IMCLONE SYSTEMS INC/DE, S-3/A, 1999-11-16

IMCLONE SYSTEMS INC/DE
S-3/A, 1999-11-16
BIOLOGICAL PRODUCTS, (NO DIAGNOSTIC SUBSTANCES)

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 16, 1999

REGISTRATION NO. 333-87489
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 4

TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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IMCLONE SYSTEMS INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C>
DELAWARE 04-2834797
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
</TABLE>

180 VARICK STREET
NEW YORK, NY 10014
(212) 645-1405
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

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

JOHN B. LANDES, ESQ.

VICE PRESIDENT, BUSINESS DEVELOPMENT
AND GENERAL COUNSEL
IMCLONE SYSTEMS INCORPORATED
180 VARICK STREET
NEW YORK, NY 10014
(212) 645-1405
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)

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

COPIES TO:

<TABLE>
<S> <C>
RICHARD A. DRUCKER, ESQ. PATRICK O'BRIEN, ESQ.
DAVIS POLK & WARDWELL ROPES & GRAY
450 LEXINGTON AVENUE ONE INTERNATIONAL PLACE
NEW YORK, NEW YORK 10017 BOSTON, MASSACHUSETTS 02110
(212) 450-4000 (617) 951-7000
</TABLE>

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] __________________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ] __________________
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ] __________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ] __________________

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.

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- --------------------------------------------------------------------------------
<PAGE> 2

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS
NOT AN OFFER TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING OFFERS TO
BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.

PROSPECTUS (Subject to Completion)

Issued November 16, 1999

2,500,000 Shares

[IMCLONE LOGO]

ImClone Systems Incorporated
COMMON STOCK
------------------------

IMCLONE SYSTEMS INCORPORATED IS OFFERING 2,500,000 SHARES OF ITS COMMON STOCK.

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OUR COMMON STOCK IS LISTED FOR TRADING ON THE NASDAQ NATIONAL MARKET UNDER THE
SYMBOL "IMCL." ON NOVEMBER 15, 1999, THE REPORTED LAST SALE PRICE OF THE COMMON
STOCK ON THE NASDAQ NATIONAL MARKET WAS $29 15/16 PER SHARE.

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

INVESTING IN THE COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 10.
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PRICE $ A SHARE
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<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS COMPANY
-------- ------------- -----------
<S> <C> <C> <C>
Per Share................................................. $ $ $
Total..................................................... $ $ $
</TABLE>

We have granted the underwriters the right to purchase up to an additional
375,000 shares to cover over-allotments.

The Securities and Exchange Commission and state securities regulators have not
approved or disapproved these securities, or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.

Morgan Stanley & Co. Incorporated expects to deliver the shares to purchasers on
November , 1999.
------------------------
MORGAN STANLEY DEAN WITTER MERRILL LYNCH & CO.

PRUDENTIAL VECTOR HEALTHCARE WARBURG DILLON READ LLC
a unit of Prudential Securities
November , 1999
<PAGE> 3

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary...................... 5
Risk Factors............................ 10
Use of Proceeds......................... 20
Price Range of Common Stock............. 20
Dividend Policy......................... 20
Capitalization.......................... 21
Dilution................................ 22
Selected Consolidated Financial Data.... 23
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................ 24
Business................................ 33
Management.............................. 50
Principal Stockholders.................. 55
Description of Capital Stock............ 57
Material U.S. Federal Tax Considerations
for Non-U.S. Holders of Common
Stock................................. 62
Underwriters............................ 64
Legal Matters........................... 65
Experts................................. 65
Where You Can Find More Information..... 66
Index to Financial Statements........... F-1
</TABLE>

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In this prospectus, "ImClone," the "company," "we," "us" and "our" refer to
ImClone Systems Incorporated. You should rely only on the information contained
in this prospectus. We have not authorized anyone to provide you with
information different from that contained in this prospectus. We are offering to
sell, and seeking offers to buy, shares of common stock only in jurisdictions
where offers and sales are permitted. The information contained in this
prospectus is accurate only as of the date of this prospectus, regardless of the
time of delivery of this prospectus or of any sale of the common stock.

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

FORWARD-LOOKING STATEMENTS

The statements incorporated by reference or contained in this prospectus
discuss our future expectations, contain projections of our results of
operations or financial condition, and include other "forward-looking"
information within the meaning of Section 27A of the Securities Act of 1933, as
amended. Our actual results may differ materially from those expressed in
forward-looking statements made or incorporated by reference in this prospectus.
Forward-looking statements that express our beliefs, plans, objectives,
assumptions or future events or performance may involve estimates, assumptions,
risks and uncertainties. Therefore, our actual results and performance may
differ materially from those expressed in the forward-looking statements.
Forward-looking statements often, although not always, include words or phrases
such as the following:

- "will likely result"

- "are expected to"

- "will continue"

- "is anticipated"

- "estimate"

- "intends"

- "plans"

- "projection"

- "outlook"
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<PAGE> 4

You should not unduly rely on forward-looking statements contained or
incorporated by reference in this prospectus. Actual results or outcomes may
differ materially from those predicted in our forward-looking statements due to
the risks and uncertainties inherent in our business, including risks and
uncertainties in:

- clinical trial results

- obtaining and maintaining regulatory approval

- market acceptance of and continuing demand for our products

- the impact of competitive products and pricing

- our ability to obtain additional financing to support our operations

- factors discussed in the documents listed below

You should read and interpret any forward-looking statements together with
the following documents:

- our most recent Annual Report on Form 10-K

- our Quarterly Reports on Form 10-Q

- the risk factors contained in this prospectus under the caption "Risk
Factors"

- our other filings with the Securities and Exchange Commission

Any forward-looking statement speaks only as of the date on which that
statement is made. We will not update any forward-looking statement to reflect
events or circumstances that occur after the date on which such statement is
made.

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

ImClone was incorporated in Delaware in 1984 and began its principal
research and development operations in March 1986. Our principal executive
offices and laboratories are located at 180 Varick Street, New York, New York
10014, and our telephone number is (212) 645-1405.

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(This page intentionally left blank)

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PROSPECTUS SUMMARY

This summary highlights information contained elsewhere or incorporated by
reference in this prospectus. This summary may not contain all of the
information that you should consider before deciding to invest in our common
stock. You should read this entire prospectus carefully, including the "Risk
Factors" section, the financial statements and the notes to those statements,
and the documents incorporated by reference in this prospectus. Unless otherwise
indicated, all information in this prospectus assumes no exercise of the
underwriters' overallotment option.

IMCLONE

OVERVIEW

ImClone is a biopharmaceutical company engaged in the research and
development of novel cancer treatments. We are currently pursuing three research
and development programs that we believe show promise for treating cancer:
growth factor inhibitors, cancer vaccines and angiogenesis inhibitors. Our lead
product candidate, C225, is a therapeutic antibody that inhibits stimulation of
a receptor found on the cells of certain solid tumors. C225 has been shown in
several Phase I/II trials to have an acceptable safety profile, to be well
tolerated and, when administered in conjunction with either radiation therapy or
chemotherapy, to enhance tumor reduction. We are currently testing C225 in
pivotal trials for treating head and neck cancer and in a Phase II clinical
trial for colorectal cancer.

Our next most advanced product candidate, BEC2, is a cancer vaccine. We and
our partner Merck KGaA are testing BEC2 for preventing recurrence or progression
of small-cell lung cancer in a multinational pivotal Phase III trial. We are
also developing inhibitors of angiogenesis, or the growth of new blood vessels,
to treat various kinds of cancer and other diseases. We have identified an
antibody for angiogenesis inhibition, c-p1C11, and we plan to file an
application with the FDA in the fourth quarter of 1999 in order to commence
clinical trials.

C225 CANCER THERAPEUTIC

C225 is a monoclonal antibody that binds to a receptor, known as the
Epidermal Growth Factor, or EGF, receptor. The EGF receptor is overexpressed on
the cells of approximately one-third of all types of solid tumors. For these
tumor types, the percentage of EGF receptor positive patients varies. For
example, 90% of all head and neck cancer patients are positive for the EGF
receptor, as well as a majority of colorectal and non small-cell lung cancer
patients. The activation of the EGF receptor is believed to play a critical role
in the proliferation of these types of tumor cells. C225 attaches to the EGF
receptor and blocks this activation, thereby inhibiting cell proliferation. We
are developing C225 as a therapeutic for treating, in conjunction with
conventional radiation therapy or chemotherapy, those cancer types characterized
by high levels of, and dependence upon, the EGF receptor.

Completed Clinical Trials

Since December 1994, we have completed several Phase I/II clinical trials
to evaluate the safety and potential efficacy of C225. In these studies, we have
given C225 to approximately 200 patients intravenously, both alone and in
combination with conventional cancer therapies.

In June 1999, we completed a Phase I/II trial in which 12 patients with
advanced head and neck cancer were treated with C225 in combination with
cisplatin, a widely used chemotherapeutic drug. At the completion of the trial,
two of the nine evaluable patients had achieved a complete response (meaning
that the tumor was reduced beyond measurable size) and four had achieved a
partial response (meaning that the tumor was reduced by at least 50%). Most of
the patients had previously received treatment, including standard chemotherapy,
radiation therapy or experimental treatments, and either did not respond or
thereafter relapsed. In particular, three of the six responders (including the
two complete responders) had previously been treated with a regimen containing
cisplatin and relapsed following such treatment.
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<PAGE> 7

In January 1999, we completed a Phase I/II trial in which 16 patients with
advanced head and neck cancer were treated with C225 in combination with
radiation therapy. At the completion of the trial, all 15 evaluable patients had
responded to therapy; 13 of the patients had achieved a complete response and
two had achieved a partial response. This compares with historical response
rates of approximately 40% in similar patients treated with radiation alone.

In all trials to date, while most patients have experienced skin rashes and
three of the approximately 200 patients treated have experienced anaphylactic
reactions, C225 has otherwise been generally well tolerated by patients. While
encouraging, the results from these trials are not sufficient to establish that
C225 is safe or effective in treating cancer.

Ongoing Clinical Trials

We have initiated two pivotal Phase III trials of C225 in treating head and
neck cancer. One trial is evaluating the administration of C225 in combination
with radiation as first-line therapy for advanced head and neck cancer that has
not metastasized, or spread to other parts of the body. Enrollment commenced in
April 1999, and we expect the study to take approximately two-and-one-half years
to complete. The other Phase III trial is examining the effects of
administration of C225 in combination with cisplatin as first-line therapy for
metastatic or recurrent head and neck cancer. Patient treatment is expected to
commence in November 1999, and we expect the study to take one-and-one-half
years to complete.

We have also initiated two additional Phase II C225 trials in patients who
have not responded to conventional therapies. In the first trial, we are testing
C225 in combination with cisplatin in patients with refractory head and neck
cancer. In the second trial, we are testing C225 in combination with irinotecan,
another commonly used chemotherapeutic agent, in patients with EGF
receptor-positive refractory colorectal cancer. We expect that enough
information may be available from these studies during the first half of 2000 to
determine whether the data are sufficient to support an application for FDA
approval of C225.

In addition, we expect to conduct several additional Phase II clinical
trials to continue to determine other types of cancer on which C225 may be
effective. These may include pancreatic, lung and renal cancer. We also expect
to conduct C225 clinical trials with Merck KGaA in Europe.

Marketing and Development

We have entered into a development and marketing agreement with Merck KGaA
relating to C225. We have retained the right to market C225 within the United
States and Canada, for which we are building our own sales force. Merck KGaA has
the right to market C225 internationally; however, in Japan we will co-develop
and co-market C225 with Merck KGaA. In addition, we will manufacture C225 for
any and all commercial sales. Merck KGaA is required to pay us fees for various
milestone achievements as well as royalties on all C225 sold by them. Merck KGaA
has also agreed to provide a guaranty of our credit agreement obligations
relating to the construction of our new C225 commercial manufacturing facility.

BEC2 CANCER VACCINE

BEC2 is a monoclonal antibody that we are developing as a cancer vaccine.
This vaccine is given to a patient following successful treatment of a tumor and
is intended to activate the patient's immune responses to protect against spread
or recurrence of the tumor. 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 against certain forms of
cancer, including both small-cell lung cancer and melanoma. In one such trial,
15 patients with small-cell lung cancer 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

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<PAGE> 8

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 and funded primarily by Merck KGaA, we have initiated a
570-patient Phase III multinational clinical trial for BEC2 in the treatment of
limited disease small-cell lung cancer. The trial will examine patient survival
two years after a course of therapy. We expect to complete enrollment in the
trial during 2001.

We have entered into a development and marketing agreement with Merck KGaA
relating to BEC2. Under this agreement, 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. In
addition, we intend to be the worldwide manufacturer of BEC2.

MONOCLONAL ANTIBODY INHIBITOR OF ANGIOGENESIS

Our lead anti-angiogenesis product candidate, c-p1C11, is an antibody that
targets KDR, a principal receptor for a growth factor known as Vascular
Endothelial Growth Factor, or VEGF. By blocking the binding of VEGF to KDR,
c-p1C11 is designed to inhibit or eliminate tumor growth. We expect to file an
application with the FDA by the end of 1999 in order to commence clinical trials
of c-p1C11.

OTHER RESEARCH

In addition to the development of our lead product candidates, we continue
to conduct research, both independently and in collaboration with academic and
commercial partners, in a number of areas related to our core focus of growth
factor inhibitors, cancer vaccines and angiogenesis inhibitors.

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THE OFFERING

Common stock offered.......... 2,500,000 shares

Common stock to be outstanding
after the offering............ 28,129,007 shares

Over-allotment option......... 375,000 shares

Use of proceeds............... We intend to use the proceeds from this
offering:

- to fund the expansion of clinical trials

- to fund a portion of the costs of our new
manufacturing facilities

- to develop a sales force in the United States

- for general corporate purposes, including
research and development expenses, and other
working capital

Dividend policy............... We have never declared cash dividends on our
common stock and have no present intention of
declaring such cash dividends in the
foreseeable future. Any future determination to
pay dividends will be at the discretion of our
board of directors and will be dependent upon
then existing conditions, including our
financial condition, results of operations,
contractual restrictions, capital requirements,
business prospects and other factors our board
of directors deems relevant.

Nasdaq National Market
Symbol........................ IMCL

The number of shares of our common stock to be outstanding after the
offering does not take into account 7,675,550 shares of our common stock
issuable upon exercise of outstanding options and warrants, having a weighted
average exercise price of $9.65 per share, as of October 27, 1999. This number
also does not include the 400,000 shares of series A preferred stock currently
held by Merck KGaA, of which 100,000 shares are currently convertible into
800,000 shares of our common stock. This number also does not include common
stock that will be issued for cash to Merck KGaA upon the achievement of certain
milestones set forth in our agreement with Merck KGaA relating to C225.

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SUMMARY FINANCIAL DATA

The following financial data should be read in conjunction with, and are
qualified by reference to, "Selected Consolidated Financial Data," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the financial statements and notes included elsewhere in this prospectus.

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------ -------------------
1996 1997 1998 1998 1999
-------- -------- -------- -------- --------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.................................... $ 600 $ 5,348 $ 4,193 $ 3,434 $ 1,021
Operating expenses:
Research and development.................. 11,482 16,455 21,049 15,269 22,131
General and administrative................ 3,961 5,356 7,145 4,174 5,784
Net interest and other income(1)............ (95) (972) (2,619) (2,062) (529)
-------- -------- -------- -------- --------
Loss before extraordinary item.............. (14,748) (15,491) (21,382) (13,947) (26,365)
Extraordinary loss on extinguishment of
debt...................................... 1,267 -- -- -- --
-------- -------- -------- -------- --------
Net loss.................................... (16,015) (15,491) (21,382) (13,947) (26,365)
Preferred dividends......................... -- 163 3,668 2,747 2,800
-------- -------- -------- -------- --------
Net loss to common stockholders............. $(16,015) $(15,654) $(25,050) $(16,694) $(29,165)
======== ======== ======== ======== ========
Basic and diluted net loss per common
share..................................... $ (0.83) $ (0.67) $ (1.03) $ (0.69) $ (1.17)
======== ======== ======== ======== ========
Weighted average shares outstanding......... 19,371 23,457 24,301 24,277 24,947
</TABLE>

<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1999
---------------------------
ACTUAL AS ADJUSTED(2)
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(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and securities....................... $ 34,263 $ 103,741
Working capital............................................. 12,061 81,539
Total assets................................................ 53,594 122,572
Long-term obligations, less current portion................. 3,563 3,563
Accumulated deficit......................................... (165,211) (165,211)
Stockholders' equity........................................ 26,062 95,540
</TABLE>

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

(2) As adjusted to reflect receipt of the estimated net proceeds from the sale
of 2,500,000 shares of common stock at an assumed offering price of
$29 15/16 per share. See "Use of Proceeds" and "Capitalization."

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RISK FACTORS

You should carefully consider each of the following risks and all of the
other information set forth in this prospectus before deciding to invest in
shares of our common stock. Some of the following risks relate principally to
our business and the industry in which we operate. Other risks relate
principally to the securities market and ownership of our common stock. The
risks described below are not the only ones facing our company. Additional risks
not presently known to us or that we currently believe to be immaterial may also
adversely affect our business. Our business, financial condition or results of
operations could be materially adversely affected by any of these risks. The
trading price of our common stock could decline due to any of these risks, and
you may lose all or part of your investment.

OUR LEAD PRODUCT CANDIDATES ARE IN DEVELOPMENT, AND WE CANNOT BE CERTAIN THAT
ANY OF OUR PRODUCTS WILL BE COMMERCIALIZED

Our lead product candidates, C225 and BEC2, are in clinical trials. Before
we can commercialize any of our product candidates and begin to sell them to
generate revenues, we will need to demonstrate in pivotal clinical trials that
they are safe and effective and obtain the necessary approvals from the United
States Food and Drug Administration and similar foreign regulatory agencies. It
is not certain that clinical trials will demonstrate that our products are safe
and effective, or that we can obtain the required regulatory approvals to
commercialize them. With respect to C225, there can be no assurance that, even
if we were to ultimately receive regulatory approval, we would be able to
receive such approval based on the results of our ongoing Phase II clinical
trials. Further, even if we successfully develop a product, there is no
assurance that we will be able to successfully manufacture or market that
product. If we are unable to successfully commercialize C225 and BEC2, our
liquidity and financial condition could be materially negatively affected.

WE HAVE BEEN OPERATING AT A LOSS AND EXPECT TO INCUR SIGNIFICANT FUTURE LOSSES

We have had significant operating losses in each year and have not earned a
profit in any year since we formed ImClone. These operating losses and failure
to be profitable have been due mainly to the significant amount of money that we
have had to spend on research and development. As of September 30, 1999, we had
an accumulated deficit of approximately $165 million. We expect to continue to
have significant additional operating losses as we continue to expand our
product development and clinical trials and initiate marketing efforts. We may
never commercialize any of our products or achieve profitability.

WE MAY NOT BE ABLE TO OBTAIN THE EXTENSIVE GOVERNMENT APPROVALS REQUIRED TO
BRING OUR PRODUCTS TO MARKET

The research, pre-clinical development, clinical trials, manufacturing and
marketing of our products are all subject to extensive regulation by U.S. and
foreign governmental authorities. Although we intend to seek expedited approval
for certain of our products, including C225, there can be no assurance that the
FDA will grant us expedited review status for any of our potential filings.
Failure to receive regulatory approvals for our product candidates and
operations in our expected timeframes could have a material negative effect on
our liquidity and financial condition. The FDA and similar foreign regulatory
authorities regulate our clinical trials as well as our manufacturing and
marketing operations. They require us to comply with product-specific testing
and approval processes. It may take many years and cost a significant amount of
money to obtain the required regulatory approvals for our products. Once we
begin clinical trials for a new biologic therapeutic or vaccine product, it may
take five or more years to receive the required FDA approval to commercialize
that product and begin to sell and market it to the public. It may also take
several years to develop a new in vitro diagnostic product, depending upon the
clinical data requirements or approval process specified by the FDA for the
approval of the product. The FDA may also request additional data which could
substantially extend these approval processes. We cannot be certain that any of
our products will be shown to be safe and effective or that we will ultimately
receive FDA approval at the end of these approval processes. In addition, even
if granted, product approvals may be withdrawn or limited at a later time if
products do not comply with regulatory standards or if unexpected problems occur
following initial marketing.

Since our product candidates are still in clinical trials, we have not yet
sought or received regulatory approval for the commercial sale of any of our
products or for any manufacturing techniques or facilities. We and our licensees
may experience long delays or excessive costs when we do attempt to get
necessary approvals or licenses. Future federal, state, local or foreign
legislative or administrative acts could also prevent or delay
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regulatory approval of our products or the products of our licensees. We cannot
be certain that we or our corporate partners will be able to get the necessary
approvals for clinical testing, manufacturing or marketing of our products, or
that we will meet our expected timeframes for any such approvals. Any of the
following events, if they were to occur, could delay or preclude us from further
developing, marketing or realizing full commercial use of our products, which in
turn would have a material adverse effect on our business, financial condition
and results of operations:

- failure to obtain or maintain requisite governmental approvals

- failure to obtain approvals of clinically intended use of our products
under development

- identification of serious and unanticipated adverse side effects from
our products under development

Manufacturers of drugs also must comply with the applicable FDA good
manufacturing practice regulations, which include quality control and quality
assurance requirements as well as the corresponding maintenance of records and
documentation. Manufacturing facilities are subject to ongoing periodic
inspection by the FDA and corresponding state agencies, including unannounced
inspections, and must be licensed as part of the product approval process before
they can be used in commercial manufacturing. We or our present or future
suppliers may be unable to comply with the applicable good manufacturing
practice regulations and other FDA regulatory requirements.

OUR SUCCESS DEPENDS UPON OUR ABILITY TO PROTECT OUR INTELLECTUAL PROPERTY AND
OUR PROPRIETARY TECHNOLOGY

The patent position of ImClone, like that of other biopharmaceutical
companies, is generally very 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 licences to use certain 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

We may not be able to obtain patents that adequately protect our own
products. Also, our proprietary technologies could conflict with the rights of
others. Our ability to commercialize and market our products using any such
technologies could be materially and negatively affected.

We have exclusive licenses or assignments to 63 issued patents worldwide.
Thirty-seven of those are issued U.S. patents. We have exclusive licenses or
assignments to approximately 43 families of patent applications that relate to
our proprietary technology in the U.S. and in foreign countries. We cannot be
certain that patents will be issued as a result of any of these pending
applications. Nor can we be certain that any issued patents would protect or
benefit us or give us adequate protection from competing products. For example,
issued patents may be circumvented or challenged and declared invalid. In
addition, under many of the agreements under which we have licenses to the
patents or patent applications of others, we are required to meet specified
milestone or diligence requirements in order to keep our licenses. We cannot be
certain that we will satisfy any of these requirements.

We know that others have filed patent applications in various countries
that relate to several areas in which we are developing products. Some of these
patent applications have already been issued as patents and some are still
pending. The pending patent applications may issue as patents. Issued patents
are entitled to a rebuttable presumption of validity under the laws of the U.S.
and certain other countries. These issued patents may therefore limit our
ability to develop commercial products. If we need licenses to such patents to
permit us to develop or market our products, we cannot be certain that we would
be able to get such licenses on acceptable terms.

Proprietary trade secrets and unpatented know-how are important to our
research and development activities. We cannot be certain that others will not
develop the same or similar technologies on their own.
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<PAGE> 13

Although we have taken steps, including entering into confidentiality agreements
with our employees and third parties, to protect our trade secrets and
unpatented know-how and keep them secret, third parties may still obtain such
information.

The following are some of the specific areas in which we may be negatively
affected by the patents and patent applications of others:

We have an exclusive license to an issued U.S. patent for the murine form
of C225, our EGF receptor antibody product. We believe that this patent covers
C225 under the patent law doctrine of equivalents. Under this doctrine, the
subject matter of a claim is deemed to cover variations that do substantially
the same thing, in substantially the same way, to achieve the same result,
especially if the variation is known and routine. We believe, in this instance,
the doctrine of equivalents would extend protection to C225. Our licensor of
this patent did not obtain patent protection outside the U.S. for this antibody.
While this patent covers only our antibody and would not block third parties
from obtaining patents covering other antibodies to the EGF receptor, we are
pursuing additional patent protection for the use of any antibody that inhibits
the EGF receptor in combination with chemotherapy or radiation therapy, or when
used to treat refractory patients. We have exclusively licensed, from
Rhone-Poulenc Rorer, a family of patent applications seeking to cover the use of
antibodies to the EGF receptor in conjunction with chemotherapeutic agents. A
Canadian patent was issued in this family, and the patent examiner in Europe has
indicated an intent to issue a European patent. U.S. prosecution continues. We
are also currently prosecuting additional patent applications in the U.S. and
elsewhere. We cannot be certain that patents will ever be issued in respect of
these patent applications or that we will have sufficient protection for C225.

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. We have retained special
patent counsel, Kenyon & Kenyon, which 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 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. We have also received an opinion from
our regular patent counsel, Hoffmann & Baron, LLP, that we do not infringe this
third party patent. Based upon these opinions, as well as our review, in
conjunction with our regular patent counsel, of other relevant patents, we
believe that we will be able to commercialize C225 alone and in combination with
chemotherapy and radiation therapy provided we successfully complete our
clinical trials and receive the necessary FDA approvals. These opinions of
counsel, however, are 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 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.

The C225 monoclonal antibody is chimerized, meaning that it is made of
antibody fragments derived from more than one type of animal (specifically, in
the case of C225, mouse and human). Patents have been issued to other
biotechnology companies that cover the chimerization of antibodies. Therefore,
we may be required to obtain licenses under these patents, some of which have
already been obtained, before we can commercialize our own chimerized monoclonal
antibodies, including C225. We cannot be certain that we will be able to obtain
such licenses in the territories where we want to commercialize, or how much
such licenses would cost.

We know that others have been issued patents in the U.S. and Europe
covering anti-idiotypic antibodies or their use for the treatment of tumors.
These patents, if valid, could be interpreted to cover our BEC2 monoclonal
antibody and certain uses of BEC2. Merck KGaA, our worldwide licensee of BEC2,
has informed us that it has obtained non-exclusive, worldwide licenses to these
patents in order to market BEC2 in its territory. We are entitled to co-promote
BEC2 in North America. However, we cannot be certain that we can obtain the
necessary licenses on commercially acceptable terms, if at all.

We have patents and have filed patent applications to protect our
proprietary rights to anti-angiogenic therapeutics, as well as therapeutic
methods of treating angiogenic disease. We are aware that others have
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<PAGE> 14

filed patent applications that could affect our ability to commercialize some of
our anti-angiogenic therapeutics or therapeutic treatments.

We are aware that third parties have filed patent applications in areas
that could affect our ability or Abbott Laboratories's ability to commercialize
our diagnostic products. These areas could include target amplification
technology and signal amplification technology. Third party patents have already
been issued in the field of target amplification such as polymerase chain
reaction technology.

There has been significant litigation in the biopharmaceutical industry
over patents and other proprietary rights. The defense and prosecution of
intellectual property suits and related legal and administrative proceedings can
be both costly and time consuming. Litigation and interference proceedings could
result in substantial expense to us and significant diversion of effort by our
technical and management personnel. An adverse determination in any such
interference or litigation, particularly with respect to 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 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.

WE CURRENTLY HAVE LIMITED MANUFACTURING CAPACITY AND WILL NEED TO ENTER INTO
ARRANGEMENTS WITH THIRD PARTY MANUFACTURERS

So far, we have manufactured only small quantities of our products in the
laboratory and our pilot-scale manufacturing facility. In some cases, we have
produced enough for pre-clinical animal trials and early-stage clinical trials.
We can only be profitable if our products are manufactured in commercial
quantities in compliance with regulatory requirements and at acceptable costs.
However, it may be difficult for us to produce large enough quantities for
late-stage clinical trials or for more than one product candidate. Production in
commercial quantities will require us to expand our manufacturing capabilities
significantly and hire and train additional personnel. We have limited
experience in clinical-scale manufacturing and no experience in commercial-scale
manufacturing. To date, C225 has been manufactured at a 2,000 liter scale. We
expect that the commercial supply of C225 will be manufactured at the 10,000
liter scale. There can be no assurance, however, that we will be successful in
scaling up the production process for C225 to the 10,000 liter scale. Therefore,
we cannot be certain that we will be able to make the transition to late-stage
clinical or commercial production of C225 or any other of our products
successfully. In addition, we cannot be certain that our production costs will
not be higher than expected.

