(1) $
--------- ------ --------- ----- --------- -----

Exercise price is less than market
value at date of grant.......... -- $ -- 200,000(2) $5.44 -- $ --
Exercise price equals market value
at date of grant................ 2,926,694 $23.79 6,660,520 $8.30 1,800,952 $2.76
Exercise price exceeds market
value at date of grant.......... -- $ -- -- $ -- 2,817,000 $3.14

(1) Does not include 95,000 in 2000, 168,000 in 1999 and 248,000 shares in 1998
under options granted to non-employees. The fair value of these non-employee
grants has been recorded as compensation expense as prescribed by SFAS No.
123.

(2) The Company has recorded compensation expense of $72,000 and $25,000 in the
years ended December 31, 2000 and 1999 in connection with these grants as
prescribed under APB Opinion No. 25.

The fair value of stock options was estimated using the Black-Scholes
option pricing model. The Black-Scholes model considers a number of variables
including the exercise price and the expected life of the option, the current
price of the common stock, the expected volatility and the dividend yield of the
underlying common stock, and the risk-free interest rate during the expected
term of the option. The following summarizes the weighted average assumptions
used:

OPTION PLANS
-----------------------
2000 1999 1998
----- ----- -----

Expected life (years)........................ 3.41 5.9 5.3
Interest rate................................ 6.16% 5.47% 5.58%
Volatility................................... 83.79% 79.96% 76.03%
Dividend yield............................... 0% 0% 0%

The Company applies APB Opinion No. 25 and related Interpretations in
accounting for its options and warrants. Except as previously indicated, no
compensation cost has been recognized for its stock option and warrant grants.
Had compensation cost for the Company's stock option grants been determined
based on the fair value at the grant dates for awards consistent with the method
of SFAS No. 123, the Company's net loss to common stockholders and loss per
common share would have been increased to the pro forma amounts indicated below:

YEAR ENDED DECEMBER 31,
---------------------------------------------
2000 1999 1998
------------- ------------ ------------

Net loss:
As reported................................ $ (70,351,000) $(34,611,000) $(21,382,000)
Pro forma.................................. (114,081,000) (43,893,000) (28,638,000)
Basic and diluted loss per common share:
Basic and diluted
As reported................................ $ (1.22) $ (0.75) $ (0.52)
Pro forma.................................. (1.81) (0.94) (0.66)

The pro forma effect on the loss for the years ended December 31, 2000,
1999 and 1998 is not necessarily indicative of the pro forma effect on future
years' operating results.

F-20
64

(13) EMPLOYEE STOCK PURCHASE PLAN

In April 1998, the Company's Board of Directors adopted the ImClone
Systems Incorporated 1998 Employee Stock Purchase Plan (the "ESPP"), subject to
shareholders' approval, which was received in May 1998. The ESPP, as amended,
allows eligible employees to purchase shares of the Company's common stock
through payroll deductions at the end of quarterly purchase periods. To be
eligible, an individual must be an employee, work more than 20 hours per week
for at least five months per calendar year and not own greater than 5% of the
Company's common stock. Pursuant to the ESPP, the Company has reserved 1,000,000
shares of common stock for issuance. Prior to the first day of each quarterly
purchase period, each eligible employee may elect to participate in the ESPP.
The participant is granted an option to purchase a number of shares of common
stock determined by dividing each participant's contribution accumulated prior
to the last day of the quarterly period by the purchase price. The participant
has the ability to withdraw from the ESPP until the second to last day of the
quarterly purchase period. The purchase price is equal to 85% of the market
price per share on the last day of each quarterly purchase period. An employee
may purchase stock from the accumulation of payroll deductions up to the lesser
of 15% of such employee's compensation or $25,000 per year. As adjusted for the
stock split, participating employees have purchased 11,153 shares of common
stock at an aggregate purchase price of $420,000 for the year ended December 31,
2000, 13,506 shares of common stock at an aggregate purchase price of $177,000
for the year ended December 31, 1999 and 8,776 shares of common stock at an
aggregate purchase price of $33,000 for the year ended December 31, 1998. As of
December 31, 2000, 966,565 shares were available for future purchases. No
compensation expense has been recorded in connection with the ESPP. Compensation
expense of $74,000, $31,000 and $6,000 related to the discount given to
employees is included in the pro forma operating results disclosed above in note
12(c) for the years ended December 31, 2000, 1999 and 1998, respectively.