We are in the process of acquiring land adjacent to our current facility in
New Jersey on which we plan to build a commercial-scale manufacturing plant for
our products. The cost to build such a facility will be high and the
construction process will take several years. We have completed plans for, and
will begin construction of the plant before we have received FDA approval for
any of our product candidates. If we do not obtain FDA approval for these
product candidates, the financing and other costs associated with the new
manufacturing facility could have an adverse effect on our liquidity and
financial condition. Alternatively, if any of our products are approved for
sale, and we encounter difficulty or delays in completing the new manufacturing
facility, obtaining the required FDA approval of the facility or in
manufacturing commercial quantities of our products, such difficulties or delays
could have a material adverse effect on our business, financial condition or
results of operations.

If we obtain FDA approval of C225 prior to FDA approval of our proposed
manufacturing facility, we will need to obtain commercial-scale quantities of
C225 from one or more contract manufacturers in order to have sufficient
quantities of C225 for product launch. In any event, we intend to seek to enter
into arrangements with contract manufacturers in order to provide a second
source for our products as well as additional capacity for the manufacture of
our products. To date, we have entered into an agreement with Boehringer
Ingelheim Pharmaceuticals KG ("BI") under which BI has manufactured C225 in
relatively small quantities to supplement the quantities of C225 that we produce
and use in clinical trials. We may pursue an agreement with another third party
relating to the manufacture of C225 for both clinical trials and commercial
sale. We

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<PAGE> 15

cannot be certain that we will be able to enter into this agreement or any other
agreements with third party manufacturers on terms acceptable to us or at all.
Even if we are able to enter into such agreements, we cannot be certain that we
will be able to produce or obtain sufficient quantities for the commercial sale
of our products. Any delays in producing or obtaining commercial quantities of
our products could have a material adverse effect on our business, financial
condition and results of operations.

We are also dependent upon a sole supplier of a component of the media used
in the production of C225. If this supply were to cease, it could hinder our
ability to manufacture C225 in the quantities required.

OUR BUSINESS DEPENDS UPON OUR CORPORATE PARTNERS

So far, we have earned almost all of our revenues from research and
development funding and license fees and royalties paid to us under agreements
with our corporate partners. We expect this to continue over the next several
years. License fees may be payable to us either when we first enter into an
agreement or when and if we or our corporate partners, depending on the
agreement, reach agreed-upon research, regulatory and commercialization
milestones, or both. We do not receive any of these payments at regular
intervals; the amounts have fluctuated in the past and we expect them to
continue to fluctuate in the future. In most cases, our corporate partners can
terminate these arrangements, including their payment obligations, on relatively
short notice under specified circumstances. We cannot be certain that we will
continue to receive revenues from these arrangements, or that we will enter into
any new similar agreements.

The successful development, marketing and sale of our products worldwide is
subject to the risk of financial or other difficulties with respect to our
relationships with our corporate partners. The amount and timing of payments we
receive under our arrangements with these parties depend upon variables that are
out of our control. In addition, our corporate partners or their affiliates may
be developing their own products or technologies which may directly compete with
products that are the subject of their arrangements with us. While we believe
that our corporate partners are or will be economically motivated to work toward
successful arrangements with us, we cannot be certain that their corporate
interests and motivations will remain consistent with ours.

In December 1998, we entered into an agreement with Merck KGaA, a
German-based drug company, relating to the development, marketing and sale of
C225. Under this agreement:

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

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

- we have agreed to supply Merck KGaA, and Merck KGaA has agreed to
purchase, 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 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

In return, Merck KGaA agreed to pay up-front fees and to make cash payments
and equity investments in our business if specific milestones are achieved.
Merck KGaA will also pay us royalties on any sales of C225 outside the United
States and Canada. In addition, Merck KGaA has agreed to provide a guaranty of
our obligations under a credit agreement relating to the construction of our new
C225 manufacturing facility.

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<PAGE> 16

fees, to make cash milestone payments and to make royalty payments to us on all
sales of BEC2 outside North America.

If Merck KGaA fails to complete development of or does not commence
commercialization of C225 and BEC2, we would not receive any royalties on sales
by Merck KGaA, although the product rights would revert to us. Merck KGaA can
terminate its relationship with us under the agreement with respect to C225 at
its discretion on any milestone payment date. If Merck KGaA were to terminate
that agreement or we failed to meet certain requirements of that agreement, we
would lose one of our primary sources of funding and would have to look
elsewhere for financing. As well as losing future payments, if Merck KGaA were
to terminate the agreement because it determined that commercialization of C225
was economically unfeasible, we would have to pay back up to 50% of the
cash-based milestone payments made to date out of revenues, if any, based upon a
royalty rate applied to the gross profit from C225 sales or C225 license fees in
the United States and Canada. Additionally, the termination of the agreement due
to Merck KGaA's failure to provide the guaranty of our credit agreement
obligations with respect to our new C225 manufacturing facility, or our failure
to obtain the necessary collateral license agreements, would require us to
return all milestone payments made to date. Finally, upon termination we would
be required to use our reasonable best efforts to have Merck KGaA released from
its guaranty of our credit agreement obligations with respect to our new C225
manufacturing facility. This release of Merck KGaA would likely cause the
acceleration of our obligations under this credit agreement. Thus, termination
of the agreement with Merck KGaA relating to C225 could have a material adverse
effect on our business, financial condition and results of operations.

WE WILL CONTINUE TO NEED SIGNIFICANT AMOUNTS OF ADDITIONAL CASH AND WE CANNOT BE
SURE THAT ADDITIONAL CASH WILL BE AVAILABLE TO US

At this time and for the foreseeable future, we will need to spend a
significant amount of money for, among others, the following purposes:

- ongoing pre-clinical and clinical trials of our product candidates

- research and development of new products

- establishing both clinical-scale and commercial-scale manufacturing
capability in our own facilities and/or in the facilities of others

- marketing our products if we receive necessary regulatory approvals

- payment of dividends on our convertible series A preferred stock

We believe that our existing cash on hand and amounts expected to be
available under our credit facilities, together with net proceeds from this
offering, will be sufficient to fund ImClone through at least 2001. We are also
entitled to reimbursement from our corporate partners for certain research and
development expenditures and to certain milestone payments. However, we will
only receive future milestone payments from our corporate partners if we meet
specified research and development milestones. We have not yet achieved some of
those milestones and we cannot be certain that we will ever do so. Our C225
agreement with Merck KGaA is subject to termination at Merck's discretion on
certain dates and so we cannot be certain of the level of future payments, if
any, under this agreement. The cash available from our existing corporate
partners may be insufficient to meet our needs. We may also need to seek
additional capital through equity or debt financings or from other sources. We
cannot be certain that we will successfully complete any such arrangements or
financings. If adequate funds are not available from operations or additional
sources of financing, we may have to delay, reduce the scope of or eliminate one
or more of our research or development programs, which would materially and
adversely affect our business, financial conditions and operations.

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<PAGE> 17

ACCEPTANCE OF OUR PRODUCTS IN THE MARKETPLACE IS UNCERTAIN, AND FAILURE TO
ACHIEVE MARKET ACCEPTANCE WILL HARM OUR BUSINESS

Even if approved for marketing, our products may not achieve market
acceptance. The degree of market acceptance of our products will depend upon a
number of factors, including:

- the receipt of regulatory approvals for the uses that we are studying

- the establishment and demonstration in the medical community of the
safety and clinical efficacy of our products and their potential
advantages over existing therapeutic products

- pricing and reimbursement policies of government and third-party payors
such as insurance companies, health maintenance organizations and other
plan administrators

Physicians, patients, payors or the medical community in general may be
unwilling to accept, utilize or recommend any of our products.

WE NEED TO ESTABLISH OUR SALES, MARKETING AND DISTRIBUTION CAPABILITY

To date, we have had no experience in selling, marketing or distributing
new products. If we are successful in developing and obtaining regulatory
approval for our products under development, we will need to establish our
sales, marketing and distribution capability. Under our agreement with Merck
KGaA for C225, we have the exclusive right to market C225 in the United States
and Canada if it is approved for sale there. We also will co-develop and
co-market C225 with Merck KGaA in Japan. Under our agreement with Merck KGaA for
BEC2, we have the right to co-promote BEC2 in North America if it is approved
for sale there. If and when we want to market a new product on our own, we will
need expertise in sales and marketing. We currently plan to build our own sales
force to market and sell C225 in the United States and Canada. However, we
cannot be certain that we will be able to hire and train qualified or
experienced sales and marketing personnel or that any marketing or sales efforts
by such personnel will be successful. If we are unable to recruit or retain
suitable sales and marketing personnel, it could have a material adverse effect
on our business, financial condition and results of operations.

OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE

Our products are now in research and various stages of development or
clinical studies. Accordingly, we do not sell or receive any revenues from sales
of these products. At this time, most of our revenues come from payments we
receive from our corporate partners under license and research arrangements. Our
results of operations historically have fluctuated on a quarterly basis and can
be expected to continue to be subject to quarterly fluctuations. The level of
our revenues and results of operations at any given time is based primarily on
the following factors:

- the status of development of our various products

- 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 those 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 products
during any given period

We believe that quarterly comparisons of our financial results are not
necessarily meaningful and should not be relied upon as an indication of future
performance. These fluctuations may cause the price of our stock to fluctuate,
perhaps substantially.

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<PAGE> 18

OUR SUCCESS DEPENDS UPON OUR ABILITY TO ATTRACT AND RETAIN KEY PERSONNEL AND
CONSULTANTS

Our ability to successfully develop marketable products and to maintain a
competitive position will depend in large part on our ability to attract and
retain highly qualified scientific and management personnel. We will also need
to develop and maintain relationships with leading research institutions and
consultants. Our success is also very dependent upon the principal members of
our management, scientific staff and scientific advisory board, many of whom
have special expertise and would be difficult to replace. Competition for such
personnel and relationships is intense, and we cannot be certain that we will be
able to continue to attract and retain such personnel and maintain such
relationships.

WE MAY NOT BE ABLE TO KEEP PACE WITH TECHNOLOGICAL CHANGE OR WITH THE ADVANCES
OF OUR COMPETITORS

The biopharmaceutical industry is subject to rapid and significant
technological change. We have many competitors, including major drug and
chemical companies, specialized biotechnology firms, universities and other
research institutions. These competitors may develop technologies and products
that are more effective than our products or which would make our technology and
products obsolete and non-competitive. Many of these competitors have much
greater financial and technical resources and production and marketing
capabilities than we do. In addition, many of our competitors have much more
experience than we do in pre-clinical testing and human clinical trials of new
or improved drugs, as well as in obtaining FDA and other regulatory approvals.

We know that competitors are developing or manufacturing various products
that are used for the prevention, diagnosis or treatment of diseases that we
have targeted for product development. Some of these competitive products use
therapeutic approaches that compete directly with certain of our product
candidates. Our competitors may succeed in obtaining FDA approval for their
competitive products sooner than we do for ours. This could hurt our ability to
further develop and market our products. Also, if we do begin significant
commercial sales of our products, we will have to compete with the established
manufacturing and marketing capabilities of our competitors. Manufacturing and
marketing are areas in which we have limited or no experience.

WE MAY HAVE PRODUCT LIABILITY EXPOSURE

Because our product candidates are new treatments for diseases, with
limited, if any, past use on humans, their use during testing or after approval
could expose us to product liability claims. We cannot be certain that we would
have enough money available to satisfy any liability that might result from any
such claims. We try to obtain indemnification from our corporate partners
against certain of these types of claims. However, we cannot be certain that
these parties would honor any such indemnity obligations. Although we carry
product liability insurance, we cannot be certain that this coverage will be
adequate to protect us in the event of a successful product liability claim or
that the insurance will continue to be available on commercially reasonable
terms.

HEALTH CARE INSURERS AND OTHER ORGANIZATIONS MAY NOT PAY FOR OUR PRODUCTS, OR
MAY IMPOSE LIMITS ON REIMBURSEMENTS

The continuing efforts of government and insurance companies, health
maintenance organizations and other payors of healthcare costs to contain or
reduce costs of health care may affect our future revenues and profitability,
and the future revenues and profitability of our potential customers, suppliers
and collaborative partners and the availability of capital. For example, in
certain foreign markets, pricing or profitability of prescription
pharmaceuticals is subject to government control. In the United States, given
recent federal and state government initiatives directed at lowering the total
cost of health care, the U.S. Congress and state legislatures will likely
continue to focus on health care reform, the cost of prescription
pharmaceuticals and on the reform of the Medicare and Medicaid systems. While we
cannot predict whether any such legislative or regulatory proposals will be
adopted, the announcement or adoption of such proposals could have a material
adverse effect on our business, financial condition and results of operations.

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<PAGE> 19

Our ability to commercialize our products successfully will depend in part
on the extent to which appropriate reimbursement levels for the cost of our
products and related treatment are obtained by governmental authorities, private
health insurers and other organizations, such as HMOs. Third-party payors are
increasingly challenging the prices charged for medical products and services.
Also, the trend toward managed health care in the United States and the
concurrent growth of organizations such as HMOs, which could control or
significantly influence the purchase of health care services and products, as
well as legislative proposals to reform health care or reduce government
insurance programs, may all result in lower prices for or rejection of our
products. The cost containment measures that health care payors and providers
are instituting and the effect of any health care reform could materially
adversely affect our ability to operate profitably.

OUR COMPUTER SYSTEMS, AND OTHER COMPUTER SYSTEMS THAT AFFECT OUR BUSINESS, MAY
EXPERIENCE PROBLEMS WHEN THE CALENDAR YEAR CHANGES FROM 1999 TO 2000

We have completed a review of our internal computer systems, and we are in
the process of making inquiries of groups with which we do business with respect
to their computer systems, to determine whether these systems will experience a
"Year 2000 problem." A Year 2000 problem would result from a computer system
recognizing the first two digits of a year after the year 1999 as "19" instead
of "20," thereby reading the wrong year. We cannot be certain that we will be
able to successfully do this, or that the groups with which we do business will
identify and replace their computer systems which would cause a Year 2000
problem. The failure to identify and remedy Year 2000 problems could disrupt
important operations which could affect the development and ultimate marketing
of potential products as well as put us at a competitive disadvantage relative
to companies that have corrected such problems.

OUR STOCK PRICE MAY BE VOLATILE

The market price for our common stock could decline below the past or
current public offering prices. We believe that the following factors, among
others, have caused the market price of our common stock to fluctuate
substantially, and that they will continue to do so in the future:

- the results of preclinical testing and clinical trials by us or our
competitors

- the formation or termination of our corporate alliances

- determinations regarding our patent applications and those of others

- variations in our quarterly operating results

The stock market has recently experienced extreme price and volume
fluctuations. These fluctuations have especially affected the market price of
the stock of many high technology and healthcare-related companies. Such
fluctuations have often been unrelated to the operating performance of these
companies. Nonetheless, these broad market fluctuations may negatively affect
the market price of our common stock.

EVENTS WITH RESPECT TO OUR SHARE CAPITAL COULD CAUSE THE PRICE OF OUR COMMON
STOCK TO DECLINE

Sales of substantial amounts of our common stock in the open market, or the
availability of such shares for sale, could adversely affect the price of our
common stock. Upon completion of this offering, we expect to have 28,129,007
shares of common stock outstanding, excluding shares reserved for issuance upon
the exercise of outstanding stock options, warrants and preferred stock (or
28,504,007 shares of common stock outstanding if the underwriters'
over-allotment option is exercised in full). The following securities that may
be exercised for, or are convertible into, shares of our common stock were
issued and outstanding as of October 27, 1999:

- Warrants. Various warrants to purchase 1,791,590 shares of our common
stock, all of which are currently exercisable, at an average exercise
price of approximately $2.96 per share (subject to adjustment in certain
circumstances).

- Options. Stock options to purchase 5,883,960 shares of our common stock
at an average exercise price of approximately $11.68 per share (subject
to adjustment in certain circumstances); of this total, 2,526,669 are
currently exercisable at an average exercise price of approximately $7.06
per share.
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<PAGE> 20

- Series A Preferred Stock. 400,000 shares of our Series A Preferred Stock
are outstanding, of which 100,000 shares are currently convertible into
800,000 shares of our common stock, at a conversion price of $12.50 per
share. These shares are held by Merck KGaA.

The shares of our common stock that may be issued under the warrants and
options are either currently registered with the SEC, or will be registered with
the SEC before the shares are purchased by the holders of the warrants and
options.

Under our license agreement with Merck KGaA for C225, we are entitled to
receive from Merck KGaA up to $60 million upon our achievement of various
milestones in the development of C225. In connection with making the final $30
million of these milestone payments, Merck KGaA is entitled to receive milestone
shares from us, which, if issued, will be shares of our common stock (or other
capital stock convertible into our common stock). The number of milestone shares
issued will be determined based on premiums to then-market prices of our common
stock at the time the milestones are achieved. As of October 27, 1999, Merck
KGaA has not acquired any milestone shares convertible into common stock.

We have granted Merck KGaA certain registration rights regarding the shares
of common stock that they may acquire upon conversion of the series A preferred
shares and upon receipt of milestone shares. Specifically, Merck KGaA has the
right to require us to register, at our expense, the number of shares of common
stock into which the shares of series A preferred stock are converted according
to their terms and the number of milestone shares that are issued. Merck KGaA
may also exercise rights to have such registrable common stock registered at any
time that we file a registration statement for other shares of our common stock.
Merck KGaA may exercise these rights at any time after conversion of its shares
of series A preferred stock into shares of common stock or receipt of milestone
shares. As of October 27, 1999, Merck KGaA has not converted any series A
preferred stock into common stock.

We, our directors, our officers and certain other stockholders have agreed
that, without the prior written consent of Morgan Stanley & Co. Incorporated on
behalf of the underwriters, none of us will, during the period ending 90 days
after the date of this prospectus, sell or otherwise dispose of any shares of
our common stock, subject to certain exceptions.

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<PAGE> 21

USE OF PROCEEDS

We will receive net proceeds from this offering of about $69.5 million at
an assumed public offering price of $29 15/16 per share after deducting the
underwriting discounts and estimated expenses ($80.0 million if the underwriters
exercise their over-allotment option in full). We intend to use such proceeds:

- to fund the expansion of clinical trials

- to fund a portion of the costs of our new manufacturing facilities

- to develop a sales force in the United States

- for general corporate purposes, including research and development
expenses, and other working capital

Pending the use of the net proceeds of this offering, we will invest the
funds in short-term, interest-bearing, investment-grade securities.

PRICE RANGE OF COMMON STOCK

Our common stock is quoted on the Nasdaq National Market under the symbol
"IMCL." The following table sets forth, for the periods indicated, the range of
high and low sale prices for our common stock. On November 15, 1999, the
reported last sale price for our common stock was $29 15/16 per share.

<TABLE>
<CAPTION>
COMMON
STOCK PRICE
--------------
HIGH LOW
---- ----
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1997
First Quarter............................................... $10 1/8 $ 5 3/4
Second Quarter............................................ 7 7/8 4 5/8
Third Quarter............................................. 8 1/8 4 5/8
Fourth Quarter............................................ 8 1/2 5 21/32
YEAR ENDED DECEMBER 31, 1998
First Quarter............................................. 8 7/16 5 5/8
Second Quarter............................................ 13 7/8 7 5/8
Third Quarter............................................. 13 7/8 8 1/4
Fourth Quarter............................................ 12 1/8 5 9/16
YEAR ENDED DECEMBER 31, 1999
First Quarter............................................. 16 15/16 8 3/4
Second Quarter............................................ 26 15 1/2
Third Quarter............................................. 39 1/2 21 5/16
Fourth Quarter (through November 15, 1999)................ 33 3/16 16 1/4
</TABLE>

DIVIDEND POLICY

We have never declared cash dividends on our common stock and have no
present intention of declaring such cash dividends in the foreseeable future.
Any future determination to pay dividends will be at the discretion of our board
of directors and will be dependent upon then existing conditions, including our
financial condition, results of operations, contractual restrictions, capital
requirements, business prospects, and other factors our board of directors deems
relevant.

In addition, the terms of our Series A Convertible Preferred Stock (the
"series A preferred stock") restrict our ability to pay dividends on our common
stock. See "Description of Capital Stock."

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<PAGE> 22

CAPITALIZATION

The following table sets forth the total capitalization of our company at
September 30, 1999 and as adjusted to reflect our receipt of the estimated net
proceeds from our sale of 2,500,000 shares of common stock pursuant to this
offering at an assumed offering price of $29 15/16 per share. This table should
be read in conjunction with the Selected Consolidated Financial Data appearing
on page 23 in this prospectus.

<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1999
------------------------
ACTUAL AS ADJUSTED
--------- -----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Long-term debt.............................................. $ 2,200 $ 2,200
Other long-term liabilities, less current portion........... 1,363 1,363
Stockholders' equity:
Preferred stock, $1.00 par value; 4,000,000 shares
authorized; series A preferred stock: 400,000 shares
authorized, issued and outstanding, actual and 400,000
as adjusted (preference in liquidation $44,307,000).... 400 400
Common stock, $.001 par value; 60,000,000 shares
authorized; 25,671,324 shares issued and 25,620,507
shares outstanding, actual; 28,171,324 shares issued
and 28,120,507 shares outstanding, as adjusted......... 26 28
Additional paid-in capital................................ 191,094 260,570
Accumulated deficit....................................... (165,211) (165,211)
Treasury stock, at cost; 50,817 shares actual and 50,817
as adjusted............................................ (492) (492)
Note receivable--officer and stockholder.................. (139) (139)
Accumulated other comprehensive income.................... 384 384
--------- ---------
Total stockholders' equity............................. 26,062 95,540
--------- ---------
Total capitalization.............................. $ 29,625 $ 99,103
========= =========
</TABLE>

21
<PAGE> 23

DILUTION

Our net tangible book deficit on September 30, 1999 was $(14.9) million or
$(0.58) per common share. Net tangible book deficit per common share is
determined by dividing our tangible net worth, which equals total tangible
assets less total liabilities less the liquidation value of the series A
preferred stock, excluding accrued dividends, by the aggregate number of shares
of our common stock outstanding. After giving effect to the sale by us of the
2,500,000 shares of common stock in this offering, at an assumed public offering
price of $29 15/16 per share, our net tangible book value at September 30, 1999
would have been $54.6 million, or $1.94 per common share. This represents an
immediate increase in net tangible book value to existing stockholders of $2.52
per common share and an immediate dilution to new investors of $28.00 per common
share. The following table illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Assumed public offering price per common share.............. $29.94
Net tangible book deficit per common share as of September
30, 1999.................................................... $(0.58)
Increase per share attributable to new investors.......... 2.52
------
Net tangible book value per common share after offering..... 1.94
------
Dilution per share to new investors......................... $28.00
======
</TABLE>

Dilution is determined by subtracting net tangible book value per common
share after the offering from the public offering price per common share.

22
<PAGE> 24

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected financial data of ImClone should be read in
conjunction with, and are qualified by reference to, "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the financial
statements and notes thereto included elsewhere in this prospectus. The
statement of operations data for the years ended December 31, 1996, 1997 and
1998 and the balance sheet data as of December 31, 1997 and 1998 are derived
from, and qualified by reference to, the audited financial statements included
elsewhere in this prospectus, and should be read in conjunction with those
financial statements and notes thereto. The statement of operations data for the
nine-month periods ended September 30, 1998 and 1999 and the balance sheet data
as of September 30, 1999 are derived from our unaudited financial statements
included elsewhere in this prospectus, and which, in our opinion, have been
prepared on a basis consistent with the audited financial statements and reflect
all adjustments, consisting only of normal recurring adjustments, necessary for
a fair presentation of our results of operations and financial position. Results
for the nine months ended September 30, 1999 are not necessarily indicative of
results that may be expected for the entire year.

<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------------------- -------------------
1994 1995 1996 1997 1998 1998 1999
-------- ------- -------- -------- -------- -------- --------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.............................................. $ 950 $ 800 $ 600 $ 5,348 $ 4,193 $ 3,434 $ 1,021
Operating expenses:
Research and development............................ 11,816 8,768 11,482 16,455 21,049 15,269 22,131
General and administrative.......................... 3,348 3,739 3,961 5,356 7,145 4,174 5,784
Net interest and other income(1)...................... (2,365) (2,066) (95) (972) (2,619) (2,062) (529)
Equity in loss of affiliate........................... 342 -- -- -- -- -- --
-------- ------- -------- -------- -------- -------- --------
Loss before extraordinary item........................ (12,191) (9,641) (14,748) (15,491) (21,382) (13,947) (26,365)
Extraordinary loss on extinguishment
of debt............................................. -- -- 1,267 -- -- -- --
-------- ------- -------- -------- -------- -------- --------
Net loss.............................................. (12,191) (9,641) (16,015) (15,491) (21,382) (13,947) (26,365)
Preferred dividends (including assumed incremental
yield of $51 in 1997, $1,268 in 1998, $952 in 3Q98
and $1,005 in 3Q99)................................. -- -- -- 163 3,668 2,747 2,800
-------- ------- -------- -------- -------- -------- --------
Net loss to common stockholders....................... $(12,191) $(9,641) $(16,015) $(15,654) $(25,050) $(16,694) $(29,165)
======== ======= ======== ======== ======== ======== ========
Basic and diluted net loss per common share:
Loss before extraordinary item...................... $ (1.12) $ (0.72) $ (0.76) $ (0.67) $ (1.03) $ (0.69) $ (1.17)
Extraordinary loss on extinguishment of debt........ -- -- (0.07) -- -- -- --
-------- ------- -------- -------- -------- -------- --------
Net loss per share.................................... $ (1.12) $ (0.72) $ (0.83) $ (0.67) $ (1.03) $ (0.69) $ (1.17)
======== ======= ======== ======== ======== ======== ========
Weighted average shares outstanding................... 10,903 13,311 19,371 23,457 24,301 24,277 24,947
</TABLE>

<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF SEPTEMBER 30,
----------------------------------------------------------- -------------------
1994 1995 1996 1997 1998 1999
-------- -------- --------- --------- --------- -------------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and
securities............................. $ 3,032 $ 10,207 $ 13,514 $ 59,610 $ 46,739 $ 34,263
Working capital........................ (1,470) 3,735 7,695 56,671 35,073 12,061
Total assets........................... 17,467 22,803 25,885 75,780 62,252 53,594
Long-term obligations, less current
portion.............................. 4,487 4,235 2,775 3,430 3,746 3,563
Accumulated deficit.................... (76,317) (85,958) (101,973) (117,464) (138,846) (165,211)
Stockholders' equity................... 8,176 11,823 16,589 68,226 45,174 26,062
</TABLE>

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

23
<PAGE> 25

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 which affected our financial position and
operating results during the periods included in the accompanying financial
statements.

OVERVIEW

We are a biopharmaceutical company engaged in the research and development
of novel cancer treatments. We are currently pursuing three research and
development programs that we believe show promise for treating cancer: growth
factor inhibitors, therapeutic cancer vaccines and angiogenesis inhibitors.
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 $165 million for the period from our inception to
September 30, 1999. We expect to incur significant additional operating losses.

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 products

- 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 products
during any given period

Before we can commercialize our products and begin to sell them to generate
revenues, they will need additional development and clinical testing, which will
cost a lot of money. 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.
See "Risk Factors -- Our lead product candidates are in development, and we
cannot be certain that any of our products will be commercialized."

In December 1998, we entered into an agreement with Merck KGaA, a
German-based drug company, relating to the development, marketing and sale of
C225. Under this agreement: we have retained the rights to develop and market
C225 within the United States and Canada; we have granted Merck KGaA exclusive
rights, except in Japan, to develop and market C225 outside of the United States
and Canada; we have agreed to supply Merck KGaA, and Merck KGaA will purchase
from us, C225 for the conduct of clinical trials and the commercialization of
the product outside of the United States and Canada; we will co-develop and co-
market C225 in Japan with Merck KGaA; and 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 million 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 million if further milestones are achieved for which Merck
KGaA will receive equity in ImClone which 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 our obligations under a $30 million credit facility
relating to the

24
<PAGE> 26

construction of a new C225 commercial manufacturing facility, (4) fund clinical
development of C225 outside of the United States and Canada and (5) pay us
royalties on future sales of C225 in its territory, if any.

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), (2) for a one-year period after
first commercial sale of 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 C225 sales or C225 license
fees in the United States and Canada), or (3) in the event we do not obtain
certain collateral license agreements, in which case Merck KGaA also is entitled
to a return of all cash milestone payments to date, plus liquidated damages of
$500,000. Upon termination of the agreement, we would also be required to use
our best reasonable efforts to cause the release of Merck KGaA as guarantor of
the credit facility for our new manufacturing facility.

Through October 27, 1999, Merck KGaA has paid us $14 million in up-front
and milestone fees and has confirmed that we have achieved milestones with
respect to which we are entitled to receive an additional $6 million in
payments. As of September 30, 1999, $14 million had been received and recorded
as fees potentially refundable from a corporate partner and will be recognized
as revenues upon Merck KGaA's agreeing on the production concept for the new
C225 manufacturing facility and our obtaining the necessary collateral license
agreements. In April 1999, the parties agreed on the production concept for the
manufacturing facility and are currently working toward securing Merck KGaA's
guaranty of our obligations under a $30 million credit facility. We are also in
the process of negotiating the necessary collateral license agreements.

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 agreed to pay up-front fees,
to make cash milestone payments and to make royalty payments to us on all sales
of BEC2 outside North America. In return, Merck KGaA has made research support
payments to us totaling $4.7 million and is required to make milestone payments
to us of up to $22.5 million, of which $3 million has been received through
October 27, 1999. 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.

RESULTS OF OPERATIONS

NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998

Revenues. Revenues for the nine months ended September 30, 1999 and 1998
were $1,021,000 and $3,434,000, respectively, a decrease of $2,413,000, or 70%.
Revenues for the nine months ended September 30, 1999 primarily consisted of (1)
$225,000 in research support from our partnership with American Home Products
Corporation ("American Home") in infectious disease vaccines, (2) $533,000 in
research and support payments from our research and license agreement with Merck
KGaA for our principal cancer vaccine product candidate, BEC2, and (3) $258,000
in royalty revenue from our strategic alliance with Abbott Laboratories
("Abbott") in diagnostics. Revenues for the nine months ended September 30, 1998
consisted of (1) $225,000 in research support from our partnership with American
Home in infectious disease vaccines, (2) $1,000,000 in milestone revenue and
$1,875,000 in research and support payments from our research and license
agreement with Merck for BEC2, (3) $236,000 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 National Cancer Institute (the
"NCI") for a program in cancer-related angiogenesis. The decrease in revenues
for the nine months ended September 30, 1999 was primarily attributable to (1)
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 (2) a decrease in milestone revenue which can vary
widely from period to period depending upon the timing of the achievement of
various research and development milestones for products under development.

Operating Expenses: Research and Development. Total operating expenses for
the nine months ended September 30, 1999 and 1998 were $27,915,000 and
$19,443,000, respectively, an increase of $8,472,000, or

25
<PAGE> 27

44%. Research and development expenses for the nine months ended September 30,
1999 and 1998 were $22,131,000 and $15,269,000, respectively, an increase of
$6,862,000 or 45%. Such amounts for the nine months ended September 30, 1999 and
1998 represented 79% of total operating expenses in both years. The increase in
research and development expenses for the nine months ended September 30, 1999
was primarily attributable to (1) the costs associated with the initiation of a
pivotal Phase III clinical trial of C225 in treating head and neck cancer in
combination with radiation, (2) the costs associated with the initiation of two
additional Phase II clinical trials of 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
C225, (4) 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.

General and Administrative Expenses. General and administrative expenses
include administrative personnel 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 nine months ended September 30, 1999 and 1998
were $5,784,000 and $4,174,000, respectively, an increase of $1,610,000, or 39%.
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 C225 and (2)
expenses associated with the pursuit of strategic corporate alliances and other
corporate development expenses. We expect general and administrative expenses to
increase in future periods to support our planned increases in research,
development, clinical and manufacturing efforts.

Interest and Other Income or Loss and Interest Expense. Interest income
was $1,757,000 for the nine months ended September 30, 1999 compared with
$2,348,000 for the nine months ended September 30, 1998, a decrease of $591,000,
or 25%. The decrease was primarily attributable to the decrease in our
investment portfolio as a result of funding our operations. Interest expense was
$375,000 and $320,000 for the nine months ended September 30, 1999 and 1998,
respectively, an increase of $55,000 or 17%. Interest expense for both periods
primarily 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 December
1996 Financing Agreement (the "1996 Financing Agreement") and an April 1998
Financing Agreement (the "1998 Financing Agreement") with Finova Technology
Finance, Inc. ("Finova"). The increase was primarily attributable to entering
into additional capital leases. We recorded losses on securities available for
sale for the nine months ended September 30, 1999 in the amount of $853,000 as
compared to gains of $34,000 for the nine months ended September 30, 1998. The
loss for the nine months ended September 30, 1999 is primarily attributable to
the $828,000 write-down of our investment in CombiChem Inc. ("CombiChem") as a
result of an other than temporary decline. In October 1999, CombiChem announced
that it is being acquired and holders of its shares will receive cash
consideration of approximately $6.75 per share, subject to completion of the
acquisition, which would represent a financial reporting gain with respect to
the CombiChem shares of approximately $937,000, after considering the
aforementioned write-down. See "-- Liquidity and Capital Resources."

Net Losses. We had net losses to common stockholders of $29,165,000 or
$1.17 per share for the nine months ended September 30, 1999 compared with
$16,694,000 or $0.69 per share for the nine months ended September 30, 1998. The
increase in the net losses and per share net loss to common stockholders was due
primarily to the factors noted above.

YEARS ENDED DECEMBER 31, 1998 AND 1997

Revenues. Revenues for the years ended December 31, 1998 and 1997 were
$4,193,000 and $5,348,000, respectively, a decrease of $1,155,000, or 22%.
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,

26
<PAGE> 28

(2) $1 million in milestone revenue and $2.5 million 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. Revenues for the year ended December 31,
1997 consisted of (1) $300,000 in research support from our partnership with
American Home in infectious disease vaccines, (2) $2 million in milestone
revenue and $1.7 million in research and support payments from our agreement
with Merck KGaA for BEC2 and (3) $1 million in milestone revenue and $381,000 in
royalty revenue from our strategic alliance with Abbott in diagnostics. The
decrease in revenues for the year ended December 31, 1998 was primarily
attributable to a decrease in milestone revenue which can vary widely from
period to period depending upon the timing of the achievement of various
research and development milestones for products under development.

Operating Expenses: Research and Development. Total operating expenses for
the years ended December 31, 1998 and 1997 were $28,194,000 and $21,811,000,
respectively, an increase of $6,383,000, or 29%. Research and development
expenses for the years ended December 31, 1998 and 1997 were $21,049,000 and
$16,455,000, respectively, an increase of $4,594,000 or 28%. Such amounts for
both years ended December 31, 1998 and 1997 represented 75% of total operating
expenses. The increase in research and development expenses for the year ended
December 31, 1998 was partially attributable to (1) the costs associated with an
agreement in principle for the supplemental further development and manufacture
of clinical grade C225 to support ongoing and future human clinical trials, (2)
expenditures associated with additional staffing in the area of discovery
research, (3) the initiation of new supported research programs with academic
institutions, (4) the establishment of corporate in-licensing arrangements and
(5) expenditures in the functional areas of product development, manufacturing,
clinical and regulatory affairs associated with C225. This increase was
partially offset by the one-time $2.2 million non-cash compensation expense
recorded for the year ended December 31, 1997 in connection with the extension
of the term of an officer's warrant to purchase 397,000 shares of common stock.

General and Administrative Expenses. General and administrative expenses
include administrative personnel 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, 1998 and 1997 were
$7,145,000 and $5,356,000, respectively, an increase of $1,789,000, or 33%. The
increase in general and administrative expenses primarily reflected (1)
additional support staffing for expanding our research, development, clinical
and manufacturing efforts, particularly with respect to C225 and (2) expenses
associated with the pursuit of strategic corporate alliances and other corporate
development expenses. We expect general and administrative expenses to increase
in future periods to support our planned increases in research, development,
clinical and manufacturing efforts.

Interest and Other Income and Interest Expense. Interest and other income
was $3,054,000 for the year ended December 31, 1998 compared to $1,523,000 for
the year ended December 31, 1997, an increase of $1,531,000, or 101%. The
increase was primarily attributable to the increased interest income earned from
higher cash balances in our investment portfolio resulting from the private
placement of series A preferred stock completed in December 1997. Interest
expense was $435,000 and $551,000 for the years ended December 31, 1998 and
1997, respectively, a decrease of $116,000, or 21%. Interest expense for both
periods primarily included (1) interest on the 1990 IDA Bond, which has a
principal amount of $2.2 million, (2) interest recorded on capital lease
obligations and (3) interest recorded on a liability to Pharmacia and Upjohn
Inc. ("Pharmacia"), for the reacquisition of the worldwide rights to a
recombinant mutein form of Interleukin-6 ("IL-6m") as well as clinical material
manufactured and supplied to us by Pharmacia. The decrease was primarily
attributable to the (1) December 1997 repayment of an IDA Bond issued in 1986
(the "1986 IDA Bond") with a principal amount of $2.1 million and (2) February
1998 repayment of the remaining liability to Pharmacia.

Net Losses. We had net losses to common stockholders of $25,050,000, or
$1.03 per share, for the year ended December 31, 1998 compared with $15,654,000,
or $0.67 per share, for the year ended December 31, 1997. The increase in the
net losses and per share net loss to common stockholders was due primarily to
the factors noted above and the accrued dividends and incremental yield on the
series A preferred stock.

27
<PAGE> 29

YEARS ENDED DECEMBER 31, 1997 AND DECEMBER 31, 1996

Revenues. Revenues for the years ended December 31, 1997 and 1996 were
$5,348,000 and $600,000 respectively, an increase of $4,748,000. Revenue for the
year ended December 31, 1997 consisted of (1) $300,000 in research support from
our partnership with American Home in infectious disease vaccines, (2) $2
million in milestone revenue and $1.7 million in research and support payments
from our agreement with Merck KGaA for BEC2, and (3) $1 million in milestone
payments and $381,000 in royalty revenue from our strategic alliance with Abbott
in diagnostics. Revenues for the year ended December 31, 1996 consisted of (1)
$300,000 in research support from our partnership with American Home in
infectious disease vaccines, (2) $225,000 in royalty revenue from our strategic
alliance with Abbott in diagnostics, and (3) $75,000 in license fees from our
cross-licensing agreement with Immunex Corporation ("Immunex") for novel
hematopoietic growth factors. The increase in revenues for the year ended
December 31, 1997 was primarily attributable to (1) our having achieved
development milestones under our agreement with Merck KGaA for BEC2, and (2) our
strategic alliance with Abbott. Milestone revenue can vary widely from period to
period depending upon the timing of the achievement of various research and
development milestones for products under development.

Operating Expenses: Research and Development. Total operating expenses for
the years ended December 31, 1997 and 1996 were $21,811,000 and $15,443,000,
respectively, an increase of $6,368,000 or 41%. Research and development
expenses for the years ended December 31, 1997 and 1996 were $16,455,000 and
$11,482,000, respectively, an increase of $4,973,000 or 43%. Such amounts for
the years ended December 31, 1997 and December 31, 1996 represented 75% and 74%,
respectively, of total operating expenses. The increase in research and
development expenses for the year ended December 31, 1997 was partly
attributable to (1) a one-time $2.2 million non-cash compensation expense
recorded in connection with the extension of the term of an officer's warrant to
purchase 397,000 shares of our common stock, and (2) costs associated with
additional staffing, contract manufacturing and testing, and expenditures in the
functional areas of product development, manufacturing and clinical and
regulatory affairs associated with C225, and (3) growth in the area of discovery
research for future product candidates.

General and Administrative Expenses. General and administrative expenses
include administrative personnel 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, 1997 and 1996 were
$5,356,000 and $3,961,000, respectively, an increase of $1,395,000 or 35%. The
increase in general and administrative expenses primarily reflects (1) $279,000
non-cash compensation expense recorded in connection with an option grant to one
of our officers, and (2) additional support staffing for our expanding research,
development, clinical and manufacturing efforts, particularly with respect to
C225. We expect general and administrative expenses to increase in future
periods to support planned increases in research and development.

Interest and Other Income and Interest Expense. Interest and other income
was $1,523,000 for the year ended December 31, 1997 compared to $918,000 for the
year ended December 31, 1996, an increase of $605,000, or 66%. The increase was
primarily attributable to the increased interest income earned from higher cash
balances in our investment portfolio resulting from the proceeds received from a
public offering of our common stock completed in March 1997 and a private
placement of series A preferred stock completed in December 1997. Interest
expenses was $551,000 and $823,000 for the years ended December 31, 1997 and
1996, respectively, a decrease of $272,000, or 33%. Interest expense for both
periods primarily included (1) interest on two then outstanding IDA Bonds with
an aggregate principal amount of $4,313,000 ($2,113,000 of which was repaid in
December 1997), and (2) interest recorded on the liability to Pharmacia, for the
reacquisition of the worldwide rights to IL-6m as well as clinical material
manufactured and supplied to us by Pharmacia. The decrease was primarily
attributable to the May 1996 exchange of debt for our common stock with the
Oracle Group and one of our directors.

Net Losses. We had net losses to common stockholders of $15,654,000, or
$0.67 per share, for the year ended December 31, 1997, compared with
$16,015,000, or $0.83 per share, for the year ended December 31, 1996. The year
ended December 31, 1996 included a $1,267,000 or $0.07 per share extraordinary
loss on early

28
<PAGE> 30

extinguishment of debt. This extraordinary loss resulted from the issuance of
our common stock in lieu of cash repayment of a $2.5 million loan due the Oracle
Group and a $180,000 long-term note owed to one of our directors. The decrease
in the per share net loss to common stockholders is due primarily to the
increased number of shares of our common stock outstanding as a result of the
March 1997 public offering of our common stock.

LIQUIDITY AND CAPITAL RESOURCES

At September 30, 1999, our principal sources of liquidity consisted of cash
and cash equivalents and short-term securities available for sale of
approximately $34.3 million. Since inception we have financed our operations
through the following means:

- Public and private sales of equity securities in financing transactions
have raised approximately $163.8 million in net proceeds.

- We have earned approximately $33,876,000 from license fees, contract
research and development fees and royalties from collaborative partners,
including approximately $1,021,000 earned during the nine months ended
September 30, 1999. Additionally, we have received $14,000,000 in
potentially refundable fees from our C225 development and license
agreement with Merck KGaA. And, as of October 27, 1999, Merck KGaA has
confirmed that we have achieved milestones, with respect to which we are
entitled to receive an additional $6,000,000 in payments. The amounts
from Merck KGaA with respect to C225 have yet to be recognized as
revenue.

- We have earned approximately $10.2 million in interest income, including
approximately $1.8 million earned during the nine months ended September
30, 1999.

- The sale of the IDA Bonds in each of 1985, 1986 and 1990 raised an
aggregate of $6.3 million, 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 $2.2 million is
outstanding as of September 30, 1999.

The 1990 IDA Bond in the outstanding principal amount of $2.2 million
becomes due in 2004. We will incur annual interest on the 1990 IDA Bond
aggregating approximately $250,000. 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.

We signed a definitive agreement in April 1999 with BI for the further
development, production scale-up and manufacture of our lead therapeutic product
candidate, C225, for use in human clinical trials. Services pursuant to this
agreement commenced in April 1998 pursuant to an agreement in principle. We
estimate that the total cost under the agreement, including the cost of
additional amounts of material we had the right to request, will be DM12,100,000
or $6,636,000 as of September 30, 1999. As of September 30, 1999, we had
incurred approximately DM3,940,000, of which DM3,720,000 has been paid, for
services provided under this agreement. We do not currently hedge our exposure
to the foreign currency risk associated with this agreement. We may pursue an
agreement with another third party relating to the manufacture of C225 for both
clinical trials and commercial sale. Any such agreement would likely require us
to expend substantial funds over the next several years for process development
and for supply of C225.

We have obligations under various capital leases for certain laboratory,
office and computer equipment and also certain building improvements primarily
under the 1996 Financing Agreement and the 1998 Financing Agreement with Finova.
The 1996 Financing Agreement allowed us to finance the lease of equipment and
make certain building and leasehold improvements to existing facilities
involving amounts totaling approximately $2.5 million. Each lease has a fair
market value purchase option at the expiration of a 42-month term. Pursuant to
the 1996 Financing Agreement, we issued to Finova a warrant expiring December
31, 1999 to purchase 23,220 shares of our common stock at an exercise price of
$9.69 per share. We recorded a non-cash debt discount of approximately $125,000
in connection with this financing, which

29
<PAGE> 31

discount is being amortized over the 42-month term of the first lease. The 1996
Financing Agreement with Finova expired in December 1997 and we utilized only
$1.7 million of the full $2.5 million under the agreement. In April 1998, we
entered into the 1998 Financing Agreement with Finova totaling approximately $2
million. The terms of the 1998 Financing Agreement are substantially similar to
the now expired 1996 Financing Agreement except that each lease has a 48-month
term. As of September 30, 1999, we had entered into twelve individual leases
under both the 1996 Financing Agreement and the 1998 Financing Agreement
aggregating a total cost of $3.7 million. The 1998 Financing Agreement expired
in May 1999.

We rent our New York City facility under a lease which was scheduled to
expire in March 1999. We renewed the entire lease for a term commencing as of
January 1, 1999 through December 2004 and have begun to retrofit the facility to
better suit our needs at an expected cost of approximately $2 million.

Under our agreement with Merck KGaA for C225, we developed, in consultation
with Merck KGaA, a production concept for a new manufacturing facility for the
commercial production of C225. Merck KGaA is to provide us, subject to certain
conditions, with a guaranty under a $30 million credit facility for the
build-out of this facility. We have determined to erect this facility adjacent
to our current manufacturing facility in New Jersey, which supplies C225 to
support our clinical trials. We plan to begin construction on this facility in
the first half of 2000 and estimate that the total cost will be approximately
$45 million. We are currently in the process of finalizing the terms of the loan
agreement and guaranty. We expect to fund the remaining cost of this facility
through a combination of cash on hand and equipment financing transactions.

Total capital expenditures made during the nine months ended September 30,
1999 were $4,628,000, of which $532,000 have been reimbursed in accordance with
the terms of the 1998 Financing Agreement with Finova. Of the total capital
expenditures made during the nine months ended September 30, 1999, $1,788,000
related to the purchase of equipment for and costs associated with the retrofit
of our corporate office and research laboratories in New York. The balance of
capital additions include $1,821,000 in engineering and other pre-construction
costs associated with the build-out of the commercial manufacturing facility to
be erected adjacent to our current manufacturing facility in New Jersey. The
remaining $1,019,000 related to improving and equipping our existing
manufacturing facility.

The holders of the 400,000 shares of series A preferred stock are entitled
to receive cumulative dividends at an annual rate of $6.00 per share. Dividends
accrue as of 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 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. Accrued dividends were $4,307,000 at September 30, 1999.

We believe that our existing cash on hand and amounts expected to be
available under our credit facilities, together with the net proceeds from this
offering, should enable us to maintain our current and planned operations
through at least 2001. We are also entitled to reimbursement for certain
research and development expenditures and to certain milestone payments,
including $16 million in cash-based milestone payments and $30 million in
equity-based milestone payments from our C225 development and license agreement
with Merck KGaA, which are to be paid subject to our attaining research and
development milestones, certain of which have recently been attained, and
certain other conditions. There can be no assurance that we will achieve the
unachieved milestones. Additionally, the termination of the agreement due to our
failure to obtain the necessary collateral license agreements would require us
to return all milestone payments made to date, plus $500,000 in liquidated
damages. Our future working capital and capital requirements will depend upon
numerous factors, including, but not limited to:

- progress 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
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<PAGE> 32

- status of competitors

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

- costs of establishing both clinical scale and commercial scale
manufacturing capacity in our facility and those of others

In order to fund our capital needs after 2001, 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, 1998, we had net operating loss carryforwards for United
States federal income tax purposes of approximately $131 million, which expire
at various dates from 2000 through 2018. At December 31, 1998 we had research
credit carryforwards of approximately $4.7 million, which expire at various
dates from 2009 through 2018. 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 two such ownership changes. As a result, we are only
permitted to use in any one year approximately $5.2 million 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.
It has not been determined whether the offering described in this prospectus
will result in additional ownership changes that would further limit the use of
our net operating losses and research credit carryforwards.

MARKET RISK

Our holdings of financial instruments are comprised of a mix of any of 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 rated 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 typically
invest in the shorter-end of the maturity spectrum, or if longer, in highly
liquid debt instruments with periodic interest rate adjustments. We also have
certain foreign exchange currency risk. See footnote 4 of the unaudited
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 September 30, 1999:

<TABLE>
<CAPTION>
2004 AND
1999 2000 2001 2002 2003 THEREAFTER TOTAL FAIR VALUE
---- ---------- ---- ---- ---- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed Rate................. -- $2,844,000 -- -- -- -- $ 2,844,000 $ 2,843,000
Average Interest Rate...... -- 5.10% -- -- -- -- 5.10% --
Variable Rate.............. -- -- -- -- -- $30,214,000(1) $30,214,000 $30,209,000
Average Interest Rate...... -- -- -- -- -- 5.59% 5.59% --
-- ---------- --- -- -- ----------- ----------- -----------
-- $2,844,000 -- -- -- $30,214,000(1) $33,058,000 $33,052,000
== ========== === == == =========== =========== ===========
</TABLE>

- ------------
(1) These holdings consist of U.S. corporate and foreign corporate floating rate
notes. Interest on the securities are adjusted at fixed dates using
prevailing interest rates. These holdings are highly liquid and we consider
the potential for loss of principal to be minimal.

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<PAGE> 33

YEAR 2000

The "Year 2000 problem" involves mainly the inability of certain computer
programs and microprocessing devices to differentiate between the year 1900 and
the year 2000 because two-digit rather than four-digit fields were used to
identify the year. There are a variety of related "date" problems, including the
use by older programs and devices of algorithms that will fail to correctly
identify the year 2000 and certain other years in the twenty-first century as
leap years. A Year 2000 problem could cause a computer system or microprocessor
that is date sensitive to malfunction, resulting in system failures. Such
failures could cause disruptions of our operations, including, without
limitation, the systems in place at our Somerville, New Jersey clinical-scale
manufacturing facility, computers, communication devices and laboratory
instrumentation and systems which use date-based information in our research and
development and scientific testing or, possibly, in our pre-clinical or clinical
trials.

To deal with the Year 2000 problem we have developed a Year 2000 program
that has three main phases: (1) review of information technology and
non-information-technology systems for the purposes of assessing the potential
impact of Year 2000 on our business and identifying non-Year 2000 compliant
systems; (2) remediation and development of contingency plans; and (3) testing.
These phases are not necessarily sequential. We have a Year 2000 team to
coordinate and carry out the various phases and Reporting Responsible Persons in
each critical area, including computer hardware, software, other hardware,
laboratory equipment, collaborators and process/clinical development. While we
believe that our program is and will be adequate to address Year 2000 problems,
there can be no assurance that our operations will not be adversely affected.
While we have devoted significant resources to dealing with the Year 2000
problem, our efforts to date have not caused the deferral of any other
significant information technology projects.

We have reviewed the potential impact of the "Y2K" bug on our research and
development, product development, manufacturing, financial, communication and
administrative operations. We determined which systems are critical to our
business. We also determined which systems were non-Year 2000 compliant.

We are in the process of remediating through corrective programming
modifications or system replacement all mission critical systems that we
identified as non-compliant. We believe that this process is substantially
completed. In addition, for systems that we have identified as non-mission
critical, we also intend to either correct them through programming changes or
replace them with compliant software and any necessary hardware or, possibly,
simply discontinue using the system.

We have incurred approximately $350,000 on our Year 2000 program through
September 30, 1999. This includes the purchase of third-party software and
required hardware to run such software as well as the cost of modifying
software. We estimate that any additional costs incurred to complete our
remediation plan will not be material.

In addition to the review of internal systems, we are making inquiries of
our critical suppliers, corporate partners, manufacturers, clinical study sites,
service suppliers, communications providers, lessors, utilities, and banks whose
system failures or non-compliant products could have an adverse impact on our
operations. While we are not currently aware of any material Year 2000 problems
involving such entities that are likely to adversely affect us, there can be no
assurance that there will not be such problems or that, if discovered, they will
be timely remediated.

We have developed contingency plans to deal with possible disruptions of
important operations such as discovery research, product development,
manufacturing and ongoing clinical trials. Such disruptions could affect the
development and ultimate marketing of potential products as well as put us at a
competitive disadvantage relative to companies that have corrected such
problems. These contingency plans may need to be refined as more information
becomes available.

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<PAGE> 34

BUSINESS

OVERVIEW

We are a biopharmaceutical company engaged in the research and development
of novel cancer treatments. We focus on what we believe are three promising
strategies for treating cancer: growth factor inhibitors, therapeutic cancer
vaccines and angiogenesis inhibitors.

Our lead product candidate, 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. 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. C225 is currently in pivotal trials for treating head and neck
cancer. Upon the receipt of regulatory approval, we intend to market C225 in the
United States and Canada. We will rely on our development and marketing partner,
Merck KGaA, to market C225 outside the United States and Canada and to pay us a
royalty on all such sales. We are responsible for the manufacture and supply of
C225 for all clinical trials and eventual commercial sales.

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 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 c-p1C11 as
our lead clinical candidate for angiogenesis inhibition. c-p1C11 is an antibody
that binds selectively and with high affinity to KDR, a principal VEGF receptor,
thereby inhibiting angiogenesis. We plan to file an application with the FDA in
the fourth quarter of 1999 in order to commence clinical trials of c-p1C11.

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 inhibitors, 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.

DEVELOPMENT PROGRAMS

C225 CANCER THERAPEUTIC

The activation of the 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 overexpression of the EGF
receptor. For example, according to the NCI, more than 61,000 cases of head and
neck cancer are diagnosed in the United States each year. More than 90% of head
and neck cancer cases have been shown to overexpress the EGF receptor on the
surface of the tumor cells. Similarly, according to the NCI, there are
approximately 132,000 cases of colorectal cancer diagnosed in the United States
each year, and in roughly half of these cases, the tumor cells have an
overexpression of the EGF receptor. Other types of cancer are also
characterized, in certain patients, by overexpression 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.

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
C225 in numerous clinical trials, including several Phase I/II trials at
Sloan-Kettering, Yale Cancer Center, University of Virginia, MD Anderson Cancer
Center and the University of Alabama. In these studies, we have given C225
intravenously at selected doses, both alone and in combination with radiation

33
<PAGE> 35

therapy or chemotherapy. To date, we have tested C225 in approximately 200
patients with various solid cancers, such as head and neck, colorectal, lung,
renal, breast and prostate cancers.

In June 1999, we completed a Phase I/II trial in which 12 patients with
advanced head and neck cancer were treated with C225 in combination with
cisplatin, a widely used chemotherapeutic drug. At the completion of the trial,
two of the nine evaluable patients had achieved a complete response and four had
achieved a partial response. Most of the patients had previously received
treatment, including standard chemotherapy, radiation therapy or experimental
treatments, and either did not respond or thereafter relapsed. In particular,
three of the six responders (including the two complete responders) had
previously been treated with a regimen containing cisplatin and relapsed
following such treatment.

In January 1999, we completed a Phase I/II trial in which 16 patients with
advanced head and neck cancer were treated with C225 in combination with
radiation therapy. At the completion of the trial, all 15 evaluable patients had
responded to therapy; 13 of the patients had achieved a complete response and
two had achieved a partial response. This compares to historical response rates
of approximately 40% in similar patients treated with radiation alone.

We believe these trials have established an appropriate dosing regimen and
have provided preliminary evidence of efficacy. The primary side effect observed
in these trials has been a folliculitis skin rash, similar in appearance to
acne, that has varied in severity depending on the patient. The rash subsides
following completion of therapy. Additionally, of the approximately 200 patients
who have received C225 to date, three 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.

While the data from the C225 clinical trials conducted to date have been
encouraging, the results from these trials are not sufficient to establish that
C225 is safe or effective in treating cancer.