(14) INCOME TAXES

The tax effects of temporary differences that give rise to significant
portions of the gross deferred tax assets and gross deferred tax liabilities at
December 31, 2000 and December 31, 1999 are presented below:

DECEMBER 31, DECEMBER 31,
2000 1999
------------- ------------

Gross deferred tax assets:
Research and development credit carryforward.............. $ 7,960,000 $ 7,714,000
Compensation relating to the issuance of stock options and
warrants............................................... 2,864,000 3,142,000
Net operating loss carryforwards.......................... 133,124,000 64,512,000
Other..................................................... 18,015,000 8,542,000
------------- ------------
Total gross deferred tax assets............................. 161,963,000 83,910,000
Less valuation allowance.................................. (159,958,000) (83,910,000)
------------- ------------
Net deferred tax assets................................... 2,005,000 --
------------- ------------
Gross deferred tax liabilities:
Unrealized gain on marketable securities.................. 2,005,000 --
------------- ------------
Net deferred tax asset.................................... $ -- $ --
============= ============

The Company has established a valuation allowance because more likely
than not substantially all of its gross deferred tax assets will not be
realized. The net change in the total valuation allowance for the years ended
December 31, 2000 and 1999 was an increase of $76,048,000 and $19,299,000,
respectively. The valuation includes approximately $55,717,000 pertaining to tax
deductions relating to stock option exercises for which any subsequently
recognized tax benefit will be recorded as an increase to additional paid-in
capital. The tax benefit assumed using the federal statutory tax rate of 34% has
been reduced to an actual benefit of zero due principally to the aforementioned
valuation allowance.

At December 31, 2000, the Company had net operating loss carryforwards
for federal income tax purposes of approximately $302,566,000, which expire at
various dates from 2001 through 2020. At December 31, 2000, the Company had
research credit carryforwards of approximately $7,960,000, which

F-21
65

expire at various dates from 2009 through 2020. Pursuant to Section 382 of the
Internal Revenue Code of 1986, as amended, the annual utilization of a company's
net operating loss and research credit carryforwards may be limited if the
Company experiences a change in ownership of more than 50 percentage points
within a three-year period. Since 1986, the Company experienced at least two
such ownership changes. Accordingly, the Company's net operating loss
carryforwards arising before such ownership changes available to offset future
federal taxable income are limited to $5,159,000 annually. Similarly, the
Company is restricted in using its research credit carryforwards arising before
such ownership changes to offset future federal income taxes. The Company has
not yet determined whether the November 1999 public common stock offering and
the February 2000 private placement of convertible notes resulted in additional
ownership changes that would further limit the use of net operating loss and
research credit carryforwards.

(15) COMMITMENTS

LEASES

The Company leases its New York City facility under an operating lease,
which expires in December 2004. Rent expense for the New York City facility was
approximately $838,000, $817,000, and $574,000 for the years ended December 31,
2000, 1999 and 1998, respectively. See also Note 7.

Future minimum lease payments under the capital and operating leases are
as follows:

CAPITAL OPERATING
LEASES LEASES
---------- ----------

Year ending December 31, 2001....................... $ 680,000 $ 992,000
2002........................................... 431,000 954,000
2003........................................... 61,000 962,000
2004........................................... -- 977,000
2005........................................... -- 54,000
---------- ----------
1,172,000 3,939,000
Less interest expense............................... (83,000) --
---------- ----------
$1,089,000 $3,939,000
========== ==========

SUPPORTED RESEARCH

The Company has entered into various research and license agreements
with certain academic institutions and others to supplement the Company's
research activities and to obtain for the Company rights to certain technology.
The agreements generally require the Company to fund the research and to pay
royalties based upon percentages of revenues, if any, on sales of products
developed from technology arising under these agreements.

CONSULTING AGREEMENTS

The Company has consulting agreements with several of its Scientific
Advisory Board members and other consultants. These agreements generally are for
a term of one year and are terminable at the Company's option. See Note 18.

CONTRACT SERVICES

In April 1999, the Company signed a definitive agreement with BI Pharma
for the further development, production scale-up and manufacture of IMC-C225 for
use in human clinical trials. The total cost under the agreement was
DM11,440,000 or $6,283,000 based on the foreign currency rate on the dates of
payment. All of the material manufactured under this agreement has been provided
to Merck KGaA for use in

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66

clinical trials and Merck KGaA has reimbursed the Company for the costs under
this agreement. This reimbursement has been accounted for as reduction to
research and development expense in the third quarter of 2000 and the fourth
quarter of 1999.