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<PAGE> 36

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

<TABLE>
<CAPTION>
NUMBER OF
PATIENTS TO
BE ENROLLED
TRIAL/INDICATION TREATMENT IN STUDY COMMENTS
- -------------------- ------------------ ----------- ---------------------------------------
<S> <C> <C> <C>
PHASE III - C225 + radiation 416 - open-label, stratified, randomized
head and neck (vs. radiation study
cancer alone) - study initiated February 1999
- 8-week course of - patient treatment commenced April
treatment 1999
- 50+ sites expected
- primary endpoint: local regional
disease control at one year

PHASE III - C225 + cisplatin 114 - double-blinded, placebo-controlled,
head and neck (vs. placebo + randomized study
cancer cisplatin) - conducted in cooperation with the
- 8-week course of Eastern Cooperative Oncology Group
treatment - study initiated June 1999
- patient treatment expected to
commence November 1999
- 50+ sites expected
- primary endpoint: progression-free
survival

PHASE II - C225 + cisplatin 175 - open-label, stratified,
refractory head - 6-week course of non-randomized study
and neck cancer treatment - 98 patients expected to be treated
(patients with C225
previously failed - patients are stratified by disease
regimen containing progression or stable disease
cisplatin) - study initiated June 1999
- patient treatment commenced September
1999
- 40+ sites expected
- primary endpoint: response rate

PHASE II - C225 + 98 - open-label, stratified,
refractory irinotecan non-randomized study
colorectal cancer - 6-week course of - patients are stratified by disease
(patients treatment progression or stable disease
previously failed - study initiated July 1999
regimen containing - patient treatment commenced October
irinotecan) 1999
- 20+ sites expected
- primary endpoint: response rate
</TABLE>

We expect that results will be available from the two Phase III studies
described above during 2001. We expect that enough information may be available
from the two Phase II studies described above during the first half of 2000 to
determine whether the data are sufficient to support an application for FDA
approval of C225. We expect to conduct several additional Phase II clinical
trials to continue to determine whether C225 may be effective in treating other
types of cancer. These may include pancreatic, lung and renal cancer. We also
expect to conduct C225 clinical trials with Merck KGaA in Europe. There can be
no assurance that we will receive regulatory approval for C225 based on the
results of our ongoing Phase II clinical trials or any of our other ongoing or
anticipated C225 clinical trials.

We have entered into a development and marketing agreement with Merck KGaA
relating to C225. Under this agreement, we have retained the right to develop
and market C225 within the United States and Canada, and we have granted Merck
KGaA the exclusive right, except in Japan (where we will co-develop

35
<PAGE> 37

and co-market C225 with Merck KGaA), to develop and market C225 outside of the
United States and Canada. Under the agreement, we will manufacture 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 C225 outside of
the United States and Canada. Through October 27, 1999, we have received $14
million in up-front fees and milestone payments from Merck KGaA and Merck KGaA
has confirmed that we have achieved milestones with respect to which we are
entitled to receive an additional $6 million in payments under this agreement.
In addition, Merck KGaA has agreed to provide a guaranty of our credit agreement
obligations relating to the construction of our new C225 commercial
manufacturing facility.

As described above, we are testing C225 in several different types of
cancer. While in certain cancer types, like head and neck cancer, the EGF
receptor is overexpressed in nearly every patient with such cancer, in others,
like colorectal cancer, 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 C225 is approved for treating particular cancer types, standard
diagnostic kits will need to be available commercially. We are in late stage
discussions with several different companies capable of developing, obtaining
regulatory approval for and commercializing such an assay in a timely fashion so
that it will be readily available both for our ongoing clinical trials and for
commercialization.

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.

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 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
during 2001.

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 the Phase III pivotal trial. In addition, we intend to be the
worldwide manufacturer of BEC2.

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<PAGE> 38

MONOCLONAL ANTIBODY INHIBITOR OF ANGIOGENESIS

Our general experience with growth factors, particularly the use of 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.

c-p1C11 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.
c-p1C11 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 expect to file an IND application with the FDA by the end of 1999 in
order to commence clinical trials of c-p1C11.

We believe c-p1C11 will be effective in treating many solid 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.

IMCLONE'S 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 inhibitors, therapeutic 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 synthetic 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 INHIBITORS

We are conducting a research program to develop inhibitors to 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 inhibit
the binding of growth factors to 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.

In October 1997, we entered into an agreement with CombiChem, a
combinational chemistry company, to utilize their library of structures of
chemical compounds to help us identify and synthesize novel small molecule
candidates that interfere with the function of growth factor receptors.
Performance under this agreement is substantially complete but for the transfer
to us of small molecule candidates and related information. We have also entered
into an agreement with the Institute for Molecular Medicine in Freiburg,
Germany, which permits us to test small molecules as therapeutic candidates to
see if they are effective in inhibiting various tyrosine kinase receptors.

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.

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<PAGE> 39

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.

RESEARCH ON ANGIOGENESIS INHIBITORS

We are conducting research on small molecules to develop inhibitors of
enzymes important in angiogenesis.

In addition, we are continuing to work with DC101 in animal models. DC101
is an antibody that 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 DC-101 antibody alone. We are supporting research in this area at
Sunnybrook Health Science Center, University of Toronto ("Sunnybrook Health
Science Center").

In connection with our anti-angiogenesis research program, we are also
doing research to see whether antibodies that inhibit vascular-specific cadherin
("VE-cadherin") also inhibit angiogenesis. 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 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. We intend to test various monoclonal
antibodies against VE-cadherin to see if they are effective in inhibiting the
function of the VE-cadherin, and the growth of blood 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 also collaborate with the Mario
Negri Institute for Pharmacological Research, Milan, Italy (the "Mario Negri
Institute"), to do pharmacological research to better determine the role of
VE-cadherin in angiogenesis.

MISCELLANEOUS RESEARCH AREAS

We are conducting additional research outside of our three 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.

RESEARCH COLLABORATIONS AND CLINICAL COLLABORATIONS

We engage in collaborations with academic institutions and private industry
in the course of conducting our research and clinical studies. We are
collaborating with CombiChem to discover and develop novel small molecules for
use against selected targets for the treatment of cancer utilizing high
throughput screening techniques. We support research at the Mario Negri
Institute to explore the role that a family of proteins, called VE-cadherins,
plays in angiogenesis. At the University of Texas, Southwestern Medical Center
we are further studying the role VE-cadherins play in angiogenesis by studying
VE-cadherin-2, a type of VE-
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cadherin, in animal models. At the Sunnybrook Health Science Center, we are
supporting research to evaluate whether chemotherapy combined with neutralizing
antibodies to the FLK-1/VEGF receptor will result in a synergistic
anti-angiogenic response. At Princeton University and the University of
Pennsylvania, we are collaborating in the development of an extensive panel of
stem cell and stromal cell genes, toward the identification of genes critical to
stem cell maintenance and stimulation.

In the clinical area, at the University of Wisconsin-Madison Medical
School, we are conducting additional studies of C225 in head and neck cancers in
combination with radiation therapy. The European Organization for Research and
Treatment of Cancer is involved in managing the worldwide data for the BEC2
Phase III study.

At Sloan Kettering, we collaborate both in the research area and clinical
area. We support research on both potential cancer vaccine products BEC2 and
gp75. We have been testing BEC2 in Phase I clinical trials at Sloan-Kettering
against certain forms of cancer, including small cell lung carcinoma and
melanoma.

Our collaborations with Merck KGaA in developing our C225 and BEC2 products
are described in the following section.

COLLABORATIONS WITH MERCK KGAA

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

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

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

- we have agreed to supply Merck KGaA, and Merck KGaA has agreed to
purchase, 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 C225 in Japan with Merck KGaA

In return, Merck KGaA is:

- paying to us $30 million in up-front fees and early cash-based milestone
payments based upon achievement of certain milestones set forth in the
agreement, of which $14 million has been received through October 27,
1999 and Merck KGaA has confirmed that we have achieved milestones with
respect to which we are entitled to receive an additional $6 million in
payments

- paying to us an additional $30 million 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

- providing to us, subject to certain terms, a $30 million guaranty for
the construction of a manufacturing facility by us for the commercial
production of C225

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

- required to pay us royalties on its future sales of 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,
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depending upon whether the milestone is achieved early, on-time or late. The
milestone shares will be a non-voting preferred stock, or other non-voting stock
convertible into our common stock if issuing shares of common stock to Merck
KGaA would result in Merck KGaA owning greater than 19.9% of 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), (2) for a one-year period after
first commercial sale of 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 C225 sales or C225 license
fees in the United States and Canada), or (3) in the event we do not obtain
certain collateral license agreements in which case Merck KGaA also is entitled
to a return of all cash amounts with respect to milestone payments to date, plus
liquidated damages of $500,000. In April 1999, the parties agreed on the
production concept for the manufacturing facility and are currently working
toward securing Merck KGaA's guaranty of our obligations under a $30 million
credit facility relating to the construction of the manufacturing facility. In
the event of termination of the agreement, we will be required to use our best
reasonable efforts to cause the release of Merck KGaA as guarantor.

In the year ended December 31, 1998, we recorded $4 million as a fee
potentially refundable from our corporate partner under this agreement and in
the nine months ended September 30, 1999, we recorded an additional $10 million
as a fee potentially refundable from our corporate partner under this agreement.

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

- 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 $4.7 million

- is required to make milestone payments to us of up to $22.5 million, of
which $3 million has been received through October 27, 1999, 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
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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 ourselves in our respective territories). If
these expenses, including such expenses of Merck KGaA, exceed DM17 million, such
excess expenses will be shared 60% by Merck KGaA and 40% by us. As of October
27, 1999, this expense level had not yet been reached. 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 (2) or 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 the year ended December 31, 1998, we recorded $3.5 million, in revenue
from Merck KGaA under this agreement, which consisted of milestone and research
and support payments, and for the nine-month period ended September 30, 1999 we
recorded $533,000 in revenue from Merck KGaA under this agreement, which
consisted of research and support payments.

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
preferred stock for a total price of approximately $40 million. See "Description
of Capital Stock." In addition, Merck KGaA may nominate one member to our board
of directors.

OTHER CORPORATE COLLABORATIONS

ABBOTT LABORATORIES

We have licensed some of our diagnostic products and techniques to 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 has recently been sold to Bayer Pharmaceutical
Corporation.

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 million, as a result of
a patent issuance in Europe for our RCR technology. This is partially creditable
against royalties as described below. The issuance of the patent also entitles
us to receive royalty payments on sales in covered European countries for
products using our RCR technology. Abbott will be entitled to deduct from
royalties otherwise due, 25% of such royalties due for a two-year period and 50%
thereafter until a total of $500,000 has been deducted. In March 1999, we
received a notice of allowance from the U.S. Patent Office for our RCR
technology. The patent issuance upon this notice of allowance will entitle us to
a $500,000 milestone payment from Abbott and royalties on sales for a two-year
period from initiation of U.S. sales by

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Abbott for products using our RCR technology. 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.

For the year ended December 31, 1998 we received a total of $295,000, and
in the nine-month period ended September 30, 1999 we received a total of
$258,000, in royalty fees pursuant to our strategic alliance with Abbott.

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 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, 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,
requiring American Home to make a $500,000 payment to us.

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, 1998 we recorded revenues of $300,000, and
in the nine-month period ended September 30, 1999 we recorded revenues of
$225,000, under the American Home agreements.

IMMUNEX CORPORATION

We are the exclusive licensees 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 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, 1998, and in the nine-month period ended
September 30, 1999, we recorded no revenue from Immunex under this agreement.

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MANUFACTURING

Under each of our C225 and BEC2 agreements with Merck KGaA we are required
to supply to Merck KGaA and Merck KGaA is required to obtain from us C225 and
BEC2, respectively, for clinical trials and commercial supply.

We own and operate a manufacturing facility for biologics in Somerville,
New Jersey for the manufacture of clinical trial materials. At this facility we
manufacture a portion of the C225 utilized for clinical trials and are
developing the purification process for c-p1C11 and are in the early stages of
its production for clinical trials. This facility is operated in accordance with
Good Manufacturing Practices (GMP) which is a requirement for product
manufactured for use in clinical trials and for commercial sale.

We intend to build a new manufacturing facility adjacent to our current
manufacturing facility in Somerville, New Jersey. This new facility will contain
three 10,000 liter fermentors and will be dedicated to the commercial production
of C225. Under our agreement with Merck KGaA for C225, Merck KGaA is providing
us, subject to certain terms, with a $30 million guaranty to apply toward the
build-out of this new facility. In April 1999, we agreed on the production
concept for this facility with Merck KGaA and expect to break ground during the
first half of 2000, subject to obtaining the necessary permits from the local
authority. The facility will cost approximately $45 million and will be built on
a lot adjacent to our Somerville, New Jersey facility, which we are in the
process of purchasing for approximately $700,000. The facility will be dedicated
to the production of C225 and will have an area of approximately 85,000 square
feet with 20,000 square feet remaining for expansion.

BI is supplying us with quantities of C225 required for our clinical trials
that exceed the capacity of our current facility under an April 1999 development
agreement. The total cost under this agreement, including amounts of additional
C225 we had the right to request, will be approximately DM12,100,000 (or
$6,636,000 as of September 30, 1999), of which approximately DM3,940,000 had
been incurred and DM3,720,000 had been paid as of September 30, 1999.

We intend to continue to utilize the services of a contract manufacturer to
provide a supplemental supply of C225 for both clinical trials and commercial
supply. If we obtain FDA approval of C225 prior to FDA approval of our proposed
manufacturing facility, we will need to obtain commercial-scale quantities of
C225 from contract manufacturers in order to have sufficient quantities of C225
for product launch. We may pursue an agreement with another third party relating
to the manufacture of C225 for both clinical trials and commercial sale.

Under our development agreement with BI we demonstrated our ability to
successfully transfer the technology necessary for the production and
purification of C225. The stable manufacturing process for C225 has been
duplicated in both BI's manufacturing facility and ours. This process has been
performed in a number of different sized fermentors, including 1,200 liter scale
in our facility and 2,000 liter scale in BI's facility. This prior successful
scale-up makes us confident that we will be successful in scaling up to 10,000
liters in our new facility and that the process can be successfully transferred
to a contract manufacturer for supplemental supply.

MARKETING

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 C225, we have retained all rights to commercialize 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.

In November 1998, we hired a Vice-President of Marketing with experience in
the commercial launch of a monoclonal antibody cancer therapeutic to develop our
internal marketing capabilities. As we prepare for the marketing of C225 in the
U.S. and Canada, we will be hiring directors of field sales and sales operations
in 1999, regional sales managers in the first quarter of 2000 and approximately
40 sales people prior to the commencement of C225 sales. We believe that a sales
force of this size can adequately address the North
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American oncology market for this drug, because a manageable number of
oncologists are responsible for prescribing most of the cancer therapeutics in
North America. 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 C225.

We intend that the sales capability we will build for C225 will allow us to
directly market other cancer therapeutics that we may develop, including
c-p1C11, 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

For a discussion of the risks and uncertainties associated with our
intellectual property position, see "Risk Factors -- Our success depends upon
our ability to protect our intellectual property and our proprietary
technology."

PATENT RIGHTS; LICENSES

We currently have exclusive licenses or assignments to 63 issued patents
worldwide that relate to our proprietary technology in the United States and
foreign countries, 37 of which are issued United States patents. In addition, we
currently have exclusive licenses or assignments to approximately 43 families of
patent applications.

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 C225, our EGF receptor
antibody product. We believe that this patent covers C225 under the patent law
doctrine of equivalents. Under this doctrine, the subject matter of a claim is
deemed to cover variations that do substantially the same thing, in
substantially the same way, to achieve the same result, especially if the
variation is known and routine. We believe, in this instance, the doctrine of
equivalents would extend protection to C225. Our licensor did not obtain patent
protection outside the U.S. for this antibody. While this patent covers only our
antibody and would not block third parties from obtaining patents covering other
antibodies to the EGF receptor, we are pursuing additional patent protection
that may limit the ability of third parties to commercialize EGF receptor
antibodies for the treatment of cancer. Specifically, we are pursuing patent
protection for the use of any antibody that inhibits the EGF receptor in
combination with chemotherapy or radiation therapy. We have exclusively
licensed, from Rhone-Poulenc Rorer, a family of patent applications seeking to
cover the use of antibodies to the EGF receptor in conjunction with
chemotherapeutic agents. A Canadian patent was issued in this family, and the
patent examiner in Europe has indicated an intent to issue a European patent.
U.S. prosecution continues. We have filed additional patent applications based
on our own research that would cover the use of C225 or any other
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EGF receptor inhibitor in conjunction with radiation therapy, and the use of
C225 or any other EGF receptor inhibitor in refractory patients, either alone or
in combination with chemotherapy or radiation therapy. We have patent
applications pending that include claims on (1) the use of C225 to significantly
inhibit the growth of tumor cells, (2) humanized forms of the antibody and
antibody fragments and (3) chimeric and humanized forms of the antibody and
fragments of the antibody used with other drugs, including chemotherapeutic
agents.

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

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 cover the chimerization of
antibodies. Therefore, we may be required to obtain licenses under these patents
before we can commercialize our own chimerized monoclonal antibodies, including
C225. Some of these licenses have already been obtained. We cannot be certain
that we will be able to obtain the rest of such licenses in the territories
where we want to commercialize C225, or how much such licenses would cost.

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
covering anti-idiotypic antibodies or their use for the treatment of tumors.
These patents, if valid, could be interpreted to cover our BEC2 monoclonal
antibody and certain uses of BEC2. Merck KGaA, our licensee of BEC2, has
informed us that it has obtained non-exclusive, worldwide licenses to these
patents in order to market BEC2 in its territory. We are entitled to co-promote
BEC2 in North America with Merck KGaA, however, we cannot be certain that we
could obtain such licenses on commercially acceptable terms, if at all.

Our license from Sloan-Kettering requires us to pay royalties on sales of
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 the
FLK-1 receptor and antibodies to the receptor and its human homolog, KDR. We are
also the assignee of a family of patents and patent applications filed by our
scientists covering angiogenesis-inhibiting antibodies to receptors that bind
VEGF. One of the patents licensed from Princeton claims the use of FLK-1/KDR
receptor antibodies to isolate cells expressing the FLK-1/KDR receptor on their
cell surfaces. Additionally, we are a co-owner of a recently filed patent
application claiming the use of FLK-1/KDR receptor antibodies to isolate
endothelial progenitor 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 c-p1C11.
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VE Cadherin. We have an assignment of a family of patent applications
covering novel cadherin molecules that are involved in endothelial cell
interactions. These interactions are believed to be involved in 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 Laboratories. 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. Our proprietary position with respect to our diagnostics
program is based on numerous families of patents and patent applications. We
have either an assignment from our own scientists or exclusive license 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.

Trade Secrets. With respect to certain aspects of our technology, we rely,
and intend to continue to rely, on 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.

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.

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.

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.
46
<PAGE> 48

The process of obtaining requisite FDA approval has historically been
costly and time consuming. Current FDA requirements before a new human drug or
biological product may 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 IND application 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.
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 GMP 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
severe or life threatening diseases and having potential to address unmet
medical needs. 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, the FDA has broadened authority to consider evidence of
partial tumor shrinkage or other clinical outcomes for approval. This new policy
is intended to facilitate the study of cancer therapies and shorten the total
time for marketing approvals. We intend to take advantage of this policy;
however, it is too early to tell what effect, if any, these provisions may have
on the approval of our product candidates.

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. In general, the FDA must
approve a new diagnostic product that is not "substantially equivalent" to a
legally marketable product much in the way it must approve drugs and biological
products. Specifically, the device must be tested under an investigational
device exemption ("IDE") and receive FDA approval under a premarket approval
application ("PMA") before it can be commercially marketed. Substantially
equivalent devices go through a clearance process at the FDA that is generally
less onerous than the PMA process but also can require data submission and other
rigorous review.

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 GMP 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.

47
<PAGE> 49

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 countries: 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.

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, (4) and 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
48
<PAGE> 50

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 synthetic
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 165 full-time
personnel on October 15, 1999, 69 were employed in our product development,
clinical and manufacturing programs, 50 in research, and 46 in administration.
Our staff includes 20 persons with Ph.D.s and three with M.D.s.

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 annual rent under the lease
for 1999 is $720,000, which increases by 3% per year for subsequent years. Rent
expense for the New York facility, prior to our recent lease renewal, was
approximately $574,000, $554,000, and $508,000 for the years ended December 31,
1998, 1997 and 1996, respectively. We have completed a design concept and are in
the process of renovating the facility to better fit our needs. The renovation
is expected to cost approximately $2.0 million and is expected to be completed
by November 1999.

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

MANUFACTURING FACILITY -- SOMERVILLE, NEW JERSEY

In June 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 clinical-grade manufacturing
facility. 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 $5.4 million.

We currently operate the facility to develop and manufacture materials for
our clinical trials. Under certain circumstances, we also may use the facility
for the manufacturing of commercial products. The timing and any additional
costs of adapting the facility for commercial manufacturing depend on several
factors, including the progress of products through clinical trials. In January
1998, we completed the construction and commissioning of a new 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 in the process of purchasing, for approximately $700,000, a lot
adjacent to our Somerville, New Jersey facility. We intend to build a new
manufacturing facility on this site for commercial supply of C225, which we
estimate will cost approximately $45 million.

LEGAL PROCEEDINGS

There are currently no material legal proceedings pending against us or any
of our property.
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<PAGE> 51

MANAGEMENT

SENIOR OFFICERS AND DIRECTORS

The following table lists the senior officers and directors of ImClone as
of October 27, 1999. Below the table is information about the business
experience of each person listed.

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Robert F. Goldhammer............. 68 Chairman of the Board and Director(1)(2)(3)
Samuel D. Waksal, Ph.D. ......... 53 President, Chief Executive Officer and Director(2)(4)
Harlan W. Waksal, M.D. .......... 46 Executive Vice President, Chief Operating Officer and
Director(2)(3)(4)
Carl Goldfischer................. 41 Vice President and Chief Financial Officer
John B. Landes................... 51 Vice President, Business Development and General Counsel
Peter Bohlen, Ph.D. ............. 56 Vice President, Research
Michael Feldman, Ph.D. .......... 73 Vice President, Discovery Research
Ronald A. Martell................ 37 Vice President, Marketing
S. Joseph Tarnowski, Ph.D. ...... 46 Vice President, Product and Process Development
Michael A. Trapani............... 44 Vice President, Regulatory Affairs and Quality Assurance
Jean Carvais, M.D. .............. 72 Director
Vincent T. DeVita, Jr., M.D. .... 64 Director(5)(4)
Paul B. Kopperl.................. 66 Director(5)(1)(3)
William R. Miller................ 71 Director(5)(3)
David M. Kies.................... 55 Director(1)(3)
John Mendelsohn, M.D. ........... 63 Director(3)(4)
Richard Barth.................... 68 Director(5)(1)
</TABLE>

- ------------
(1) Member of Compensation and Stock Option Committee
(2) Member of Executive Committee
(3) Member of Nominating and Corporate Governance Committee
(4) Member of Research Oversight Committee
(5) Member of Audit Committee

Robert F. Goldhammer has served as ImClone's Chairman of the Board since
February 1991 and has been a Director of ImClone since October 1984. Mr.
Goldhammer has been a partner of Concord International Investment Group, L.P.
since 1991. He was a partner of Rohammer Corporation, a private investment
company, from 1989 to 1991. He was a managing director of Kidder, Peabody Group
Inc., an investment banking firm, from May 1988 to January 1989. He is a
director of Esterline Technologies Corporation.

Samuel D. Waksal, Ph.D., President of ImClone, is a founder of ImClone and
has been its Chief Executive Officer and a Director since August 1985 and
President since March 1987. From 1982 to 1985, Dr. Waksal was a member of the
faculty of Mt. Sinai School of Medicine as Associate Professor of Pathology and
Director of the Division of Immunotherapy within the Department of Pathology. He
has served as visiting Investigator of the National Cancer Institute, Immunology
Branch, Research Associate of the Department of Genetics, Stanford University
Medical School, Assistant Professor of Pathology at Tufts University School of
Medicine and Senior Scientist for the Tufts Cancer Research Center. Dr. Waksal
was a scholar of the Leukemia Society of America from 1979 to 1984. Dr. Waksal
currently serves on the Executive Committee of the New York Biotechnology
Association, the Board of Directors of Cadus Pharmaceutical Corporation and is
Chairman of the New York Council for the Humanities. Dr. Samuel Waksal and Dr.
Harlan Waksal are brothers.

Harlan W. Waksal, M.D. is a founder of ImClone and has been a Director
since April 1984. He has directed ImClone's research and development since April
1985, and has served as ImClone's Executive Vice
50
<PAGE> 52

President and Chief Operating Officer since March 1987. From 1985 to March 1987,
Dr. Waksal served as ImClone's President. Dr. Waksal received his training in
Internal Medicine from Tufts-New England Medical Center Hospital and in
Pathology from Kings County Hospital in Brooklyn, New York from 1982 to 1987.
From 1984 to 1985, Dr. Waksal was Chief Resident in Pathology at Kings County
Hospital. He received his Medical Degree from Tufts University School of
Medicine in 1979. He is currently Adjunct Assistant Professor in the Department
of Pathology at Downstate Medical Center, New York. Dr. Harlan Waksal and Dr.
Samuel Waksal are brothers.

Carl S. Goldfischer, M.D. has served as Vice President, Finance and Chief
Financial Officer since May 1996. From June 1994 until joining ImClone, Dr.
Goldfischer served as a healthcare analyst with Reliance Insurance Company. From
June 1991 until June 1994, Dr. Goldfischer was Director of Research for D. Blech
& Co., an investment banking firm. Dr. Goldfischer received a doctorate of
medicine from Albert Einstein College of Medicine in 1988 and served as a
resident in radiation oncology at Montefiore Hospital of the Albert Einstein
College of Medicine until 1991. Dr. Goldfischer is a director of Immulogic
Pharmaceutical Corporation. Dr. Goldfischer has indicated that he intends to
resign from ImClone to resume his career in investment banking in the near
future.

John B. Landes has served as Vice President, Business Development and
General Counsel since November 1992. Prior thereto, he was Vice President,
Administration and Legal since December 1984. He also has been Secretary of
ImClone since April 1985 and served as its Treasurer from April 1984 through
September 1991, except for an interim period from December 1988 to February
1991. From 1978 to 1984, Mr. Landes was an associate attorney with the Boston
law firm of Mahoney, Hawkes and Goldings.

Peter Bohlen, Ph.D. has been Vice President, Research of ImClone since
September 1996. From November 1995 to July 1996 he was Senior Director of Ixsys,
a privately-held biotechnology company. From October 1987 to June 1996 he was
department head of the Molecular Biology Section of American Cyanamid Company's
Medical Research Division and director of the company's angiogenesis program. He
also has held academic positions at the Salk Institute, San Diego and the
University of Zurich, Switzerland. Dr. Bohlen received his Ph.D. in chemistry
from the University of Berne in Switzerland. In 1983, he received the Cloetta
Award in Switzerland for his contributions in the field of protein analysis.

Michael Feldman, Ph.D. became Vice President, Discovery Research for
ImClone in May 1995. Prior thereto he served as Director of Basic Research for
ImClone since 1993. Dr. Feldman is former head of the Department of Cell Biology
at the Weizmann Institute of Science in Rehovot, Israel, and a former dean of
its graduate school. He has done pioneering work in the areas of transplantation
immunology, differentiation of lymphocytes and cancer immunology. In 1984, he
received the Griffuel Award in France for his work in cancer metastasis, and in
1986 received the Rothschild Award for his work in immunology. Dr. Feldman is a
member of the Israeli Academy of Sciences and Humanities and the World Academy
of Arts and Sciences. Dr. Feldman is currently on long-term disability.

Ronald A. Martell has served as ImClone's Vice President, Marketing since
November 1998. Prior to joining ImClone he worked at Genentech, Inc. for ten
years where he held various positions. Most recently, from 1996 until joining
ImClone, he served as Genentech's Group Manager of Oncology Products where he
directed the launch of Herceptin, Genentech's monoclonal antibody product
approved to treat breast cancer. From 1995 to 1996 he served as Senior Product
Manager where he launched Pulmozyme for cystic fibrosis in Europe. From 1994
through 1995 he served as Manager of Genentech's Piedmont Sales Division. Prior
to that, he served from 1993 as Associate Product Manager for Genentech's
Pulmozyme.

S. Joseph Tarnowski, Ph.D. has served as ImClone's Vice President, Product
and Process Development since January 1999. Prior to joining ImClone, he held
various positions with CellPro Inc., the principal business of which was the
development, manufacture and marketing of automated systems that utilize
monoclonal antibodies to purify large quantities of specific cells for
therapeutic and diagnostic applications. He joined CellPro in June 1992 as Vice
President of Operations and was appointed to the position of Vice President of
Research and Development in June 1995 and became Senior Vice President and Chief
Technical Officer in December 1996. From November 1986 to May 1992, Dr.
Tarnowski was Director, Process and Product Development of Scios Nova Inc.
(formerly California Biotechnology Inc.), a company that develops
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<PAGE> 53

recombinant human proteins for therapeutic uses. Dr. Tarnowski received a Ph.D.
in Biochemistry from the University of Tennessee in 1979 and was a Postdoctoral
Fellow at the Roche Institute of Molecular Biology from 1979 through 1981.

Michael A. Trapani has served as ImClone's Vice President, Regulatory
Affairs & Quality Assurance since June 1999. He has more than 20 years'
experience in the pharmaceutical industry, with the majority of his experience
in the drug approval area. From January 1996 through May 1999, he held various
positions at Cytogen Corp., Princeton, New Jersey, most recently as its Vice
President, Regulatory Affairs & Quality Assurance. Prior to that, he served from
September 1993 until January 1996 as Senior Director, Regulatory Affairs for
Pharmacia Adria, Columbus, Ohio. From 1981 through 1993 he served in various
positions at Kabi Pharmacia, Piscataway, New Jersey, ending as its Executive
Director, Regulatory Affairs. Mr. Trapani began his career in 1977 with the Food
and Drug Administration. Mr. Trapani received a B.S. degree in Biology from
Brooklyn College and an MBA degree from Seton Hall Graduate School of Business.

Jean Carvais, M.D. has been a Director of ImClone since July 1993, and has
since 1984 been an independent consultant to companies in the pharmaceutical
industry. Prior to that time, Dr. Carvais was President of The Research
Institute of Roger Bellon, S.A., now a division of Rhone-Poulenc. As such, he
was involved in the development of a line of anti-cancer drugs, including
Bleomycin and Adriamycin, as well as a new line of antibiotics and quinolones.
Following the acquisition of Roger Bellon, S.A. by Rhone-Poulenc, Dr. Carvais
became a member of Rhone-Poulenc's central research committee which directs the
company's worldwide research and development activities. Dr. Carvais has served
as a director of Columbia Laboratories, Inc. since 1996.

Vincent T. DeVita, Jr., M.D. has been a Director of ImClone since February
1992. Since 1995 Dr. DeVita has served as Director of the Yale Cancer Center as
well as Professor of Medicine and Professor of Epidemiology and Public Health at
Yale University School of Medicine, New Haven, Connecticut. From September 1988
through June 1995, Dr. DeVita served as Attending Physician at Sloan-Kettering,
New York, and through June 1991 as Physician-in-Chief. From 1980 to 1988, he
served under Presidential appointment as Director of the National Cancer
Institute, where he had held various positions since 1966. During his years with
the National Cancer Institute, Dr. DeVita was instrumental in developing the
first successful combination cancer chemotherapy program. This work ultimately
led to effective regimens of curative chemotherapy for a variety of cancers. Dr.
DeVita's numerous awards include the 1990 Armand Hammer Cancer Prize and the
1982 Albert and Mary Lasker Medical Research Award for his contribution to the
cure of Hodgkin's disease. Dr. DeVita received his M.D. from the George
Washington University School of Medicine, Washington, DC, in 1961.

Paul B. Kopperl has served as a Director of ImClone since December 1993. He
is President of Pegasus Investments, Inc., Boston, a private investment
management firm established in 1994. He has served as President of Delano &
Kopperl, Inc., a private business strategy and venture investing firm in Boston
and its predecessor firms from 1976 to the present. From 1967 through 1975 he
was Vice President and a principal of Kidder, Peabody & Co. Incorporated, New
York, an investment banking firm. From 1959 to 1967 he was an associate with
Goldman, Sachs & Co., New York. Mr. Kopperl is a Trustee and Governor of the
Dana-Farber Cancer Institute, Boston, and over the years has served as a trustee
or director of numerous not-for-profit educational, performing arts and social
welfare organizations and businesses.

William R. Miller has been a Director of ImClone since June 1996. Mr.
Miller served as Vice Chairman of the Board of Directors of the Bristol-Myers
Squibb Company from 1985 until 1991, at which time he retired. Mr. Miller is a
director of Isis Pharmaceuticals, Inc., Transkaryotic Therapies, Inc., Westvaco
Corporation and Xomed Surgical Products, Inc. He is Chairman of the Board of
Vion Pharmaceuticals, Inc. and SIBIA Neurosciences, Inc. He is Chairman of the
Board of Trustees of the Cold Spring Harbor Laboratory and is a past Chairman of
the Board of the Pharmaceutical Manufacturers Association. Mr. Miller is a
Trustee of the Manhattan School of Music, Metropolitan Opera Association and
Opera Orchestra of New York. He is a member of Oxford University Chancellor's
Court of Benefactors, Honorary Fellow of St. Edmund Hall and Chairman of the
English-Speaking Union of the United States.

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<PAGE> 54

David M. Kies has been a Director of ImClone since June 1996. Mr. Kies is a
Partner of the New York based law firm Sullivan & Cromwell, specializing in
mergers and acquisitions, securities and general corporate matters. Mr. Kies
joined Sullivan & Cromwell in 1968, and was elected a partner of the firm in
1976. From 1991 until 1995, he was the managing partner of the firm's London
office.

John Mendelsohn, M.D. has been a Director of ImClone since February 1998.
He has served as the President of M.D. Anderson Cancer Center, University of
Texas, where he has also been Professor of Medicine since 1996. From 1985 to
1996 he was Chairman of the Department of Medicine at Sloan-Kettering, New York,
as well as holder of the Winthrop Rockefeller Chair in Medical Oncology at
Sloan-Kettering. He was also Professor and Vice-Chairman of Medicine at Cornell
University Medical College and an attending physician at both Memorial and New
York Hospitals. Dr. Mendelsohn served on the faculty of the University of
California, San Diego and was instrumental in the creation of the University's
Cancer Center, where he served as Director from 1976 to 1985. Dr. Mendelsohn's
work has focused on growth factors and their role in regulating the
proliferation of cancer cells through cell surface receptors. Dr. Mendelsohn was
responsible for developing specific monoclonal antibodies that block receptors,
including epidermal growth factor receptors, which mediate growth factor
activation of cell and growth and division. Dr. Mendelsohn is currently a board
member of Enron Corp., the Richard Lounsbery Foundation and the Greater Houston
Partnership, and a fellow of the New York Academy of Medicine. In 1997, Dr.
Mendelsohn was elected to the Institute of Medicine of the National Academy of
Sciences.

Richard Barth has been a Director of ImClone since October 1996. Mr. Barth
served as Chairman of the Board of Ciba-Geigy Corporation, United States from
1990 until December 1996, and was President and Chief Executive Officer of
Ciba-Geigy Corporation from 1986 until April 1996. Mr. Barth is a member of the
Board of Directors of numerous organizations, including Novartis Corporation,
United States, The Bank of New York, Bowater, Inc., and New York Medical
College.

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<PAGE> 55

SCIENTIFIC ADVISORY BOARD

The following table lists the members of ImClone's Scientific Advisory
Board as of October 27, 1999 and their primary professional affiliations.

<TABLE>
<CAPTION>
NAME PROFESSIONAL AFFILIATION(S)
- ---- ---------------------------
<S> <C>
Thomas Deuel, M.D............. Professor of Medicine, Director of the Division of Growth
Regulation, Harvard Medical School
Charles A. Dinarello, M.D..... Professor of Medicine, University of Colorado School of
Medicine
Michael Feldman, Ph.D. ....... Vice President, Discovery Research, ImClone Systems
Incorporated; Member of the Israeli Academy of Sciences
and Humanities and the World Academy of Arts and Sciences
Zvi Fuks, M.D................. Chairman of the Department of Radiation Oncology, Memorial
Sloan-Kettering Cancer Center
Gerald T. Keusch, M.D. ....... Professor and the Head of the Division of Geographic
Medicine and Infectious Disease, Tufts University School of
Medicine
Arnold Levine, Ph.D........... President, Rockefeller University
John Mendelsohn, M.D.......... President, MD Anderson Cancer Center, University of Texas
Malcolm Moore, Ph.D........... Enid A. Haupt Professor of Cell Biology, Head of the James
Ewing Laboratory of Development Hematopoiesis at Memorial
Sloan-Kettering Cancer Center
Richard C. Mulligan, Ph.D..... Mallinckrodt Professor of Genetics, Harvard Medical School;
Investigator, Howard Hughes Medical Institute, Children's
Hospital, Boston
Robert Schneider, Ph.D........ Associate Professor, Department of Biochemistry, New York
University Medical Center
Thomas Shenk, Ph.D............ Professor of Molecular Biology, Princeton University;
(Chairman, Scientific Advisory American Cancer Society Professor, Howard Hughes Medical
Board) Institute
P. Frederick Sparling, M.D.... Professor and Chairman of the Department of Medicine and
Professor of Microbiology and Immunology, University of
North Carolina School of Medicine
Samuel D. Waksal, Ph.D. ...... President and Chief Executive Officer, ImClone Systems
Incorporated
</TABLE>

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<PAGE> 56

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information that we know about the
beneficial ownership of our common stock as of October 27, 1999, except as
otherwise indicated, by (1) each of our directors, (2) each of our officers who
beneficially owns our common stock and (3) all of our directors and executive
officers as a group. Except as otherwise indicated, the persons or entities
listed below have sole voting and investment power with respect to all shares
owned by them.

<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OF SHARES
BENEFICIAL OWNER BENEFICIALLY OWNED BENEFICIALLY OWNED(1)(2)
- ---------------- ------------------ ------------------------
<S> <C> <C>
Samuel D. Waksal, Ph.D. ....................... 1,302,583(3) 4.9%
Harlan W. Waksal, M.D. ........................ 1,065,780(4) 4.1%
Robert F. Goldhammer........................... 855,390(5) 3.3%
John B. Landes................................. 241,000(6) *
John Mendelsohn, M.D. ......................... 183,476(7) *
Carl S. Goldfischer, M.D. ..................... 179,400 *
Michael Feldman, Ph.D. ........................ 165,500(8) *
David M. Kies.................................. 158,450(9) *
Peter Bohlen, Ph.D. ........................... 80,315(10) *
Paul B. Kopperl................................ 69,460(11) *
Vincent T. DeVita, Jr., M.D. .................. 69,092(12) *
Jean Carvais, M.D. ............................ 48,542(13) *
William R. Miller.............................. 36,147 *
Richard Barth.................................. 35,250(14) *
All directors and executive officers as a group
(11 persons)(15)............................. 4,003,570 14.4%
</TABLE>

- ------------
* Less than 1%.

(1) Unless otherwise noted, each person's address is in care of ImClone Systems
Incorporated, 180 Varick Street, Seventh Floor, New York, New York 10014.

(2) The percentage of voting stock owned by each stockholder is calculated by
dividing (1) the number of shares deemed to be beneficially held by such
stockholder as of October 27, 1999, as determined in accordance with Rule
13d-3 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), by (2) the sum of (A) 25,629,007 which is the number of shares of
common stock outstanding as of October 27, 1999 plus (B) the number of
shares of common stock issuable upon exercise of currently exercisable
options and warrants held by such stockholder. For purposes of this
security ownership table "currently exercisable options" and "currently
exercisable warrants" consist of options and warrants exercisable as of
October 27, 1999 or within 60 days after October 27, 1999. Shares of our
series A preferred stock are not included in the denominator because they
do not have voting rights.

(3) Includes 350,000 shares issuable upon the exercise of currently exercisable
warrants and 415,000 shares issuable upon the exercise of currently
exercisable options. Does not include an additional 1,000,000 shares
issuable upon the exercise of an option, 200,000 shares of which will
become exercisable on May 24, 2000, subject only to Dr. Waksal's continued
employment with ImClone.

(4) Includes 240,000 shares issuable upon the exercise of currently exercisable
options; 310,680 shares issuable upon the exercise of currently exercisable
warrants; and 2,600 shares owned by Dr. Waksal's sons. Does not include an
additional 650,000 shares issuable upon the exercise of an option, 130,000
shares of which will become exercisable on May 24, 2000, subject only to
Dr. Waksal's continued employment with ImClone.

(5) Includes 113,542 shares issuable upon the exercise of currently exercisable
options; 379,990 shares issuable upon the exercise of currently exercisable
warrants; and 13,314 shares held in trust as to which Mr. Goldhammer
disclaims beneficial ownership.

(6) Includes 101,500 shares issuable upon the exercise of currently exercisable
options and 104,000 shares issuable upon the exercise of currently
exercisable warrants.

(7) Consists of 183,476 shares issuable upon the exercise of currently
exercisable options.

(8) Includes 105,000 shares issuable upon the exercise of currently exercisable
options.

(9) Includes 18,750 shares issuable upon the exercise of currently exercisable
options and 8,200 shares held by Mr. Kies as custodian for his son.

(10) Includes 79,500 shares issuable upon the exercise of currently exercisable
options.

(11) Includes 42,500 shares issuable upon the exercise of currently exercisable
options and 500 shares held by Mr. Kopperl's spouse as to which Mr. Kopperl
disclaims beneficial ownership.

(12) Includes 68,792 shares issuable upon the exercise of currently exercisable
options.

(13) Consists of 48,542 shares issuable upon the exercise of currently
exercisable options.

(14) Includes 33,750 shares issuable upon exercise of currently exercisable
options.

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<PAGE> 57

(15) Includes an aggregate of (1) 2,205,022 shares issuable upon the exercise of
currently exercisable options and warrants and (2) 13,814 shares as to
which beneficial ownership is disclaimed. Shares held by Mr. Landes, Dr.
Feldman and Dr. Bohlen have not been included as they are not considered to
be executive officers of ImClone. In addition, each of Messrs. Martell and
Trapani and Dr. Tarnowski, none of whom is considered to be an executive
officer of ImClone, beneficially owns a de minimus number of shares of our
common stock, which are not reflected in the table.

On October 18, 1999, a Schedule 13D filing under the Securities Exchange
Act of 1934 was made jointly by High River Limited Partnership, Riverdale LLC
and Carl C. Icahn disclosing that their beneficial ownership had increased to
5.1% of ImClone's common stock, based on the number of shares outstanding as of
September 1, 1999. According to the Schedule 13D, Riverdale LLC is the general
partner of High River Limited Partnership and is wholly owned by Carl C. Icahn.
The Schedule 13D states that the shares of ImClone's common stock were acquired
for investment purposes. According to the Schedule 13D filing, the principal
business address of High River Limited Partnership and Riverdale LLP is 100
South Bedford Road, Mount Kisco, New York 10549 and the principal business
address of Carl C. Icahn is c/o Icahn Associates Corp., 767 Fifth Avenue, 47th
Floor, New York, New York 10153.

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<PAGE> 58

DESCRIPTION OF CAPITAL STOCK

Our authorized capital stock consists of 60,000,000 shares of common stock,
par value $.001 per share ("common stock"), and 4,000,000 shares of preferred
stock, par value $1.00 per share. As of October 27, 1999, there were 25,629,007
shares of common stock outstanding held of record by approximately 372
stockholders and there were 400,000 shares of series A preferred stock
outstanding, which are all held by Merck KGaA.

The registrar and transfer agent for the common stock is Equiserve.

COMMON STOCK

Holders of shares of common stock are entitled to one vote per share on
matters to be voted upon by our stockholders. Holders of shares of common stock
do not have cumulative voting rights. Therefore, the holders of more than 50% of
the shares of the common stock will have the ability to select all of our
directors. Holders of shares of common stock will be entitled to receive
dividends when, as and if declared by our board of directors. In the event of a
liquidation, dissolution or winding up of ImClone, holders of common stock have
the right to share ratably in all assets remaining after the payment of all
liabilities, subject to preference in liquidation of any outstanding preferred
stock. Holders of common stock have neither preemptive rights nor rights to
convert their common stock into any other securities and are not subject to
future calls or assessments by ImClone. There are no redemption or sinking fund
provisions applicable to the common stock. The rights, preferences and
privileges of the holders of common stock are subject to, and may be adversely
affected by, the rights of the holders of the series A preferred stock, as well
as any additional preferred stock that ImClone may designate and issue in the
future.

PREFERRED STOCK

Our board of directors has the authority to issue preferred stock in one or
more series, and to fix the rights, preferences, privileges and restrictions,
including the dividend, conversion, voting, redemption (including sinking fund
provisions) and other rights, liquidation preferences and the number of shares
constituting any series and the designations of such series, without any further
vote or action by our stockholders. The provisions of any preferred stock could
adversely affect the voting power of the holders of common stock and could,
among other things, have the effect of delaying, deferring or preventing a
change in control of ImClone.

SERIES A PREFERRED STOCK

In December 1997, in connection with an amendment to our research and
license agreement with Merck KGaA for BEC2, Merck KGaA purchased from us 400,000
shares of series A preferred stock for total consideration of $40 million.
Holders of series A preferred stock generally have no voting rights, except:

- that two-thirds of the outstanding shares must consent to changes in the
terms of the series A preferred stock

- in certain cases, if we default in the timely payment of dividends on the
series A preferred stock, the holders will have the right to elect a
nominee to our board of directors

- as otherwise required by law

The holders of the series A preferred stock are entitled to receive annual
cumulative dividends of $6.00 per share. Dividends on the outstanding series A
preferred stock accrue as of their issuance date and are payable in cash
annually on or the earlier of

- December 31st of each year beginning 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

Up to 100,000 shares of series A preferred stock as of December 31, 1998
were convertible into 800,000 shares of common stock and an additional 100,000
shares will become convertible, into a number of shares of
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<PAGE> 59

common stock based on the applicable conversion price, on each of January 1,
2000, January 1, 2001 and January 1, 2002.

During the period from issuance through December 31, 1999, the series A
preferred stock is convertible at a price of $12.50 per share. During the period
from January 1, 2000 through December 31, 2000 the series A preferred stock is
convertible at a price equal to the average of the closing prices for the common
stock for the five trading days ending one trading day prior to December 31,
1999. During the period from January 1, 2001 through December 31, 2001 the
series A preferred stock is convertible at a price equal to the average of the
closing prices for the common stock for the five trading days ending one trading
day prior to December 31, 2000. During the period from January 1, 2002 through
December 31, 2002 the series A preferred stock is convertible at a price equal
to 88% of the average of the closing prices for the common stock for the five
trading days ending one trading day prior to December 31, 2001 (the "beneficial
conversion feature"). Anytime after January 1, 2003 the series A preferred stock
is convertible at a price equal to the average of the closing prices for the
common stock for the five trading days ending one trading day prior to the
receipt by us of the notice of conversion.

The conversion price is subject to adjustment in the case of certain
dilutive events. Further, in the event the average market price of the common
stock for the five consecutive trading days ending one trading day prior to any
trading day during which any series A preferred stock is outstanding exceeds
150% of the conversion price then in effect, we have the right, as long as such
price exceeds 150% of the conversion price, to require the holder of the series
A preferred stock to convert all its series A preferred stock as may then be
convertible. We may also redeem in whole or any part of the series A preferred
stock then outstanding at a redemption price of $120 per share, plus accrued and
unpaid dividends thereon.

In the event of our liquidation, dissolution or winding up, holders of the
series A preferred stock are entitled to receive in cash out of our assets
available for distribution to our stockholders an amount equal to the stated
value of $100 per share outstanding, plus accrued and unpaid dividends. Such
payments will be made before any amount will be paid to the holders of the
common stock or holders of other classes or series of our capital stock or if
the assets are insufficient to pay the full amount due to the holders of series
A preferred stock such holders will receive a pro rata portion thereof.

In accordance with the terms of the series A preferred stock, we are
required to recognize an assumed incremental yield of $5,455,000 (calculated at
the date of issuance and based on the beneficial conversion feature noted
above). This amount is being amortized as a preferred stock dividend over a
four-year period beginning with the day of issuance. Accrued dividends payable
were $4,307,000 or $10.77 per share at September 30, 1999. Additionally, we have
recognized a cumulative incremental yield attributable to a beneficial
conversion feature of $2,324,000 through September 30, 1999.

MILESTONE SHARES

Under our license agreement with Merck KGaA for C225, we are entitled to
receive from Merck KGaA up to $60 million upon our achievement of various
milestones in the development of C225. In connection with making the final $30
million of these milestone payments, Merck KGaA is entitled to receive milestone
shares from us, which, if issued, will be shares of our common stock (or other
capital stock convertible into our common stock). We describe the milestone
shares more fully under the heading "Business -- Collaborations with Merck
KGaA -- C225 License and Development Agreement."

OPTIONS AND WARRANTS

OPTIONS

In February 1986, our board of directors adopted an incentive stock option
plan and a non-qualified stock option plan (the "86 Plans"). In February 1996,
we adopted an additional incentive stock option plan and non-qualified stock
option plan (the "96 Plans"). In May 1998, we adopted an additional
non-qualified stock option plan (the "98 Plan"). Combined the 86 Plans, the 96
Plans, as amended, and the 98 Plan, as amended, provide for the granting of
options to purchase up to 6,500,000 shares of common stock to our key employees,

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<PAGE> 60

directors, consultants and advisors. 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. Certain options granted
under these plans vest over one-to-five-year periods. At October 27, 1999,
options to purchase 3,663,960 shares of common stock were outstanding under the
86 Plans, the 96 Plans and the 98 Plan, and 1,046,490 shares were available for
grant under the 96 Plans and the 98 Plan. Options may no longer be granted under
the 86 Plans pursuant to the terms of the 86 Plans.

In September 1998 and January 1999, we granted to both our Vice President
of Marketing and Vice President of Product and Process Development options to
purchase 60,000 shares of common stock each. 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.

In May 1999, our stockholders approved the grant of an option to our
President and Chief Executive Officer and Executive Vice President and Chief
Operating Officer to purchase 1,000,000 and 650,000 shares, respectively, of
common stock at a per share exercise price equal to $18.25, the last reported
sale price of the common stock on the date shareholder approval was obtained.
The options will vest no later than seven years from the grant date and
specified amounts are subject to earlier vesting if specified common stock price
thresholds are met.

During April 1995, we completed the sale of the remaining one-half of our
shares of capital stock of Cadus Pharmaceutical Corporation, a Delaware
corporation, for $3.0 million to High River LP, a Delaware limited partnership.
In exchange for receiving a now-expired right to repurchase all outstanding
shares of capital stock of Cadus held by High River, ImClone granted to High
River two options to purchase shares of common stock. One option is for 150,000
shares at an exercise price per share equal to $2.00, subject to certain
adjustments and the other option is for 300,000 shares at an exercise price per
share equal to $0.69, subject to certain adjustments. Both options expire on
April 26, 2000. The 450,000 options have a weighted average exercise price of
$1.13.

WARRANTS

As of October 27, 1999, a total of 1,791,590 shares of common stock were
issuable upon exercise of outstanding warrants. Such warrants have been issued
to our officers, directors, other employees, certain scientific advisory board
members, as well as certain investors and certain credit providers. The
warrants, all of which are currently exercisable, have exercise prices ranging
from $.0625 to $13.33 per share, with an average exercise price of approximately
$2.96. The warrants have standard anti-dilution provisions including adjustments
for stock splits, reverse stock splits and stock dividends as well as
adjustments for capital reorganizations.

REGISTRATION RIGHTS

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
shares and upon receipt of milestone shares. Specifically, Merck KGaA has the
right to require us to register upon its request once during any 12-month
period, up to a total of four times, at our expense, the number of shares of
common stock into which the shares of series A preferred stock are converted
according to their terms and the number of milestone shares that are issued.
Merck KGaA may also exercise rights to have such registrable common stock
registered at any time that we file a registration statement for other shares of
our common stock. Merck KGaA may exercise these rights at any time after
conversion of its shares of series A preferred stock into shares of common stock
or receipt of milestone shares. However, Merck KGaA has waived its rights to
exercise these registration rights in connection with this offering and during
the period ending 90 days after the date of this prospectus. As of October 27,
1999, Merck KGaA has not converted any series A preferred stock into common
stock and has not acquired any milestone shares.

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<PAGE> 61

LIMITATION OF LIABILITY

As permitted by the Delaware General Corporation Law, our certificate of
incorporation provides that our directors shall not be personally liable to us
or our stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability:

- for any breach of the director's duty of loyalty to ImClone or its
stockholders

- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law

- under Section 174 of the Delaware General Corporation Law, relating to
prohibited dividends or distributions or the repurchase or redemption of
stock or

- for any transaction from which the director derives an improper personal
benefit

As a result of this provision, we and our stockholders may be unable to
obtain monetary damages from a director for breach of his duty of care. Although
stockholders may continue to seek injunctive or other equitable relief for an
alleged breach of fiduciary duty by a director, stockholders may not have any
effective remedy against the challenged conduct if equitable remedies are
unavailable.

We have obtained directors and officers liability insurance against claims
made in the aggregate amount of $13 million per loss and per year. In addition,
our by-laws provide for indemnification of all officers and directors against
liabilities or expenses incurred in connection with any action, suit or
proceeding if the director or officer acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, our best interests, unless the
action, suit or proceeding involved liability by the director or officer to us
and no court determines that such director or officer is entitled to
indemnification. Our by-laws also provide that expenses incurred by a director
or officer in defending any such action may be advanced by us if the director or
officer agrees to repay such amount if it is subsequently determined that he is
not entitled to indemnification.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Securities Act") may be permitted to directors,
officers or persons controlling ImClone pursuant to the foregoing provisions, we
have been informed that in the opinion of the SEC such indemnification is
against public policy and is therefore unenforceable.

BUSINESS COMBINATION PROVISIONS

The business combination provision contained in Section 203 of the Delaware
General Corporation Law ("Section 203") defines an interested stockholder as any
person that

- owns, directly or indirectly 15% or more of the outstanding voting stock
of a corporation or

- is an affiliate or associate of a corporation and was the owner of 15% or
more of the outstanding voting stock at any time within the three-year
period immediately prior to the date on which it is sought to be
determined whether such person is an interested stockholder, and the
affiliates and the associates of such person

Under Section 203, a resident domestic corporation may not engage in any
business combination with any interested stockholder for a period of three years
following the date such stockholder became an interested stockholder, unless

- prior to such date the board of directors of the corporation approved
either the business combination or the transaction which resulted in the
stockholder becoming an interested stockholder

- upon consummation of the transaction which resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced (excluding, for determining the number of
shares outstanding, (a) shares owned by persons who are directors and
officers and (b) employee stock plans, in certain instances) or

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<PAGE> 62

- on or subsequent to such date the business combination is approved by the
board of directors and authorized at an annual or special meeting of
stockholders by the affirmative vote of at least 66 2/3% of the
outstanding voting stock which is not owned by the interested stockholder

The restrictions imposed by Section 203 will not apply to a corporation if

- the corporation's original certificate of incorporation contains a
provision expressly electing not to be governed by Section 203 and

- the corporation by the action of its stockholders holding a majority of
outstanding stock adopts an amendment to its certificate of incorporation
or by-laws expressly electing not to be governed by Section 203

Such amendment will not be effective until 12 months after adoption and
shall not apply to any business combination between such corporation and any
person that became an interested stockholder of such corporation on or prior to
such adoption.

We have not elected out of the statute and therefore the restrictions
imposed by Section 203 will apply to us.

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MATERIAL U.S. FEDERAL TAX CONSIDERATIONS FOR
NON-U.S. HOLDERS OF COMMON STOCK

The following is a general discussion of the material U.S. federal income
and estate tax consequences of the ownership and disposition of common stock by
a beneficial owner that is a "Non-U.S. Holder." A "Non-U.S. Holder" is a person
or entity that, for U.S. federal income tax purposes, is a non-resident alien
individual, a foreign corporation, a foreign partnership, or a foreign estate or
trust.

This discussion is based on the Internal Revenue Code of 1986, as amended
(the "Code"), and administrative interpretations as of the date of this
prospectus, all of which are subject to change, including changes with
retroactive effect. This discussion does not address all aspects of U.S. federal
income and estate taxation that may be relevant to Non-U.S. Holders in light of
their particular circumstances and does not address any tax consequences arising
under the laws of any state, local or foreign jurisdiction. Prospective holders
should consult their tax advisors with respect to the particular tax
consequences to them of owning and disposing of common stock, including the
consequences under the laws of any state, local or foreign jurisdiction.

DIVIDENDS

Dividends paid to a Non-U.S. Holder of common stock generally will be
subject to withholding tax at a 30% rate or a reduced rate specified by an
applicable income tax treaty. For purposes of determining whether tax is to be
withheld at a reduced rate under an income tax treaty, ImClone will presume that
dividends paid on or before December 31, 2000 to an address in a foreign country
are paid to a resident of that country unless it has knowledge that the
presumption is not warranted.

In order to obtain a reduced rate of withholding for dividends paid after
December 31, 2000, a Non-U.S. Holder will be required to provide an Internal
Revenue Service Form W-8BEN certifying its entitlement to benefits under a
treaty. In addition, in certain cases where dividends are paid to a Non-U.S.
Holder that is a partnership or other pass-through entity, persons holding an
interest in the entity may need to provide the required certification.

The withholding tax does not apply to dividends paid to a Non-U.S. Holder
that provides a Form 4224 or, after December 31, 2000, a Form W-8ECI, certifying
that the dividends are effectively connected with the Non-U.S. Holder's conduct
of a trade or business within the United States. Instead, the effectively
connected dividends will be subject to regular U.S. income tax as if the
Non-U.S. Holder were a U.S. resident. A non-U.S. corporation receiving
effectively connected dividends may also be subject to an additional "branch
profits tax" imposed at a rate of 30% (or a lower treaty rate) on an earnings
amount that is net of the regular tax.