In December 1999, the Company entered into a development and
manufacturing services agreement with Lonza Biologics PLC ("Lonza"). Under the
agreement, Lonza is responsible for process development and scale-up to
manufacture IMC-C225. These steps are being taken to assure that its process
will produce bulk material that conforms with the Company's reference material.
As of December 31, 2000, the Company has incurred approximately $1,677,000 for
services provided under this agreement. In September 2000, the Company entered
into a three-year commercial manufacturing services agreement with Lonza
relating to IMC-C225. Under the agreements with Lonza, Lonza will manufacture
IMC-C225 at the 5,000 liter scale under cGMP conditions and deliver it to the
Company over a term ending no later than December 2003. As of December 31, 2000,
the Company has incurred approximately $5,400,000 for services provided under
this agreement and has included this amount as research and development expense.
In the event the commercial manufacturing services agreement is terminated by
the Company, the Company will be required to pay 85% of the stated costs for
each of the first ten batches cancelled, 65% of the stated costs for each of the
next ten batches cancelled and 40% of the stated costs for any remaining batches
cancelled. These amounts are subject to mitigation should Lonza use its
manufacturing capacity caused by such termination for another customer.

The Company is building a new product launch manufacturing facility
adjacent to its pilot manufacturing facility in New Jersey. This new facility
will contain three 10,000 liter fermentors and will be dedicated to the
commercial production of IMC-C225. The 80,000 square foot facility will cost
approximately $50 million and is being built on land purchased in December 1999.
The Company has incurred approximately $35,934,000 in engineering, capitalized
interest, pre-construction and construction costs associated with the new
manufacturing facility through December 31, 2000. The costs incurred to date
associated with the construction of the facility have been paid from the
Company's cash reserves.

(16) RETIREMENT PLANS

The Company maintains a 401(k) retirement plan available to all
full-time, eligible employees. Employee contributions are voluntary and are
determined by the individual, limited to the maximum amount allowable under
federal tax regulations. The Company, at its discretion, may make certain
contributions to the plan. The Company contributed approximately $108,000,
$70,000 and $47,000 to the plan for the years ended December 31, 2000, 1999 and
1998, respectively.

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67

(17) SUPPLEMENTAL CASH FLOW INFORMATION AND NON-CASH INVESTING AND FINANCING
ACTIVITIES

YEAR ENDED DECEMBER 31,
-------------------------------------
2000 1999 1998
---------- ----------- --------

Cash paid during the year for:
Interest, including amounts capitalized of $846,000
in 2000 and $204,000 in 1999...................... $7,097,000 $ 497,000 $422,000
========== =========== ========
Non-cash investing and financing activities:
Redemption of series A preferred stock............... 20,000,000 -- --
========== =========== ========
Conversion of series A preferred stock............... 10,000,000 10,000,000 --
========== =========== ========
Series A preferred stock redemption premium and
dividends......................................... 5,764,000 -- --
========== =========== ========
Finova capital asset and lease obligations
additions......................................... -- 532,000 731,000
========== =========== ========
Unrealized gain (loss) on securities
available-for-sale................................ 4,377,000 645,000 (676,000)
========== =========== ========
Warrant exercise paid with a note from officer and
stockholder....................................... -- -- 131,000
========== =========== ========
Accrued interest on note receivable -- officer and
stockholder....................................... 3,000 11,000 11,000
========== =========== ========

(18) RELATED PARTY TRANSACTIONS

The Company has scientific consulting agreements with two members of the
Board of Directors. Expenses relating to these agreements were $112,000 for each
of the years ended December 31, 2000, 1999 and 1998.

In January 1998, the Company accepted a promissory note totaling
approximately $131,000 from its President and CEO in connection with the
exercise of a warrant to purchase 174,610 shares of the Company's common stock.
The note was due no later than two years from issuance and was full recourse.
Interest was payable on the first anniversary date of the promissory note and on
the stated maturity or any accelerated maturity at the annual rate of 8 1/2%.
The note, including all interest, has been paid in full.

In December 2000, the Company accepted a promissory note totaling
approximately $282,000 from its President and CEO. The note is payable upon the
earlier of the Company's demand or six months from issuance and is full
recourse. The note bears interest at the annual rate of 10 1/2%.

In October 1998, the Company accepted an unsecured promissory note
totaling $100,000 from its Executive Vice President and COO. The note was
payable on demand including interest at the annual rate of 8.25% for the period
that the loan was outstanding. In April 1999, the note, including all interest,
was paid in full.