GAIN ON DISPOSITION OF COMMON STOCK

A Non-U.S. Holder generally will not be subject to U.S. federal income tax
on gain realized on a sale or other disposition of common stock unless:

- the gain is effectively connected with a trade or business of the
Non-U.S. Holder in the United States

- in the case of certain Non-U.S. Holders who are non-resident alien
individuals and hold the common stock as a capital asset, the
individuals are present in the United States for 183 or more days in the
taxable year of the disposition

- the Non-U.S. Holder is subject to tax under the provisions of the Code
regarding the taxation of U.S. expatriates or

- ImClone is or has been a U.S. real property holding corporation at any
time within the five-year period preceding the disposition or the
Non-U.S. Holder's holding period, whichever period is shorter

The tax relating to stock in a U.S. real property holding corporation does not
apply to a Non-U.S. Holder whose holdings, actual and constructive, at all times
during the applicable period, amount to 5% or less of the common stock of a U.S.
real property holding corporation, provided that the common stock is regularly
traded
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on an established securities market. Generally, a corporation is a U.S. real
property holding corporation if the fair market value of its U.S. real property
interests, as defined in the Code and applicable regulations, equals or exceeds
50% of the aggregate fair market value of its worldwide real property interests
and its other assets used or held for use in a trade or business. ImClone may
be, or may prior to a Non-U.S. Holder's disposition of common stock become, a
U.S. real property holding corporation.

INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING

ImClone must report to the IRS the amount of dividends paid, the name and
address of the recipient, and the amount of any tax withheld. A similar report
is sent to the Non-U.S. Holder. Under tax treaties or other agreements, the IRS
may make its reports available to tax authorities in the recipient's country of
residence. Dividends paid on or before December 31, 2000 at an address outside
the United States are not subject to backup withholding, unless the payor has
knowledge that the payee is a U.S. person. However, a Non-U.S. Holder may need
to certify its non-U.S. status in order to avoid backup withholding at a 31%
rate on dividends paid after December 31, 2000 or dividends paid on or before
that date at an address inside the United States.

U.S. information reporting and backup withholding generally will not apply
to a payment of proceeds of a disposition of common stock where the transaction
is effected outside the United States through a non-U.S. office of a non-U.S.
broker. However, a Non-U.S. Holder may need to certify its non-U.S. status in
order to avoid information reporting and backup withholding at a 31% rate on
disposition proceeds where the transaction is effected by or through a U.S.
office of a broker. In addition, U.S. information reporting requirements may
apply to the proceeds of a disposition effected by or through a non-U.S. office
of a U.S. broker, or by a non-U.S. broker with specified connections to the
United States.

Backup withholding is not an additional tax. Rather, the tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. When withholding results in an overpayment of taxes, a refund may be
obtained if the required information is furnished to the IRS.

FEDERAL ESTATE TAX

An individual Non-U.S. Holder who is treated as the owner of, or has made
certain lifetime transfers of, an interest in the common stock will be required
to include the value of the stock in his gross estate for U.S. federal estate
tax purposes, and may be subject to U.S. federal estate tax unless an applicable
estate tax treaty provides otherwise.

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UNDERWRITERS

Under the terms and subject to the conditions contained in an Underwriting
Agreement dated the date hereof, the underwriters named below, for whom Morgan
Stanley & Co. Incorporated, Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Prudential Securities Incorporated and Warburg Dillon Read LLC are acting as
representatives, have severally agreed to purchase, and the company has agreed
to sell to them, severally, the respective number of shares of common stock set
forth opposite the names of such underwriters below:

<TABLE>
<CAPTION>
NUMBER
OF
NAME SHARES
- ---- ---------
<S> <C>
Morgan Stanley & Co. Incorporated...........................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...................................
Prudential Securities Incorporated..........................
Warburg Dillon Read LLC.....................................
---------
Total.................................................. 2,500,000
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the several
underwriters to pay for and accept delivery of the shares of common stock
offered hereby are subject to the approval of certain legal matters by their
counsel and to certain other conditions. The underwriters are obligated to take
and pay for all of the shares of common stock offered hereby (other than those
covered by the underwriters' over-allotment option described below) if any such
shares are taken.

The underwriters initially propose to offer part of the shares of common
stock directly to the public at the public offering price set forth on the cover
page hereof and part to certain dealers at a price that represents a concession
not in excess of $ a share under the public offering price. Any
underwriter may allow, and such dealers may reallow, a concession not in excess
of $ a share to other underwriters or to certain dealers. After the
initial offering of the shares of common stock, the offering price and other
selling terms may from time to time be varied by the representatives.

The company has granted to the underwriters an option, exercisable for 30
days from the date of this prospectus, to purchase up to an aggregate of 375,000
additional shares of common stock at the public offering price set forth on the
cover page hereof, less underwriting discounts and commissions. The underwriters
may exercise such option solely for the purpose of covering over-allotments, if
any, made in connection with the offering of the shares of common stock offered
hereby. To the extent such option is exercised, each underwriter will become
obligated, subject to certain conditions, to purchase approximately the same
percentage of such additional shares of common stock as the number set forth
next to such underwriter's name in the table above bears to the total number of
shares of common stock set forth next to the names of all underwriters in the
table above. If the underwriters' option is exercised in full, the total price
to the public would be $ , the total underwriters' discounts and
commission would be $ and total proceeds to the company would be
$ .

Each of the company and the directors, officers and certain other
stockholders of the company has agreed that, without the prior written consent
of Morgan Stanley & Co. Incorporated on behalf of the underwriters, it will not
during the period ending 90 days after the date of this prospectus:

- offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend or otherwise transfer or dispose of,

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<PAGE> 66

directly or indirectly, any shares of common stock or any securities convertible
into or exercisable or exchangeable for common stock or

- enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of the
common stock

whether any such transaction described above is to be settled by delivery of
common stock or such other securities, in cash or otherwise.

The restrictions described above do not apply to:

- the sale of shares to the underwriters

- the issuance by the company of shares of common stock upon the exercise
of an option or a warrant or the conversion of a security outstanding on
the date of this prospectus of which the underwriters have been advised
in writing or

- transactions by any person other than the company relating to shares of
common stock or other securities acquired in open market transactions
after the completion of the offering of the shares

In order to facilitate the offering of the common stock, the underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the common stock. Specifically, the underwriters may over-allot in
connection with the offering, creating a short position in the common stock for
their own account. In addition, to cover over-allotments or to stabilize the
price of the common stock, the underwriters may bid for, and purchase, shares of
common stock in the open market. Finally, the underwriting syndicate may reclaim
selling concessions allowed to an underwriter or a dealer for distributing the
common stock in the offering, if the syndicate repurchases previously
distributed common stock in transactions to cover syndicate short positions, in
stabilization transactions or otherwise. Any of these activities may stabilize
or maintain the market price of the common stock above independent market
levels. The underwriters are not required to engage in these activities and may
end any of these activities at any time.

The underwriters and dealers may engage in passive market making
transactions in the common stock in accordance with Rule 103 of Regulation M
promulgated by the SEC. In general, a passive market maker may not bid for, or
purchase, the common stock at a price that exceeds the highest independent bid.
In addition, the net daily purchases made by any passive market maker generally
may not exceed 30% of its average daily trading volume in the common stock
during a specified two month prior period, or 200 shares, whichever is greater.
A passive market maker must identify passive market making bids as such or
maintain the market price of the common stock above independent market levels.
Underwriters and dealers are not required to engage in passive market making and
may end passive market making activities at any time.

The company and the underwriters have agreed to indemnify each other
against certain liabilities, including liabilities under the Securities Act.

LEGAL MATTERS

Certain legal matters relating to the issuance of the shares of common
stock offered hereby will be passed upon for ImClone by Davis Polk & Wardwell,
New York, New York, and for the underwriters by Ropes & Gray, Boston,
Massachusetts.

EXPERTS

The statements in this prospectus under the captions "Risk Factors -- Our
success depends upon our ability to protect our intellectual property and our
proprietary technology" and "Business -- Patents and Trade Secrets" on matters
of U.S. intellectual property law other than references in such sections to the
opinion of Kenyon & Kenyon, have been reviewed and approved by Hoffmann & Baron,
LLP, intellectual property counsel for ImClone, as experts in U.S. intellectual
property law, and are included herein in reliance upon such review and approval.
The statements in this prospectus in the second sentence of each of the eighth

65
<PAGE> 67

paragraph under the caption "Risk Factors -- Our success depends upon our
ability to protect our intellectual property and our proprietary technology" and
in the third paragraph under the caption "Business -- Patents and Trade
Secrets -- Patent Rights; Licenses -- C225" on matters of U.S. intellectual
property law that refer to the opinion of Kenyon & Kenyon, have been reviewed
and approved by Kenyon & Kenyon, special intellectual property counsel for
ImClone, as experts in U.S. intellectual property law, and are included herein
in reliance upon such review and approval.

The consolidated financial statements of ImClone Systems Incorporated and
its subsidiary as of December 31, 1998 and 1997, and for each of the years in
the three-year period ended December 31, 1998, have been included herein and in
the registration statement in reliance upon the report of KPMG LLP, independent
certified public accountants, appearing elsewhere herein, and upon authority of
said firm as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We file annual, quarterly and special reports, proxy statements and other
information with the Commission. You may read and copy any document we file at
the SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the Commission at 1-800-SEC-0330 for further
information on these public reference rooms. Our filings with the SEC are also
available to the public from the SEC's web site at http://www.sec.gov. Our
common stock is traded on the NASDAQ National Market under the ticker symbol
"IMCL." You may also read and copy our filings with the SEC at the NASDAQ
National Market offices located in Washington, D.C.

We filed a registration statement on Form S-3 to register the shares
offered by this prospectus with the Commission. As allowed by SEC rules, this
prospectus does not contain all the information that you can find in the
registration statement or the exhibits to the registration statement. The SEC
allows us to "incorporate by reference" the information we file with them. This
means that we can disclose important information to you by referring you to
those documents. The information incorporated by reference is considered to be a
part of this prospectus, except if it is superseded by information in this
prospectus or by later information that we file with the Commission. Information
that we file with the SEC after the date of this prospectus will automatically
update and supersede the information contained or incorporated by reference in
this prospectus. We incorporate by reference the documents listed below, as well
as any future filings we may make with the SEC under Section 13(a), 13(c), 14 or
15(d) of the Exchange Act, before the time that all of the shares offered by
this prospectus have been sold or de-registered. These documents contain
important information about our company and its financial condition.

- our Annual Report on Form 10-K for the fiscal year ended December 31,
1998

- our Quarterly Reports on Form 10-Q for the fiscal quarters ended March
31, 1999, June 30, 1999 and September 30, 1999

- our Proxy Statement dated April 21, 1999 filed in connection with our
May 24, 1999 Annual Meeting of Stockholders

- our Current Report on Form 8-K filed on October 7, 1999

You may request a copy of these filings, excluding all exhibits unless we
have specifically incorporated by reference an exhibit, at no cost, by writing
or telephoning us at:

ImClone Systems Incorporated
180 Varick Street
New York, New York 10014
(212) 645-1405
Attention: Catherine M. Vaczy, Associate General Counsel

When you are deciding whether to purchase the shares being offered by this
prospectus, you should rely only on the information incorporated by reference or
provided in this prospectus or any supplement. We have not authorized anyone
else to provide you with different information. We are not making any offer of
the shares in any state where the offer is not permitted. You should not assume
that the information in this prospectus or any supplement is accurate as of any
date other than the date on the front of those documents.
66
<PAGE> 68

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S> <C>
AUDITED FINANCIAL STATEMENTS:
Independent Auditors' Report................................ F-2
Consolidated Balance Sheets at December 31, 1998 and 1997... F-3
Consolidated Statements of Operations and Comprehensive Loss
for the Years Ended December 31, 1998, 1997, and 1996..... F-4
Consolidated Statements of Stockholders' Equity for the
Years Ended December 31, 1998, 1997, and 1996............. F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1998, 1997, and 1996......................... F-7
Notes to Consolidated Financial Statements.................. F-8

UNAUDITED FINANCIAL STATEMENTS:
Unaudited Consolidated Balance Sheet at September 30,
1999...................................................... F-27
Unaudited Consolidated Statements of Operations for the Nine
Months Ended September 30, 1999 and 1998.................. F-28
Unaudited Consolidated Statements of Cash Flows for the Nine
Months Ended September 30, 1999 and 1998.................. F-29
Unaudited Notes to Consolidated Financial Statements........ F-30
</TABLE>

F-1
<PAGE> 69

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 generally accepted auditing
standards. 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, 1998 and 1997, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1998, in conformity with generally accepted
accounting principles.

KPMG LLP

Princeton, New Jersey
February 19, 1999

F-2
<PAGE> 70

IMCLONE SYSTEMS INCORPORATED

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

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1997
ASSETS ------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 3,888 $ 2,558
Securities available for sale............................. 42,851 57,052
Prepaid expenses.......................................... 470 596
Other current assets...................................... 1,196 589
-------- ---------
Total current assets................................ 48,405 60,795
-------- ---------
Property and equipment:
Land...................................................... 340 340
Building and building improvements........................ 10,519 8,969
Leasehold improvements.................................... 4,846 4,832
Machinery and equipment................................... 7,834 6,315
Furniture and fixtures.................................... 640 550
Construction in progress.................................. 115 2,159
-------- ---------
Total cost.......................................... 24,294 23,165
Less accumulated depreciation and amortization............ (12,877) (11,294)
-------- ---------
Property and equipment, net............................. 11,417 11,871
-------- ---------
Patent costs, net........................................... 860 944
Deferred financing costs, net............................... 46 55
Other assets................................................ 1,524 2,115
-------- ---------
$ 62,252 $ 75,780
======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 1,109 $ 1,731
Accrued expenses and other................................ 4,847 1,440
Interest payable.......................................... 45 68
Deferred revenue.......................................... 75 208
Fee potentially refundable from corporate partner......... 4,000 --
Current portion of long-term liabilities.................. 744 677
Preferred stock dividends payable......................... 2,512 --
-------- ---------
Total current liabilities........................... 13,332 4,124
-------- ---------
Long-term debt.............................................. 2,200 2,200
Other long-term liabilities, less current portion........... 1,546 1,118
Preferred stock dividends payable........................... -- 112
-------- ---------
Total liabilities................................... 17,078 7,554
-------- ---------
Commitments and contingencies
Stockholders' equity:
</TABLE>

<TABLE>
Preferred stock, $1.00 par value; authorized 4,000,000 shares; issued and outstanding
Series A Convertible Preferred Stock: 400,000 at December 31, 1998 and
December 31, 1997 (preference in liquidation $42,512 and $40,112, respectively). 400 400
<S> <C> <C>
Common stock, $.001 par value; authorized 45,000,000 shares; issued 24,567,312 and
24,265,072 at December 31, 1998 and December 31, 1997, respectively; outstanding
24,516,495, and 24,214,255 at December 31, 1998 and December 31, 1997,
respectively........................................................ 25 24
Additional paid-in capital............................................ 184,853 185,706
Accumulated deficit................................................... (138,846) (117,464)
Treasury stock, at cost; 50,817 shares at December 31, 1998 and December 31,
1997................................................................ (492) (492)
Note receivable--officer and stockholder.............................. (142) --
Accumulated other comprehensive income (loss):
Unrealized (loss) gain on securities available for sale............. (624) 52
-------- ---------
Total stockholders' equity...................................... 45,174 68,226
-------- ---------
$ 62,252 $ 75,780
======== =========
</TABLE>

See accompanying notes to financial statements.
F-3
<PAGE> 71

IMCLONE SYSTEMS INCORPORATED

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

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Revenues:
License fees from third parties.......................... $ 1,000 $ 3,000 $ 75
Research and development funding from third parties and
other................................................. 3,193 2,348 525
-------- -------- --------
Total revenues................................... 4,193 5,348 600
-------- -------- --------
Operating expenses:
Research and development................................. 21,049 16,455 11,482
General and administrative............................... 7,145 5,356 3,961
-------- -------- --------
Total operating expenses......................... 28,194 21,811 15,443
-------- -------- --------
Operating loss............................................. (24,001) (16,463) (14,843)
-------- -------- --------
Other:
Interest and other income................................ (3,054) (1,523) (918)
Interest expense......................................... 435 551 823
-------- -------- --------
Net interest and other income.................... (2,619) (972) (95)
-------- -------- --------
Loss before extraordinary item............................. (21,382) (15,491) (14,748)
Extraordinary loss on extinguishment of debt............... -- -- 1,267
-------- -------- --------
Net loss................................................... (21,382) (15,491) (16,015)
Preferred dividends (including assumed incremental yield
attributable to beneficial conversion feature of $1,268
and $51 for the years ended December 31, 1998 and 1997,
respectively)............................................ 3,668 163 --
-------- -------- --------
Net loss to common stockholders............................ $(25,050) $(15,654) $(16,015)
======== ======== ========
Net loss per common share:
Basic and diluted:
Loss before extraordinary item........................ $ (1.03) $ (0.67) $ (0.76)
Extraordinary loss on extinguishment of debt.......... -- -- (0.07)
-------- -------- --------
Net loss................................................. $ (1.03) $ (0.67) $ (0.83)
======== ======== ========
Weighted average shares outstanding........................ 24,301 23,457 19,371
======== ======== ========
Comprehensive loss:
Net loss................................................... $(21,382) $(15,491) $(16,015)
Other comprehensive income (loss):
Unrealized gain on securities available for sale:
Unrealized holding gain (loss) arising during the
period.............................................. (638) 99 (49)
Less: Reclassification adjustment for realized gain
(loss) included in net loss......................... 38 (2) --
-------- -------- --------
Total other comprehensive income (loss).......... (676) 101 (49)
-------- -------- --------
Total comprehensive loss......................... $(22,058) $(15,390) $(16,064)
======== ======== ========
</TABLE>

See accompanying notes to financial statements.
F-4
<PAGE> 72

IMCLONE SYSTEMS INCORPORATED

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK ADDITIONAL
----------------- ------------------- PAID-IN ACCUMULATED TREASURY
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT STOCK
-------- ------ ---------- ------ ---------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995... -- $ -- 16,819,622 $17 $ 97,914 $ (85,958) $(150)
-------- ---- ---------- --- -------- --------- -----
Issuance of common stock....... 2,200,000 2 13,560
Options exercised.............. 266,275 846
Warrants exercised............. 604,892 1 2,960
Options granted to
non-employees................ 95
Extinguishment of debt......... 357,333 3,260
Debt discount.................. 125
Treasury shares................ (19)
Changes in unrealized loss on
securities available for
sale.........................
Net loss....................... (16,015)
-------- ---- ---------- --- -------- --------- -----
Balance at December 31, 1996... -- -- 20,248,122 20 118,760 (101,973) (169)
-------- ---- ---------- --- -------- --------- -----
Issuance of preferred stock.... 400,000 400 39,597
Issuance of common stock....... 3,000,000 3 23,152
Options exercised.............. 147,450 223
Warrants exercised............. 869,500 1 1,385
Options granted to
non-employees................ 189
Options/warrants granted to
employees.................... 2,512
Treasury shares................ (323)
Changes in unrealized loss on
securities available for
sale.........................
Preferred stock dividends...... (112)
Net loss....................... (15,491)
-------- ---- ---------- --- -------- --------- -----
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
Changes in unrealized gain on
securities available for
sale.........................
Note receivable--officer and
stockholder..................
Interest on note
receivable--officer and
stockholder.................. 11
Preferred stock dividends...... (2,400)
Net loss....................... (21,382)
-------- ---- ---------- --- -------- --------- -----
Balance at December 31, 1998... 400,000 $400 24,567,312 $25 $184,853 $(138,846) $(492)
======== ==== ========== === ======== ========= =====
</TABLE>

See accompanying notes to financial statements.
F-5
<PAGE> 73

IMCLONE SYSTEMS INCORPORATED

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS)

<TABLE>
<CAPTION>
NOTE ACCUMULATED
RECEIVABLE OTHER
OFFICER AND COMPREHENSIVE
STOCKHOLDER LOSS TOTAL
----------- ------------- --------
<S> <C> <C> <C>
Balance at December 31, 1995........................ $ -- $ -- $ 11,823
----- ----- --------
Issuance of common stock............................ 13,562
Options exercised................................... 846
Warrants exercised.................................. 2,961
Options granted to non-employees.................... 95
Extinguishment of debt.............................. 3,260
Debt discount....................................... 125
Treasury shares..................................... (19)
Changes in unrealized loss on securities available
for sale.......................................... (49) (49)
Net loss............................................ (16,015)
----- ----- --------
Balance at December 31, 1996........................ -- (49) 16,589
----- ----- --------
Issuance of preferred stock......................... 39,997
Issuance of common stock............................ 23,155
Options exercised................................... 223
Warrants exercised.................................. 1,386
Options granted to non-employees.................... 189
Options/warrants granted to employees............... 2,512
Treasury shares..................................... (323)
Changes in unrealized loss on securities available
for sale.......................................... 101 101
Preferred stock dividends........................... (112)
Net loss............................................ (15,491)
----- ----- --------
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
Changes in unrealized gain on securities available
for sale.......................................... (676) (676)
Note receivable--officer and stockholder............ (131) (131)
Interest on note receivable--officer and
stockholder....................................... (11) --
Preferred stock dividends........................... (2,400)
Net loss............................................ (21,382)
----- ----- --------
Balance at December 31, 1998........................ $(142) $(624) $ 45,174
===== ===== ========
</TABLE>

See accompanying notes to financial statements.
F-6
<PAGE> 74

IMCLONE SYSTEMS INCORPORATED

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1998 1997 1996
-------- --------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(21,382) $ (15,491) $(16,015)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization........................... 1,769 1,797 1,704
Expense associated with issuance of options and
warrants............................................. 690 2,729 95
Extraordinary loss on extinguishment of debt............ -- -- 1,267
Discounted interest amortization........................ -- -- 156
Write-off of patent costs............................... 235 146 --
(Gain) loss on sale of investments...................... (38) 2 --
Changes in:
Prepaid expenses..................................... 126 (474) (7)
Other current assets................................. (607) (110) (453)
Due from officer and stockholder..................... -- 101 31
Other assets......................................... (62) (37) (14)
Interest payable..................................... (23) (170) (105)
Accounts payable..................................... (622) 672 67
Accrued expenses and other........................... 3,407 75 540
Deferred revenue..................................... (133) 208 --
Fee potentially refundable from corporate partner.... 4,000 -- --
-------- --------- --------
Net cash used in operating activities.............. (12,640) (10,552) (12,734)
-------- --------- --------
Cash flows from investing activities:
Acquisitions of property and equipment.................... (472) (1,657) (272)
Purchases of securities available for sale................ (62,779) (241,623) (32,665)
Sales and maturities of securities available for sale..... 76,996 195,450 21,836
Investment in CombiChem, Inc. ............................ -- (2,000) --
Additions to patents...................................... (254) (212) (343)
-------- --------- --------
Net cash provided by (used in) investing
activities....................................... 13,491 (50,042) (11,444)
-------- --------- --------
Cash flows from financing activities:
Net proceeds from issuance of preferred stock............. -- 39,997 --
Net proceeds from issuance of common stock................ -- 23,154 13,562
Proceeds from exercise of stock options and warrants...... 682 1,581 3,807
Proceeds from issuance of common stock under the employee
stock purchase plan..................................... 33 -- --
Purchase of treasury stock................................ -- (323) (19)
Proceeds from equipment and building improvement
financings.............................................. 594 -- --
Repayment of long-term debt............................... -- (2,113) --
Payments of other liabilities............................. (830) (1,878) (645)
-------- --------- --------
Net cash provided by financing activities.......... 479 60,418 16,705
-------- --------- --------
Net increase (decrease) in cash and cash equivalents........ 1,330 (176) (7,473)
Cash and cash equivalents at beginning of period............ 2,558 2,734 10,207
-------- --------- --------
Cash and cash equivalents at end of period.................. $ 3,888 $ 2,558 $ 2,734
======== ========= ========
</TABLE>

See accompanying notes to financial statements.
F-7
<PAGE> 75

IMCLONE SYSTEMS INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) ORGANIZATION AND BASIS OF PREPARATION

ImClone Systems Incorporated (the "Company") is a biopharmaceutical company
engaged primarily in the research and development of therapeutic products for
the treatment of cancer and cancer related disorders. The Company employs
accounting policies that are in accordance with generally accepted accounting
principles in the United States.

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
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 and in obtaining Food and Drug Administration ("FDA") and other
regulatory approvals on products for use in health care. 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 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.

(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 investment in debt and equity securities in one
of three categories: trading, available-for-sale, or held-to-maturity. Trading
securities are bought and held principally for the purpose of selling them in
the near term. Held-to-maturity securities are those debt securities in which
the Company has the ability and intent to hold the security until maturity. All
other securities not included in trading or held-to-maturity are classified as
available-for-sale.

Trading and available-for-sale securities are recorded at fair value.
Held-to-maturity securities are recorded at amortized cost, adjusted for the
amortization or accretion of premiums or discounts. Unrealized holding gains and
losses on trading securities are included in earnings. 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

F-8
<PAGE> 76
IMCLONE SYSTEMS INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

component of accumulated comprehensive 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 or held-to-maturity
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. Premiums and
discounts are amortized or accreted over the life of the related
held-to-maturity security as an adjustment to yield using the effective interest
method. Dividend and interest income is recognized when earned.

At December 31, 1998 and 1997, all investments in securities were
classified as available-for-sale.

(D) LONG-LIVED ASSETS

Property and equipment are stated at cost. Equipment under capital leases
are 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 twelve 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 written down to fair value
if expected associated 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 obtaining the Industrial Development Revenue Bonds (Note
6) are amortized using the straight-line method over the terms of the related
bonds.

(F) REVENUE RECOGNITION

License fees are recognized if the Company enters into license agreements
with third parties that provide for the payment of non-refundable fees when the
agreement is signed or when all parties concur that specified goals are
achieved. These fees are recognized as license fee revenues in accordance with
the terms of the particular agreement.

Research and development funding revenue is derived from collaborative
agreements with third parties 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 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 and
recognized as revenue upon the achievement of such specified goals. Revenue
received that is related to future performance is classified as deferred revenue
and recognized when the revenue is earned.

(G) 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 only if the
F-9
<PAGE> 77
IMCLONE SYSTEMS INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

market price on the date of grant of the underlying stock exceeded the exercise
price. The Company provides the pro forma net income and pro forma earnings per
share disclosures for employee 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.

(H) RESEARCH AND DEVELOPMENT

Research and development expenditures made pursuant to certain research and
development contracts with academic institutions, and other research and
development costs, are expensed as incurred.

(I) 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 on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.

(J) 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 financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.

(K) NET LOSS PER COMMON SHARE

Basic and diluted loss per common share is based on the net loss for the
relevant period, adjusted for cumulative Series A Preferred Stock dividends and
the assumed incremental yield attributable to beneficial conversion feature of
$3,668,000, $163,000 and none for the years ended December 31, 1998, 1997 and
1996, 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, 1998, 1997 and 1996, the Company had approximately 10,933,000,
9,444,000 and 5,380,000, respectively, potential common shares outstanding
including convertible preferred stock, stock options and stock warrants. The
potential shares of Common Stock to which the Series A Preferred Stock is
convertible is based on the future market price of the Company's Common Stock.
The potential Common Stock outstanding relating to Preferred Stock conversion
for the years ended December 31, 1998 and 1997 has been estimated based on the
respective closing prices of the Common Stock at December 31, 1998 and December
31, 1997.

(L) COMPREHENSIVE INCOME (LOSS)

On January 1, 1998, the Company adopted SFAS No. 130, Reporting
Comprehensive Income. SFAS No. 130 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 operations and comprehensive loss. Prior year
financial statements have been reclassified to conform to the requirements of
SFAS No. 130.

(M) RECLASSIFICATION

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

F-10
<PAGE> 78
IMCLONE SYSTEMS INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(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, 1998 and 1997, were as follows:

At December 31, 1998:

<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST HOLDING GAINS HOLDING LOSSES FAIR VALUE
----------- ------------- -------------- -----------
<S> <C> <C> <C> <C>
Commercial paper................ $ 4,738,000 $ -- $ -- $ 4,738,000
U.S. government debt............ 2,000,000 2,000 -- 2,002,000
U.S. corporate debt............. 21,633,000 69,000 (48,000) 21,654,000
Foreign corporate debt.......... 14,150,000 44,000 (42,000) 14,152,000
Foreign government/agency
guaranteed debt............... 302,000 3,000 -- 305,000
----------- -------- -------- -----------
$42,823,000 $118,000 $(90,000) $42,851,000
=========== ======== ======== ===========
</TABLE>

At December 31, 1997:

<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST HOLDING GAINS HOLDING LOSSES FAIR VALUE
----------- ------------- -------------- -----------
<S> <C> <C> <C> <C>
Commercial paper................ $12,104,000 $ 4,000 $ -- $12,108,000
U.S. government debt............ 23,568,000 24,000 (5,000) 23,587,000
U.S. corporate debt............. 3,992,000 4,000 -- 3,996,000
Foreign corporate debt.......... 4,719,000 7,000 -- 4,726,000
Foreign government/agency
guaranteed debt............... 12,617,000 18,000 -- 12,635,000
----------- -------- -------- -----------
$57,000,000 $ 57,000 $ (5,000) $57,052,000
=========== ======== ======== ===========
</TABLE>

Maturities of debt securities classified as available-for-sale were as
follows at December 31, 1998:

Years ended December 31,

<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
----------- -----------
<S> <C> <C>
1999.............................................. $11,257,000 $11,260,000
2000.............................................. 7,151,000 7,198,000
2001.............................................. 1,764,000 1,757,000
2002.............................................. -- --
2003.............................................. -- --
2004 and thereafter............................... 22,651,000 22,636,000
----------- -----------
$42,823,000 $42,851,000
=========== ===========
</TABLE>

Proceeds from the sale of investment securities available-for-sale were
$35,604,000, $9,115,000 and $2,596,000 for the years ended December 31, 1998,
1997 and 1996, respectively. Gross realized gains included in income in 1998 and
1997 were $41,000 and $1,000, respectively and gross realized losses included in
income in 1998 and 1997 were $3,000 in both years. There were no realized gains
or losses in 1996.

F-11
<PAGE> 79
IMCLONE SYSTEMS INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(4) OTHER ASSETS

The following items are included in other assets:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
Deposits...................................... $ 176,000 $ 115,000
Investment in CombiChem, Inc.................. 1,348,000 2,000,000
---------- ----------
$1,524,000 $2,115,000
========== ==========
</TABLE>

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 companies are utilizing CombiChem's Discovery Engine(TM) and
Universal Informer Library(TM) to generate small molecules for screening in the
Company's assays for identification of lead candidates. The Company is providing
CombiChem with research funding through October 1999 in the amount of $500,000
annually and milestone payments and royalties on marketed products, if any,
resulting from the collaboration. 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. The Company recorded an unrealized loss of $652,000 and none as of
December 31, 1998 and 1997, respectively, on this investment due to a reduction
in the market value of the stock. The Company deems this reduction in market
value to be temporary and therefore this unrealized loss was recorded as a
component of accumulated other comprehensive loss.

(5) ACCRUED EXPENSES AND OTHER

The following items are included in accrued expenses and other:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
Salaries and other payroll related expenses... $1,256,000 $ 773,000
Legal and accounting fees..................... 484,000 169,000
Research and development contract services.... 2,032,000 --
Other......................................... 1,075,000 498,000
---------- ----------
$4,847,000 $1,440,000
========== ==========
</TABLE>

(6) LONG-TERM DEBT

On December 31, 1986, the New York City Industrial Development Agency (the
"NYIDA") issued on behalf of the Company an Industrial Development Revenue Bond
(the "1986 Bond") bearing annual interest at 10.75% in the amount of $2,113,000
with a maturity date of December 15, 1994. The proceeds from the sale of the
1986 Bond were used by the Company for the acquisition, construction and
installation of the Company's research and development facility in New York
City. During December 1994, the 1986 Bond's original maturity date of December
15, 1994 was extended to June 15, 1996. During June 1996, the Company and the
NYIDA extended the maturity date an additional eighteen months to December 15,
1997. The Company repaid the obligation on December 15, 1997.

In August 1990, the NYIDA issued another Industrial Development Revenue
Bond (the "1990 Bond") bearing annual interest at 11.25% in the amount of
$2,200,000. The 1990 Bond is due May 1, 2004. The 1990 Bond includes a provision
that if the Company terminates its lease on its New York City facility, a
portion of

F-12
<PAGE> 80
IMCLONE SYSTEMS INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

which was scheduled to expire in March 1999, the 1990 Bond will become due 60
days prior to such date. The Company renewed the entire lease for the New York
City facility effective as of January 1, 1999 through December 2004. 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 substantially all equipment
located in its New York City facility to secure the obligation of the Company to
the NYIDA relating to the 1990 Bond. Interest expense on the 1986 and 1990 Bonds
was approximately $248,000 for the year ended December 31, 1998, and $465,000
for each of the years ended December 31, 1997 and 1996, respectively.

(7) OTHER LONG-TERM LIABILITIES

Other long-term liabilities are comprised of the following:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
Liability to reacquire IL-6m rights........... $ -- $ 283,000
Liability under capital lease obligations..... 2,253,000 1,469,000
Liability under license agreement............. 37,000 43,000
---------- ----------
2,290,000 1,795,000
Less current portion.......................... (744,000) (677,000)
---------- ----------
$1,546,000 $1,118,000
========== ==========
</TABLE>

In July 1993, the Company entered into an agreement with Erbamont, Inc.,
now a subsidiary of Pharmacia and Upjohn, Inc. ("Pharmacia"), to acquire the
worldwide rights to IL-6m, a blood cell growth factor, which had been licensed
to Pharmacia pursuant to a development and licensing agreement. In consideration
of the return of rights and the transfer of certain material and information,
the Company had paid $1,400,000 and entered into a repayment agreement for an
additional $2,400,000 payable over 24 months commencing March 1996. At December
31, 1998, all amounts due Pharmacia under the repayment agreement were paid in
full. Additionally, the Company is required to pay Pharmacia up to $2,700,000 in
royalties on eventual sales of IL-6m, if any.

The Company is obligated under various capital leases for certain
laboratory, office and computer equipment and also certain building improvements
primarily under a December 1996 financing agreement (the "1996 Financing
Agreement") and an April 1998 financing agreement (the "1998 Financing
Agreement") with Finova Technology Finance, Inc. ("Finova"). The 1996 Financing
Agreement allowed the Company to finance the lease of equipment and make certain
building and leasehold improvements to existing facilities involving amounts
aggregating approximately $2,500,000. Each lease has a fair market value
purchase option at the expiration of a 42-month term. Pursuant to the 1996
Financing Agreement, the Company issued to Finova a warrant expiring December
31, 1999 to purchase 23,220 shares of Common Stock at an exercise price of $9.69
per share. The Company recorded a non-cash debt discount of approximately
$125,000 in connection with this financing, which discount is being amortized
over the 42-month term of the first lease. The 1996 Financing Agreement with
Finova expired in December 1997 and the Company did not utilize the full
$2,500,000 under the agreement. In April 1998, the Company entered into the 1998
Financing Agreement with Finova aggregating approximately $2,000,000. The terms
of the 1998 Financing Agreement are substantially similar to the now expired
1996 Financing Agreement except that each lease has a 48-month term and no
warrants were issued. As of December 31, 1998, the Company had entered into ten
individual leases under both the 1996 Financing Agreement and the 1998 Financing
Agreement aggregating a total cost of $3,069,000 and had $676,000 available
under the 1998 Financing Agreement. The 1998 Financing Agreement terminates
March 31, 1999 and the Company is in discussions regarding its

F-13
<PAGE> 81
IMCLONE SYSTEMS INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

extension for an additional 60 days. There are no financial covenants associated
with these financing agreements. See Notes 13 and 15.

At December 31, 1998 and 1997, the gross amount 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:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
Laboratory, office and computer equipment..... $2,407,000 $1,204,000
Building improvements......................... 861,000 831,000
Furniture and fixtures........................ 92,000 --
---------- ----------
3,360,000 2,035,000
Less accumulated depreciation and
amortization................................ (643,000) (291,000)
---------- ----------
$2,717,000 $1,744,000
========== ==========
</TABLE>

In connection with the Company's production and eventual marketing of
certain products, the Company entered into a license agreement that requires
minimum annual royalty payments throughout the term of the agreement. The
agreement expires in 2004 and calls for minimum annual payments of $10,000,
which are creditable against royalties that may be due from sales. To the extent
the minimum annual royalties are not expected to be offset by sales, the Company
has charged the net present value of these payments to operations. An interest
rate of 10% was used to discount the cash flows.

In July 1995, a director loaned the Company $180,000 in exchange for a
long-term note due two years from issuance at an annual interest rate of 8%. As
part of the transaction, the director was granted 36,000 warrants to purchase
Company Common Stock at $1.50 per share and an additional 36,000 warrants to
purchase Common Stock at $3.00 per share. In May 1996, the Company and the
director exchanged the note for 24,000 shares of Common Stock and the Company
paid the accrued and unpaid interest on the note in the amount of $10,000 in
cash. The Company recorded an extraordinary loss of $39,000 on the
extinguishment of the debt. The Company has registered such shares of Common
Stock with the Securities and Exchange Commission (the "Commission") under a
registration statement in accordance with the provisions of the Securities Act
of 1933, as amended (the "1933 Act").

On August 11, 1995, the Oracle Group purchased 1,000,000 shares of Common
Stock for a purchase price of $1.5 million and made a loan to the Company in the
aggregate amount of $2.5 million with a two-year maturity, but subject to
mandatory prepayment, in whole or in part, upon the occurrence of certain
events, including the raising of certain additional funds. The loan carried an
annual interest rate of 8%. The Oracle Group includes Oracle Partners, LP,
Quasar International Partners C.V., Oracle Institutional Partners LP, Sam Oracle
Fund, Inc. and Warren B. Kanders. The Oracle Group also received warrants
exercisable at any time until August 10, 2000 entitling the holders thereof to
purchase 500,000 shares of Common Stock at a price of $1.50 per share and
500,000 shares of Common Stock at a price of $3.00 per share. As a result of the
Company's offerings of shares of its Common Stock in November 1995 and February
1996, the Oracle Group was entitled to require the Company to apply 20 percent
of the gross proceeds of the sale of the shares of Common Stock from the
offerings to repay the loan.

In May 1996, the Company and the Oracle Group exchanged the notes in the
aggregate outstanding principal amount of $2.5 million for 333,333 shares of
Common Stock and the Company paid the accrued and unpaid interest on the notes
in the amount of $143,000 in cash. The Company recorded an extraordinary loss of
$1,228,000 on the extinguishment of the debt. The Company has registered such
shares of Common Stock with the Commission under a registration statement in
accordance with the provisions of the 1933 Act.

F-14
<PAGE> 82
IMCLONE SYSTEMS INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(8) COLLABORATIVE AGREEMENTS

In December 1990, the Company entered into a development and
commercialization agreement with Merck KGaA ("Merck KGaA") with respect to its
principal cancer vaccine product candidate, 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 for all indications
outside of North America. 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 $4,700,000, of which $4,167,000 has been recognized as of
December 31, 1998, in research support payments. Merck KGaA is also required to
make milestone payments up to $22,500,000, of which $3,000,000 has been
recognized as of December 31, 1998, based on milestones achieved in the licensed
products' development. Merck KGaA is also required to pay royalties on the
eventual sales of BEC2 outside of North America, if any. Revenues arising from
sales 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, C225. In exchange for exclusive rights to market
C225 outside of North America and co-development rights in Japan, the Company
can receive $30,000,000, of which $4,000,000 has been received as of December
31, 1998, 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.
Additionally, Merck KGaA will, subject to certain terms, provide the Company a
$30,000,000 secured line of credit or guaranty for the build-out of a
manufacturing facility for the commercial development of C225. Merck KGaA will
pay the Company a royalty on future sales of 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. The agreement may be terminated by
Merck KGaA on any date on which a milestone is achieved (in which case no
milestone payment will be made) or for a one year period after the first
commercial sale of 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 milestones then paid to
date, but only based upon a royalty rate applied to the Company's sales in North
America, if any). In the event of termination of the agreement, the due date for
the payment of the line of credit for the manufacturing facility will be
accelerated, or in the event of a guaranty, the Company will be required to use
its best efforts to release Merck KGaA as guarantor. In the event by April 15,
1999 the Company and Merck KGaA fail to agree on a concept for the manufacturing
facility or Merck KGaA fails to provide the Company with the credit facility or
guaranty then the agreement may be terminated by either party, in which case
Merck KGaA is entitled to receive back all milestone payments made to date.
Additionally, the Company must timely obtain certain collateral license
agreements and the failure to do so will also entitle Merck KGaA to receive back
all milestone payments made to date. The $4,000,000 milestone payment received
in December 1998 has been recorded as a fee potentially refundable from
corporate partner and will be recognized as revenue upon the parties mutual
agreement of the manufacturing facility concept and obtaining the defined
collateral license agreements.

Revenues for the years ended December 31, 1998, 1997 and 1996 were
$4,193,000, $5,348,000 and $600,000 respectively. Revenues for the year ended
December 31, 1998 consisted of (i) $300,000 in research support from the
Company's partnership with the Wyeth/Lederle Vaccine and Pediatrics Division of
American Home in infectious disease vaccines, (ii) $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 with respect to the Company's
BEC2 product candidate, (iii) $295,000 in royalty revenue from the Company's
F-15
<PAGE> 83
IMCLONE SYSTEMS INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

strategic alliance with Abbott in diagnostics, and (iv) $98,000 from a Phase I
Small Business Innovation Research grant from the National Cancer Institute for
a program in cancer-related angiogenesis. Revenues for the year ended December
31, 1997 consisted of (i) $300,000 in research support from the Company's
partnership with American Home in infectious disease vaccines, (ii) $2,000,000
in milestone revenue and $1,667,000 in research and support payments from the
Company's research and license agreement with Merck KGaA with respect to the
Company's BEC2 product candidate, and (iii) $1,000,000 in milestone revenue and
$381,000 in royalty revenue from the Company's strategic alliance with Abbott in
diagnostics. Revenues for the year ended December 31, 1996 consisted of (i)
$300,000 in research support from the Company's partnership with American Home
in infectious diseases, (ii) $225,000 in royalty revenue from the Company's
strategic alliance with Abbott in diagnostics, and (iii) $75,000 in license fees
from the Company's cross-licensing agreement with Immunex Corporation for novel
hematopoietic growth factors.

Revenues were derived from the following geographic areas:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1998 1997 1996
---------- ---------- --------
<S> <C> <C> <C>
United States................................... $ 693,000 $1,681,000 $600,000
Germany......................................... 3,500,000 3,667,000 --
---------- ---------- --------
$4,193,000 $5,348,000 $600,000
========== ========== ========
</TABLE>

(9) PREFERRED STOCK

In connection with the December 1997 amendment to the Company's research
and license agreement with Merck KGaA, Merck KGaA purchased from the Company in
December 1997 400,000 shares of the Company's Series A Convertible Preferred
Stock (the "Series A Preferred Shares" or "Series A Preferred Stock") for total
consideration of $40,000,000. The holders of the Series A Preferred Shares are
entitled to receive annual cumulative dividends of $6.00 per share. Dividends
accrue as of the issuance date of the Series A Preferred Shares and are payable
on the outstanding Series A Preferred Shares in cash annually on December 31 of
each year beginning December 31, 1999 or at the time of conversion or redemption
of the Series A Preferred Shares on which the dividend is to be paid, whichever
is sooner. Up to 100,000 Series A Preferred Shares as of December 31, 1998 were
convertible and an additional 100,000 Series A Preferred Shares will become
convertible on each of January 1, 2000, January 1, 2001 and January 1, 2002.
During the period from issuance through December 31, 1999, the Series A
Preferred Shares are convertible at a price equal to $12.50 per share; during
the period from January 1, 2000 through December 31, 2000 the Series A Preferred
Shares are convertible at a price equal to the average of the closing prices for
the Common Stock for the five trading days ending on December 31, 1999; during
the period from January 1, 2001 through December 31, 2001 the Series A Preferred
Shares are convertible at a price equal to the average of the closing prices for
the Common Stock for the five trading days ending on December 31, 2000; during
the period from January 1, 2002 through December 31, 2002 the Series A Preferred
Shares are convertible at a beneficial conversion price equal to 88% of the
average of the closing prices for the Common Stock for the five trading days
ending on December 31, 2001; and anytime after January 1, 2003 the Series A
Preferred Shares are convertible at a price equal to the average of the closing
prices for the Common Stock for the five trading days ending on December 31,
2002. The conversion price is subject to adjustment in the case of certain
dilutive events. Further, in the event the average market price of the Common
Stock for the five consecutive trading days ending one trading day prior to any
trading day during which any Series A Preferred Shares are outstanding exceeds
150% of the conversion price then in effect, the Company has the right to
require the holder of the Series A Preferred Shares to convert all such shares
that may be convertible. The Company may also redeem in whole or any part of the
Series A Preferred Shares then outstanding at a redemption price of $120 per
Preferred Share, plus accrued and unpaid dividends thereon. In the event of any
voluntary or

F-16
<PAGE> 84
IMCLONE SYSTEMS INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

involuntary liquidation, dissolution or winding up of the Company, the holders
of the Series A Preferred Shares shall be entitled to receive in cash out of the
assets of the Company, whether from capital or from earnings, available for
distribution to its stockholders, before any amount shall be paid the holders of
the Common Stock or holders of other classes or series of capital stock of the
Company, an amount equal to the preference in liquidation; provided that, if the
assets are insufficient to pay the full amount due to the holders of Series A
Preferred Shares, such holders will receive a pro rata portion thereof. In
accordance with the terms of the Series A Preferred Stock, the Company is
required to recognize an assumed incremental yield of $5,455,000 (calculated at
the date of issuance and based on the beneficial conversion feature noted
above). Such amount is being amortized as a preferred stock dividend over a
four-year period beginning with the day of issuance. Accrued dividends payable
were $2,512,000 or $6.28 per share at December 31, 1998. Additionally, the
Company has recognized an incremental yield attributable to a beneficial
conversion feature of $1,319,000 at December 31, 1998.

(10) 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 are not required to approve. Combined, the 86
Plans, the 96 Plans, as amended, and the 98 Plan provide for the granting of
options to purchase up to 5,500,000 shares of Common Stock to key employees,
directors, consultants and advisors of the Company. 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. Certain
options granted under these plans vest over one-to-five-year periods. At
December 31, 1998, options to purchase 4,409,124 shares of Common Stock were
outstanding and 453,405 shares were available for grant. Options may no longer
be granted under the 86 Plans pursuant to the terms of the 86 Plans.

F-17
<PAGE> 85
IMCLONE SYSTEMS INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

A summary of stock option activity follows:

<TABLE>
<CAPTION>
WEIGHTED AVERAGE
NUMBER OF EXERCISE PRICE
SHARES PER SHARE
--------- ----------------
<S> <C> <C>
Balance at December 31, 1995......................... 1,366,954 $2.34
1996 activity:
Granted............................................ 1,077,875 9.32
Exercised.......................................... (266,275) 3.18
Canceled........................................... (74,977) 2.58
---------
Balance at December 31, 1996......................... 2,103,577 5.80
1997 activity:
Granted............................................ 456,194 6.62
Exercised.......................................... (147,450) 1.51
Canceled........................................... (35,226) 8.60
---------
Balance at December 31, 1997......................... 2,377,095 6.19
1998 activity:
Granted............................................ 2,432,976 10.19
Exercised.......................................... (154,097) 3.98
Canceled........................................... (246,850) 11.04
---------
Balance at December 31, 1998......................... 4,409,124 $8.20
=========
</TABLE>

In May 1996, the Company granted an officer an option to purchase 225,000
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 is recognizing compensation
expense as prescribed under APB Opinion No. 25.

In September 1998 and January 1999, the Company granted options to its Vice
President of Marketing and Vice President of Product and Process Development to
respectively purchase 60,000 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, 1998, 1997 and 1996, the Company
granted options to purchase 124,000, 32,000 and 116,000 shares, respectively, of
its Common Stock to certain Scientific Advisory Board members and outside
consultants in consideration for future services. The fair value of these grants
was calculated using the Black-Scholes option pricing model. See Note 10(c) for
weighted average assumptions used. During the years ended December 31, 1998,
1997 and 1996, the Company recognized approximately $540,000, $189,000 and
$95,000, respectively, in compensation expense relating to the options granted
to Scientific Advisory Board members and outside consultants. During the years
ended December 31, 1998, 1997 and 1996, the Company granted options to outside
members of its Board of Directors to purchase approximately 44,000, 153,000 and
158,000 shares, respectively, of its Common Stock.

During April 1995, the Company completed the sale of the remaining one-half
of its shares of capital stock of Cadus for $3.0 million to 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 if for 150,000 shares
at an exercise price per share equal to $2.00, subject to adjustment under
certain circumstances, and the other option is for 300,000 shares at an exercise
price per share equal to $0.69, subject to adjustment under certain
circumstances. Both options will expire on April 26, 2000. The 450,000 options
have a weighted average exercise price of $1.13.

F-18
<PAGE> 86
IMCLONE SYSTEMS INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(B) WARRANTS

As of December 31, 1998, a total of 2,263,590 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:

<TABLE>
<CAPTION>
WEIGHTED AVERAGE
NUMBER OF EXERCISE PRICE
SHARES PER SHARE
--------- ----------------
<S> <C> <C>
Balance at December 31, 1995......................... 3,891,567 $ 3.15
1996 activity:
Granted............................................ 23,220 9.69
Exercised.......................................... (604,892) 4.89
Canceled........................................... (33,050) 12.92
---------
Balance at December 31, 1996......................... 3,276,845 2.41
1997 activity:
Granted............................................ 397,000 1.50
Exercised.......................................... (869,500) 1.56
Canceled........................................... (397,000) 1.50
---------
Balance at December 31, 1997......................... 2,407,345 2.71
1998 activity:
Granted............................................ -- --
Exercised.......................................... (143,755) 1.39
Canceled........................................... -- --
---------
Balance at December 31, 1998......................... 2,263,590 $ 2.80
=========
</TABLE>

In March 1997, the Company extended for a two-year period the term of an
officer's warrant to purchase 397,000 shares of the Company's Common Stock at a
per share exercise price equal to $1.50. In connection with this transaction,
the Company recognized non-cash compensation expense of approximately
$2,233,000.

During September 1996, the Company repriced certain warrants held by
investors to purchase 80,700 shares of Common Stock in order to promote their
exercise prior to pending expiration. The warrants were repriced to an amount
which was ten percent less than the average closing price for the Common Stock
for the thirty days leading up to and including the day prior to the date of
exercise. The fair market value of the warrants was reflected as a cost of
capital.

During November 1996, the Company repriced certain warrants held by
investors to purchase 130,000 shares of Common Stock in order to promote their
exercise prior to pending expiration. The warrants were repriced to an amount
which was ten percent less than the average closing price for the Common Stock
for the thirty days leading up to and including the day prior to the date of
exercise. The fair market value of the warrants was reflected as a cost of
capital.

F-19
<PAGE> 87
IMCLONE SYSTEMS INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

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

<TABLE>
<S> <C>
December 1999............................................. 35,520
March 2000................................................ 6,150
July 2000................................................. 72,000
August 2000............................................... 925,000
November 2000............................................. 12,720
March 2001................................................ 2,500
May 2001.................................................. 847,700
June 2003................................................. 12,000
December 2005............................................. 350,000
---------
Total................................................ 2,263,590
=========
</TABLE>

The following tables summarize the weighted average fair value of stock
options and warrants granted to employees and directors during the years ended
December 31, 1998, 1997 and 1996:

<TABLE>
<CAPTION>
OPTION PLANS
----------------------------------------------------------
1998 1997 1996
------------------ ---------------- ----------------
SHARES $ SHARES $ SHARES $
--------- ----- ------- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Exercise price is less than market
value at date of grant........... -- $ -- -- $ -- 225,000 $6.36
Exercise price equals market value
at date of grant................... 900,476(1) $5.52 424,194(1) $4.29 736,875(1) $5.31
Exercise price exceeds market value
at date of grant................. 1,408,500 $6.28 -- $ -- -- $ --
</TABLE>

- ------------
(1) Does not include 124,000 shares in 1998, 32,000 shares in 1997 and 116,000
shares in 1996 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.

<TABLE>
<CAPTION>
WARRANTS
--------------------------------------------------------
1998 1997 1996
--------------- ----------------- ----------------
SHARES $ SHARES $ SHARES $
------ ----- -------- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Exercise price is less than market
value at date of grant............ -- $ -- 397,000(1) $5.91 -- --
Exercise price equals market value
at date of grant.................... -- $ -- -- $ -- 23,220 $5.39
Exercise price exceeds market value
at date of grant.................. -- $ -- -- $ -- -- $ --
</TABLE>

- ------------
(1) The only grant of warrants during 1997 was the extension of an officer's
warrant to purchase 397,000 shares of Common Stock. The extension has been
considered a cancellation of the original grant and the issuance of a new
below market grant. Accordingly, the Company recognized compensation expense
consistent with APB Opinion No. 25.

The fair value of stock options and warrants 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

F-20
<PAGE> 88
IMCLONE SYSTEMS INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

underlying Common Stock, and the risk-free interest rate during the expected
term of the option. The following summarizes the weighted average assumptions
used:

<TABLE>
<CAPTION>
OPTION PLANS WARRANTS
----------------------- ----------------------
1998 1997 1996 1998 1997 1996
----- ----- ----- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Expected life (years)...................... 5.3 5.0 3.5 -- 2.0 2.0(1)
Interest rate.............................. 5.58% 6.00% 5.00% -- 6.00% 5.00%
Volatility................................. 76.03% 72.29% 85.13% -- 72.29% 85.13%
Dividend yield............................. 0% 0% 0% -- 0% 0%
</TABLE>

- ------------
(1) The weighted average expected life does not include the warrants repriced in
1996 as they were exercised simultaneously.

The following table summarizes information concerning stock options
outstanding at December 31, 1998:

<TABLE>
<CAPTION>
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
NUMBER REMAINING AVERAGE NUMBER AVERAGE
RANGE OF OUTSTANDING CONTRACTUAL EXERCISE EXERCISABLE EXERCISE
EXERCISE PRICES AT 12/31/98 TERM PRICE AT 12/31/98 PRICE
- ----------------------------- ----------- ----------- -------- ------------- --------
<S> <C> <C> <C> <C> <C>
$0.563 - 2.00................ 665,825 2.36 $ 1.13 637,575 $ 1.14
3.75 - 6.00................. 510,125 8.38 5.71 396,751 5.73
6.063 - 7.875............... 602,727 8.76 6.44 66,003 7.08
8.125 - 10.625.............. 492,300 8.13 8.95 257,092 8.57
10.875 - 11.33............... 504,147 7.40 10.88 300,602 10.88
11.375....................... 1,319,000 9.42 11.38 -- --
11.50 - 13.33................ 315,000 9.23 11.84 14,250 13.03
--------- ---------
4,409,124 7.76 $ 8.20 1,672,273 $ 5.46
========= =========
</TABLE>

As of December 31, 1998, the outstanding warrants to purchase 2,263,590
common shares were all exercisable and have a weighted average remaining
contractual term of 2.9 years. The weighted average remaining contractual term
at December 31, 1998 for the 6,150, outstanding warrants exercisable at $.63 per
share is 1.2 years, the 12,300 exercisable at $.69 per share is 1.0 year, the
1,313,420 exercisable at $1.50 per share is 2.1 years, the 498,500 exercisable
at $3.00 per share is 1.6 years, the 350,000 exercisable at $5.50 per share is
7.0 years, the 12,000 exercisable at $7.00 per share is 4.5 years, the 23,220
exercisable at $9.69 per share is 1.0 year, the 6,000 exercisable at $10.00 per
share is 1.9 years, and the 42,000 exercisable at $13.33 per share is 2.3 years.

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 and loss per share would have been
increased or decreased to the pro forma amounts indicated below.

F-21
<PAGE> 89
IMCLONE SYSTEMS INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Net loss to common stockholders
As reported........................ $(25,050,000) $(15,654,000) $(16,015,000)
Pro forma.......................... (32,306,000) (17,283,000) (19,653,000)
Loss per share
Basic and diluted:
As reported........................ $ (1.03) $ (0.67) $ (0.83)
Pro forma.......................... (1.33) (0.74) (1.01)
</TABLE>

The pro forma effect on the loss for the years ended December 31, 1998,
1997, and 1996 is not necessarily indicative of the pro forma effect on future
years' operating results since it does not take into effect the pro forma
compensation expense related to grants made prior to January 1, 1995.