The Company uses Concord Investment Management, a New York-based money
management firm, to manage a substantial portion of the Company's debt security
portfolio tabulated in Note 3. The Company's Chairman of the Board is a limited
partner of Concord Investment Management. The Company paid investment management
fees to Concord Investment Management of approximately $412,000, $60,000 and
$82,000 in the years ended December 31, 2000, 1999 and 1998, respectively.

In January 1999, the Company accepted an unsecured promissory note
totaling $60,000 from its Vice President, Product and Process Development. The
note was payable upon the earlier of the Company's demand or July 28, 1999
including interest at an annual rate of 8.75% for the period that the loan was
outstanding. The loan was made in connection with the acceptance of employment
and the corresponding relocation of the officer. In July 1999, the note,
including all interest, was paid in full.

F-24
68

(19) FAIR VALUE OF FINANCIAL INSTRUMENTS

As of December 31, 2000 and 1999, the following methods and assumptions
were used to estimate the fair value of each class of financial instrument:

CASH AND CASH EQUIVALENTS, OTHER RECEIVABLES, ACCOUNTS PAYABLE, ACCRUED AND
OTHER CURRENT LIABILITIES

The carrying amounts approximate fair value because of the short
maturity of those instruments.

LONG-TERM OBLIGATIONS

The fair value of the 5 1/2% convertible subordinated notes was
approximately $234,000,000 at December 31, 2000 based on their quoted market
price. Discounted cash flow analyses were used to determine the fair value of
other long-term obligations because no quoted market prices on these instruments
were available. The fair value of other long-term obligations approximated their
carrying amount.

(20) QUARTERLY FINANCIAL DATA (UNAUDITED)

The tables below summarize the Company's unaudited quarterly operating
results for 2000 and 1999. The first three quarters of 2000 have been restated
as a result of the adoption of SAB 101 in the fourth quarter of 2000, effective
as of the beginning of the year, as described in note 2(f).

THREE MONTHS ENDED
----------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
2000 2000 2000 2000
------------ ------------ ------------- ------------

Revenues............................. $ 247,000 $ 200,000 $ 813,000 $ 153,000
Net loss before cumulative effect of
change in accounting policy........ (12,016,000) (13,809,000) (12,904,000) (29,026,000)
Net loss............................. (14,612,000) (13,809,000) (12,904,000) (29,026,000)
Net loss to common stockholders
before cumulative effect of change
in accounting policy............... (12,718,000) (14,512,000) (13,616,000) (33,682,000)
Net loss to common stockholders after
cumulative effect of change in
accounting policy.................. (15,314,000) (14,512,000) (13,616,000) (33,682,000)
Basic and diluted loss per common
share before cumulative effect of
change in accounting policy........ (0.21) (0.23) (0.21) (0.52)
Basic and diluted net loss per common
share after cumulative effect of
change in accounting policy........ $ (0.26) $ (0.23) $ (0.21) $ (0.52)

THREE MONTHS ENDED
--------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1999 1999 1999 1999
----------- ----------- ------------- ------------

Revenues................................ $ 629,000 $ 254,000 $ 138,000 $1,122,000
Net loss................................ (8,078,000) (8,131,000) (10,156,000) (8,246,000)
Net loss to common stockholders......... (9,006,000) (9,065,000) (11,094,000) (9,159,000)
Basic and diluted net loss per common
share................................. $ (0.18) $ (0.18) $ (0.22) $ (0.17)

F-25
69

The table below reflects the effect of the change in accounting policy
on net loss to common stockholders and basic and diluted net loss per common
share under the Company's historical revenue recognition policy as a result of
the adoption of SAB 101 in the fourth quarter of 2000.

THREE MONTHS ENDED
----------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
2000 2000 2000 2000
------------ ------------ ------------- ------------

Net loss under historical revenue
recognition policy................. $(12,057,000) $(13,849,000) $(12,944,000) $(29,067,000)
Effect of change in accounting
policy............................. 41,000 40,000 40,000 41,000
Cumulative effect of change in
accounting policy.................. (2,596,000) -- -- --
------------ ------------ ------------ ------------
Net loss............................. $(14,612,000) $(13,809,000) $(12,904,000) $(29,026,000)
============ ============ ============ ============
Basic and diluted net loss per common
share under historical revenue
recognition policy................. $ (0.22) $ (0.23) $ (0.21) $ (0.52)
Effect of change in accounting
policy............................. -- -- -- --
Cumulative effect of change in
accounting policy.................. (0.04) -- -- --
------------ ------------ ------------ ------------
Basic and diluted net loss per common
share after cumulative effect of
change in accounting policy........ $ (0.26) $ (0.23) $ (0.21) $ (0.52)
============ ============ ============ ============

F-26