(11) 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 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 employed for a period of not less than six months, he or she
is required to work more than 20 hours per week for at least five months per
calendar year and he or she may not own greater than 5% of the Company's Common
Stock. Pursuant to the ESPP, the Company has reserved 500,000 shares of Common
Stock for issuance. On the first day of each quarterly purchase period, each
eligible employee participating in such quarterly purchase period will be
granted an option to purchase a number of shares of Common Stock determined by
dividing such employee's contributions accumulated prior to the last day of the
quarterly period by the purchase price. 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 of up to
a maximum of 15% of his or her compensation, limited to $25,000 per year. As of
December 31, 1998, participating employees have purchased 4,388 shares of Common
Stock at an aggregate purchase price of approximately $33,000 and 495,612 shares
were available for future purchases. No compensation expense has been recorded
in connection with the ESPP.

F-22
<PAGE> 90
IMCLONE SYSTEMS INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(12) INCOME TAXES

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
1998 and December 31, 1997 are presented below.

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
Deferred tax assets:
Liability to reacquire IL-6m rights and materials... $ -- $ 262,000
Research and development carryforward............... 3,642,000 2,303,000
Compensation relating to the issuance of stock
options and warrants............................. 376,000 189,000
Net operating loss carryforwards.................... 57,169,000 52,408,000
Other............................................... 3,424,000 1,116,000
------------ ------------
Total gross deferred tax assets....................... 64,611,000 56,278,000
Less valuation allowance............................ (64,611,000) (56,278,000)
------------ ------------
Net deferred tax assets............................. -- --
------------ ------------
Deferred tax liabilities:
Total gross deferred tax liabilities................ -- --
------------ ------------
Net deferred tax.................................... $ -- $ --
============ ============
</TABLE>

A valuation allowance is provided when it is more likely than not that some
portion or all of the deferred tax assets will not be realized. The net change
in the total valuation allowance for the years ended December 31, 1998 and 1997
was an increase of $8,333,000 and $5,460,000, respectively. 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, 1998, the Company had net operating loss carryforwards for
federal income tax purposes of approximately $129,485,000 which expire at
various dates from 2000 through 2018. At December 31, 1998, the Company had
research credit carryforwards of approximately $3,642,000 which expire at
various dates between years 2009 and 2018. 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 two such
ownership changes. Accordingly, the Company's net operating loss carryforwards
available to offset future federal taxable income arising before such ownership
changes 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 tax expense.

(13) COMMITMENTS

LEASES

The Company leases its New York City facility under an operating lease, a
portion of which was scheduled to expire in March 1999. The Company renewed the
entire lease effective as of January 1, 1999 through December 2004. The annual
minimum rent for 1999 is $720,000 and increases 3% annually for each year
thereafter. Rent expense for the New York City facility was approximately
$574,000, $554,000, and $508,000 for the years ended December 31, 1998, 1997 and
1996, respectively. See also Note 6.

F-23
<PAGE> 91
IMCLONE SYSTEMS INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

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

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
---------- ----------
<S> <C> <C>
Years ending December 31,
1999.............................................. $ 900,000 $ 769,000
2000.............................................. 889,000 780,000
2001.............................................. 520,000 794,000
2002.............................................. 248,000 815,000
2003.............................................. -- 823,000
2004.............................................. -- 835,000
---------- ----------
2,557,000 4,816,000
Less interest expense............................... (304,000) --
---------- ----------
$2,253,000 $4,816,000
========== ==========
</TABLE>

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 or are terminable at the Company's option.

CONTRACT SERVICES

In April, 1998, the Company entered into an agreement in principle with a
pharmaceutical manufacturer for the supplemental further development, production
scale-up and manufacture of its lead therapeutic product candidate, C225, for
use in human clinical trials. Services pursuant to this agreement commenced in
April 1998 and are anticipated to conclude in October 1999. The total project
cost is DM8,950,000, or as of December 31, 1998, approximately $5,424,000. As of
December 31, 1998, the Company had incurred a liability of approximately
$1,897,000 (U.S. dollar equivalent) for services provided to date under this
agreement.

(14) RETIREMENT PLANS

The Company maintains a 401(k) retirement plan available to all full-time,
eligible employees. Employee contributions are voluntary and are determined on
an individual basis, 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 $47,000 to the plan for the year
ended December 31, 1998. No such contributions were made to the plan during the
years ended December 31, 1997 and 1996.

F-24
<PAGE> 92
IMCLONE SYSTEMS INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(15) SUPPLEMENTAL CASH FLOW INFORMATION AND NON-CASH INVESTING AND FINANCING

Activities are as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Cash paid during the year for:
Interest............................................. $ 422,000 $ 707,000 $ 817,000
========== ========== ==========
Non-cash investing and finance activities:
Finova capital asset and lease obligations
additions......................................... 731,000 1,324,000 421,000
========== ========== ==========
Fair value of Finova warrant......................... -- -- 125,000
========== ========== ==========
Other capital lease obligations...................... -- 28,000 --
========== ========== ==========
Unrealized gain (loss) on securities
available-for-sale................................ (676,000) 101,000 (49,000)
========== ========== ==========
Extinguishment of Oracle Group debt for stock........ -- -- 2,500,000
========== ========== ==========
Extinguishment of director debt for stock............ -- -- 180,000
========== ========== ==========
Preferred Stock dividend............................. 2,400,000 163,000 --
========== ========== ==========
Warrant exercise paid with a note, including accrued
interest.......................................... 142,000 -- --
========== ========== ==========
</TABLE>

(16) 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, 1998, 1997 and 1996.

Through March 1995, the Company made miscellaneous non interest bearing
cash advances to the President and CEO of the Company totaling approximately
$156,000. The officer provided the Company with a demand promissory note
pursuant to which the officer was obligated to repay the debt over a twenty-four
month period ending April 30, 1997. In March 1997, the Company accepted a new
promissory note (the "new promissory note") in the aggregate amount of $110,000
from the officer. The new promissory note was payable as to $15,000 no later
than May 15, 1997 and the remainder upon the earlier of on demand by the Company
or December 31, 1997 and bore interest at the rate of 5% compounded quarterly.
The new promissory note covered the remaining balance of the original note,
interest thereon and additional miscellaneous cash advances made since the date
of the original note totaling $15,000. At December 31, 1997, the new promissory
note was paid in full by the officer.

In January 1996, the Company paid Concord International Investment Group,
LP, approximately $163,000 for services rendered by it to the Company in
connection with structuring a contemplated product related financing for C225.
Mr. Robert F. Goldhammer, Chairman of the Board of Directors, is a limited
partner of Concord International Investment Group, LP.

In August 1995 and January 1996, the Company paid Delano & Kopperl
Financial Advisors, Inc. a total of approximately $69,000 for services rendered
by it to the Company in connection with structuring a contemplated product
related financing for C225. Paul B. Kopperl, a director of the Company, is
President, director, and 25% shareholder of Delano & Kopperl Financial Advisors,
Inc.

F-25
<PAGE> 93
IMCLONE SYSTEMS INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

common stock. The note is due no later than two years from issuance and is full
recourse. Interest is payable on the first anniversary date of the promissory
note and on the stated maturity or any accelerated maturity at the annual rate
of 8.5%. At December 31, 1998, the total amount due the Company, including
interest, was approximately $142,000 and is classified in the stockholders'
equity section of the balance sheet as a note receivable from officer and
stockholder.

In October 1998, the Company accepted an unsecured promissory note totaling
$100,000 from its Executive Vice President and COO. The note is payable on
demand including interest at the annual rate of 8.25% for the period that the
loan is outstanding. At December 31, 1998, the total amount due the Company,
including interest, is approximately $102,000.

In August 1998, the Company entered into a utilization agreement with a
company to provide certain support services. This company is considered a
related party because of common management. The Company is being reimbursed
$2,000 per month for providing laboratory space and related support.

(17) FAIR VALUE OF FINANCIAL INSTRUMENTS

For the years ended December 31, 1998 and 1997, the following methods and
assumptions were used to estimate the fair value of each class of financial
instrument:

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

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

LONG-TERM DEBT

Discounted cash flow analyses were used to determine the fair value of
long-term debt because quoted market prices on these instruments were
unavailable. The fair value of these instruments approximated the carrying
amount.

F-26
<PAGE> 94

IMCLONE SYSTEMS INCORPORATED

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

<TABLE>
<CAPTION>
SEPTEMBER 30,
1999
ASSETS -------------
<S> <C>
Current assets:
Cash and cash equivalents................................... $ 1,211
Securities available for sale............................. 33,052
Prepaid expenses.......................................... 239
Other current assets...................................... 1,528
---------
Total current assets................................ 36,030
---------
Property and equipment:
Land...................................................... 340
Building and building improvements........................ 10,708
Leasehold improvements.................................... 4,878
Machinery and equipment................................... 8,619
Furniture and fixtures.................................... 653
Construction in progress.................................. 3,724
---------
Total cost.......................................... 28,922
Less accumulated depreciation and amortization............ (14,162)
---------
Property and equipment, net......................... 14,760
---------
Patent costs, net........................................... 897
Deferred financing costs, net............................... 39
Other assets................................................ 1,868
---------
$ 53,594
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 1,948
Accrued expenses and other................................ 2,695
Interest payable.......................................... 106
Deferred revenue.......................................... --
Fees potentially refundable from corporate partner........ 14,000
Current portion of long-term liabilities.................. 913
Preferred stock dividends payable......................... 4,307
---------
Total current liabilities........................... 23,969
---------
Long-term debt.............................................. 2,200
Other long-term liabilities, less current portion........... 1,363
---------
Total liabilities................................... 27,532
---------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $1.00 par value; authorized 4,000,000
shares; issued and outstanding Series A Convertible:
400,000 at September 30, 1999 (preference in liquidation
of $44,307)............................................. 400
Common stock, $.001 par value; authorized 60,000,000
shares; issued 25,671,324 at September 30, 1999;
outstanding 25,620,507, at September 30, 1999........... 26
Additional paid-in capital................................ 191,094
Accumulated deficit....................................... (165,211)
Treasury stock, at cost; 50,817 shares at September 30,
1999.................................................... (492)
Note receivable -- officer and stockholder................ (139)
Accumulated other comprehensive income (loss):
Unrealized gain on securities available for sale, net... 384
---------
Total stockholders' equity.......................... 26,062
---------
$ 53,594
=========
</TABLE>

See accompanying notes to consolidated financial statements.
F-27
<PAGE> 95

IMCLONE SYSTEMS INCORPORATED

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------
1999 1998
-------- --------
<S> <C> <C>
Revenues:
Product development milestone revenues.................... $ -- $ 1,000
Research and development funding from third parties and
other.................................................. 1,021 2,434
-------- --------
Total revenues.................................... 1,021 3,434
-------- --------
Operating expenses:
Research and development.................................. 22,131 15,269
General and administrative................................ 5,784 4,174
-------- --------
Total operating expenses.......................... 27,915 19,443
-------- --------
Operating loss.............................................. (26,894) (16,009)
-------- --------
Other:
Interest income........................................... (1,757) (2,348)
Interest expense.......................................... 375 320
Loss (gain) on securities available for sale.............. 853 (34)
-------- --------
Net interest and other income..................... (529) (2,062)
-------- --------
Net loss.................................................... (26,365) (13,947)
Preferred dividends (including assumed incremental yield
attributable to beneficial conversion feature of $1,005
and $952 for the nine months ended September 30, 1999 and
1998, respectively)....................................... 2,800 2,747
-------- --------
Net loss to common stockholders............................. $(29,165) $(16,694)
======== ========
Basic and diluted net loss per common share................. $ (1.17) $ (0.69)
======== ========
Weighted average shares outstanding......................... 24,947 24,277
======== ========
</TABLE>

See accompanying notes to consolidated financial statements.
F-28
<PAGE> 96

IMCLONE SYSTEMS INCORPORATED

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------
1999 1998
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(26,365) $(13,947)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization........................... 1,374 1,341
Expense associated with issuance of options and
warrants.............................................. 1,979 416
Loss (gain) or securities available for sale............ 853 (34)
Changes in:
Prepaid expenses..................................... 231 382
Other current assets................................. (332) (320)
Other assets......................................... (130) (47)
Interest payable..................................... 61 38
Accounts payable..................................... 839 (429)
Accrued expenses and other........................... (2,152) 1,023
Deferred revenue..................................... (75) 150
Fees potentially refundable from corporate partner... 10,000 --
-------- --------
Net cash used in operating activities.............. (13,717) (11,427)
-------- --------
Cash flows from investing activities:
Acquisitions of property and equipment.................. (4,096) (812)
Purchases of securities available for sale.............. (19,378) (38,322)
Sales and maturities of securities available for sale... 29,117 50,503
Additions to patents.................................... (118) (248)
-------- --------
Net cash provided by investing activities.......... 5,525 11,121
-------- --------
Cash flows from financing activities:
Proceeds from exercise of stock options and warrants.... 5,936 404
Proceeds from issuance of common stock under the
employee stock purchase plan.......................... 114 12
Proceeds from equipment and building improvement
financings............................................ 94 593
Payments of other liabilities........................... (640) (662)
Interest received on note receivable -- officer and
stockholder........................................... 11 --
-------- --------
Net cash provided by financing activities.......... 5,515 347
-------- --------
Net (decrease) increase in cash and cash equivalents........ (2,677) 41
Cash and cash equivalents at beginning of period............ 3,888 2,558
-------- --------
Cash and cash equivalents at end of period.................. $ 1,211 $ 2,599
======== ========
</TABLE>

See accompanying notes to consolidated financial statements.
F-29
<PAGE> 97

IMCLONE SYSTEMS INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

(1) BASIS OF PRESENTATION

The consolidated financial statements of ImClone Systems Incorporated
("ImClone" or the "Company") as of September 30, 1999 and for the nine months
ended September 30, 1999 and 1998 are unaudited. In the opinion of management,
these unaudited financial statements include all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation. These financial
statements should be read in conjunction with the audited financial statements
and notes thereto included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1998, as filed with the Securities and Exchange
Commission.

Results for the interim periods are not necessarily indicative of results
for the full years.

(2) SEGMENT INFORMATION

The Company is a biopharmaceutical company engaged in the research and
development of novel cancer treatments. The Company is currently pursuing three
research and development programs that it believes show promise for treating
cancer: growth factor inhibitors, cancer vaccines and angiogenesis inhibitors. 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 managed and operated as one business. The entire business 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 directly 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 as defined by SFAS No. 131.

(3) 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 statement 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 $9,000 for the
nine months ended September 30, 1999 and losses on foreign currency transactions
of approximately $131,000 for the nine months ended September 30, 1998.

(4) COMMITMENTS

The Company signed a definitive agreement in April 1999 with Boehringer
Ingelheim Pharmaceuticals KG ("BI Pharmaceuticals") for the further development,
production scale-up and manufacture of the Company's lead therapeutic product
candidate, C225, for use in human clinical trials. Services pursuant to this
agreement commenced in April 1998 pursuant to an agreement in principle. The
Company estimates that the total cost under the agreement, including the cost of
additional amounts of material the Company had the right to request, will be
DM12,100,000 or $6,636,000 as of September 30, 1999. As of September 30, 1999,
the Company has incurred approximately DM3,940,000, of which DM3,720,000 has
been paid, for services provided under this agreement.

F-30
<PAGE> 98
IMCLONE SYSTEMS INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)

(5) RELATED PARTY TRANSACTIONS

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 87,305 shares of the Company's common stock,
$.001 par value (the "Common Stock"). The note is due no later than two years
from issuance and is full recourse. Interest was paid on the first anniversary
date of the promissory note at an annual rate of 8.5% and is payable on the
stated maturity or any accelerated maturity at the annual rate of 8.5%. At
September 30, 1999, the total amount due the Company, including interest, was
approximately $139,000 and is classified in the stockholders' equity section of
the balance sheet as a note receivable from officer and stockholder.

(6) EARNINGS PER SHARE

Basic and diluted Earnings Per Share ("EPS") are computed based on the net
loss for the relevant period, adjusted for cumulative Series A Convertible
Preferred Stock (the "Series A Preferred Stock" or "Series A Preferred Shares")
dividends and the assumed incremental yield attributable to the beneficial
conversion feature in the preferred stock, divided by the weighted average
number of shares outstanding during the period. Potentially dilutive securities,
including convertible preferred stock, options and warrants, have not been
included in the diluted EPS computation because they are anti-dilutive.

(7) COMPREHENSIVE INCOME (LOSS)

The following table reconciles net loss to comprehensive loss:

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------------
1999 1998
------------ ------------
<S> <C> <C>
Net loss.................................................... $(26,365,000) $(13,947,000)
Other comprehensive income:
Unrealized holding gain arising during the period......... 155,000 (704,000)
Less: Reclassification adjustment for realized gain (loss)
included in net loss................................ (853,000) 34,000
------------ ------------
Total other comprehensive income....................... 1,008,000 (738,000)
Total comprehensive loss.................................... $(25,357,000) $(14,685,000)
============ ============
</TABLE>

(8) LOSS ON SECURITIES AVAILABLE FOR SALE

In October 1997, the Company entered into a Collaborative Research and
License Agreement with CombiChem Inc. ("CombiChem"). Concurrent with this
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 a total purchase price of $2,000,000. The investment has been classified as
available for sale and a long-term asset. The market value of the investment in
CombiChem has declined substantially from the date of original investment and
the Company has deemed this decline in market value to be other than temporary.
Accordingly, the cost basis in the investment in CombiChem has been adjusted and
a loss on securities available for sale of $828,000 was recorded in March 1999.
These securities have not been sold by the Company. In October 1999, CombiChem
announced that it is being acquired and holders of its shares will receive cash
consideration of approximately $6.75 per share, subject to completion of the
acquisition, which would represent a financial reporting gain with respect to
the CombiChem shares of approximately $937,000, after considering the
aforementioned write-down.

F-31
<PAGE> 99
IMCLONE SYSTEMS INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)

(9) COMMON STOCK

On May 24, 1999, the date of the annual shareholders meeting, 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 45,000,000 shares to 60,000,000 shares.

In September 1999, the Company filed with the Securities and Exchange
Commission a Registration Statement on Form S-3 relating to the public offering
and sale of up to 2,875,000 shares of its common stock. There can be no
assurance that the Company will consummate the sale of any of these shares of
common stock.

(10) STOCK OPTIONS AND WARRANTS

On May 24, 1999, the date of the annual shareholders meeting, the
stockholders approved an amendment to the Company's 1996 Incentive Stock Option
Plan (the "1996 ISO Plan") to increase the total number of shares of Common
Stock that may be issued pursuant to options that may be granted under the 1996
ISO Plan from 3,000,000 to 4,000,000, which number shall be reduced by the
number of shares of Common Stock that have been or may be issued pursuant to
options granted under the Company's 1996 Non-Qualified Stock Option Plan (the
"1996 Non-Qualified Plan").

The stockholders also approved amendments to the Company's 1996
Non-Qualified Plan to (i) increase the total number of shares of Common Stock
that may be issued pursuant to options that may be granted under the 1996
Non-Qualified Plan from 3,000,000 to 4,000,000, which number shall be reduced by
the number of shares of common stock that have been or may be issued pursuant to
options granted under the Company's 1996 ISO Plan, and (ii) increase the annual
option grant made to members of the Board of Directors and the Chairman who are
not full-time employees of the Company under the 1996 Non-Qualified Plan. The
annual option grant to non-employee members of the Board of Directors increased
from 2,500 to 15,000 and the annual option grant to the Chairman increased from
2,500 to 30,000.

The stockholders approved the grant of an option to the Company's President
and Chief Executive Officer to purchase 1,000,000 shares of Common Stock at a
per share exercise price equal to $18.25, the last reported sale price of the
Common Stock on the date shareholder approval was obtained at the annual
shareholders meeting. The options will vest no later than six years from the
grant date and specified amounts are subject to earlier vesting if specified
Company Common Stock price thresholds are met.

The stockholders approved the grant of an option to the Company's Executive
Vice President and Chief Operating Officer to purchase 650,000 shares of Common
Stock at a per share exercise price equal to $18.25, the last reported sale
price of the Common Stock on the date shareholder approval was obtained at the
annual shareholders meeting. The options will vest no later than six years from
the grant date and specified amounts are subject to earlier vesting if specified
Company Common Stock price thresholds are met.

(11) RECLASSIFICATION

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

(12) COLLABORATIVE AGREEMENTS

The Company has a development and license agreement with Merck KGaA with
respect to C225, its lead interventional therapeutic product for the treatment
of cancer. In exchange for certain marketing and development rights, the Company
can receive up to $60,000,000 in milestone payments ($30,000,000 of which are
equity based) assuming the achievement of certain milestones and a $30,000,000
secured line of credit or guaranty for the build-out of a manufacturing facility
for the commercial production of C225. This agreement

F-32
<PAGE> 100
IMCLONE SYSTEMS INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)

may be terminated by Merck KGaA in various instances, including (i) at its
discretion on any date on which a milestone is achieved (in which case no
milestone payment will be made), (ii) for a one-year period after first
commercial sale of 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 C225 sales or C225 license fees in the
United States and Canada), or (iii) in the event the Company does not obtain
certain collateral license agreements in which case Merck KGaA also is entitled
to a return of all cash amounts with respect to milestone payments to date, plus
liquidated damages of $500,000. In April 1999, the parties agreed on the
production concept for the manufacturing facility and are currently working
toward securing Merck KGaA's guaranty of the Company's obligations under a
$30,000,000 credit facility relating to the construction of the manufacturing
facility. In the event of termination of the agreement, the Company will be
required to use its best reasonable efforts to cause the release of Merck KGaA
as guarantor. As of September 30, 1999, the Company has received $14,000,000 in
milestone payments. And, as of October 27, 1999, Merck KGaA has confirmed the
Company has achieved milestones, with respect to which the Company is entitled
to receive an additional $6,000,000 in payments. These payments have been
recorded as fees potentially refundable from corporate partner and will be
recognized as revenue upon Merck's providing the credit facility or guaranty and
the Company's obtaining the defined collateral license agreements.

F-33
<PAGE> 101

ImClone Logo
<PAGE> 102

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

<TABLE>
<CAPTION>
AMOUNT
TO BE PAID
----------
<S> <C>
Registration fee............................................ $ 28,102
NASD filing fee............................................. 10,609
Nasdaq National Market additional share listing fee......... 17,500
Transfer agent's fees....................................... 25,000
Printing and engraving expenses............................. 130,000
Legal fees and expenses..................................... 500,000
Accounting fees and expenses................................ 150,000
Blue Sky fees and expenses.................................. 10,000
Miscellaneous............................................... 3,789
--------
Total............................................. $875,000
========
</TABLE>

Each of the amounts set forth above, other than the Registration fee and
the NASD filing fee, is an estimate.

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Our Certificate of Incorporation and Bylaws set forth the extent to which
our officers and directors may be indemnified by us against any liabilities
which they may incur. The general effect of such provisions is that, on the
terms and conditions set forth in our Certificate of Incorporation and Bylaws,
any person made a party or threatened to be made a party to an action, suit or
proceeding by reason of the fact that he or she is or was a director or officer,
or is or was serving as a director, officer, employee or agent of another
corporation or other enterprise at our request, shall be indemnified by us
against expenses (including attorneys' fees, judgments, fines and amounts paid
in settlement) reasonably incurred or suffered by him or her in connection with
such action, suit or proceeding, to the full extent permitted under the laws of
the State of Delaware; provided, however, that, subject to certain limited
exceptions, we shall indemnify any such person seeking indemnification in
connection with a proceeding initiated by such person only if such proceeding
was authorized by our Board of Directors. Our Certificate of Incorporation gives
our Board of Directors the authority to extend such indemnification to our
employees and other agents as well.

The general effect of the indemnification provisions contained in Section
145 of the General Corporation Law of the State of Delaware (the "DGCL") is as
follows: A director or officer who, by reason of such directorship or
officership, is involved in any action, suit or proceeding (other than an action
by or in the right of the corporation) may be indemnified by the corporation
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him or her in connection with
such action, suit or proceeding if he or she acted in good faith and in a manner
he or she reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding, has no
reasonable cause to believe that his or her conduct was unlawful. A director or
officer who, by reason of such directorship or officership, is involved in any
action or suit by or in the right of the corporation may be indemnified by the
corporation against expenses (including attorneys' fees) actually and reasonably
incurred by him or her in connection with the defense or settlement of such
action or suit if he or she acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification may be made in respect of any claim,
issue or matter as to which he or she shall have been adjudged to be liable to
the corporation unless and only to the extent that a court of appropriate
jurisdiction shall approve such indemnification.

II-1
<PAGE> 103

Our Certificate of Incorporation provides that, to the maximum extent
permitted under the DGCL, a director of ImClone shall not be personally liable
to us or to any stockholders for monetary damages for breach of fiduciary duty
as a director of ImClone. Section 102(b)(7) of the DGCL permits a corporation to
include in its certificate of incorporation a provision that eliminates or
limits the personal liability of a director to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director;
provided, that such provision shall not eliminate or limit the liability of a
director (1) for any breach of the Director's duty of loyalty to the corporation
or its stockholders, (2) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (3) under Section
174 of the DGCL or (4) for any transaction from which the director derived in
improper personal benefit.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

The following exhibits are filed as part of this Registration Statement or
incorporated by reference herein:

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- ------------------------------------------------------------
<S> <C>
1.1* Form of Underwriting Agreement
3.1+ Certificate of Incorporation, and all amendments thereto
3.1A++ Amendment dated June 4, 1999 to the Company's certificate of
incorporation, as amended
3.2+ Amended and Restated By-Laws of the Company
4.1+ Form of Warrant issued to the Company's officers and
directors under Warrant Agreements
4.2+ Stock Purchase Agreement between Erbamont Inc. and the
Company, dated May 1, 1989
4.3+ Stock Purchase Agreement between American Cyanamid Company
and the Company dated December 18, 1987
4.4+ Form of Subscription Agreement entered into in connection
with September 1991 private placement
4.5+ Form of Warrant issued in connection with September 1991
private placement
4.6+ Preferred Stock Purchase Agreement between the Company and
Merck KGaA dated December 3, 1997
4.7+ Certificate of Designations, Preferences and Rights of
Series A Convertible Preferred Stock
5.1* Opinion of Davis Polk & Wardwell
10.1+ Company's 1986 Employee Incentive Stock Option Plan,
including form of Incentive Stock Option Agreement
10.2+ Company's 1986 Non-qualified Stock Option Plan, including
form of Non-qualified Stock Option Agreement
10.3+ Company's 401(k) Plan
10.4+ Research and License Agreement between Merck KGaA and the
Company dated December 19, 1990
10.5+ Hematopoietic Growth Factors License Agreement between
Erbamont, N.V. and the Company, dated September 28, 1990
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
10.7+ Agreement between Hadasit Medical Research Services &
Development, Ltd. and the Company
10.8+ Agreement between Hadasit Medical Research Services &
Development, Ltd. and the Company dated September 21, 1989
10.9+ Supported Research Agreement between Memorial
Sloan-Kettering Cancer Center (MSKCC) and the Company dated
March 26, 1990
</TABLE>

II-2
<PAGE> 104

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- ------------------------------------------------------------
<S> <C>
10.10+ License Agreement between MSKCC and the Company, dated March
26, 1990
10.11+ License Agreement between MSKCC and the Company, dated March
26, 1990
10.12+ License Agreement between MSKCC and the Company, dated March
26, 1990
10.13+ Research Agreement between the Trustees of Princeton
University (Princeton) and the Company dated January 1, 1991
10.14+ Research Agreement between Princeton and the Company dated
May 1, 1991
10.15+ Research Agreement between Princeton and the Company dated
May 1, 1991
10.16+ License Agreement between Princeton and the Company dated
March 20, 1991
10.17+ License Agreement between Princeton and the Company dated
May 29, 1991
10.18+ License Agreement between Princeton and Oncotech, Inc. dated
September 3, 1987
10.19+ Supported Research Agreement between The University of North
Carolina at Chapel Hill ("UNC") and the Company effective
July 5, 1988
10.20+ License Agreement between UNC and the Company dated July 5,
1988
10.21+ License Agreement between UNC and the Company dated July 27,
1988
10.22+ Supported Research Agreement between UNC and the Company
effective April 1, 1989
10.23+ License Agreement between UNC and the Company dated July 1,
1991
10.24+ Agreement between Celltech Limited and the Company dated May
23, 1991
10.25+ Form of Non-disclosure and Discovery Agreement between
employees of the Company and the Company
10.26.1+ Industrial Development Revenue Bonds (1985 ImClone Systems
Incorporated Project)
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
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
10.26.1.3+ Company Sublease Agreement, dated as of October 1, 1985,
between the Company and NYCIDA
10.26.1.4+ Tax Regulatory Agreement, dated October 9, 1985, from NYCIDA
and the Company to US Trust, as Trustee
10.26.1.5+ Lessee Guaranty Agreement, dated as of October 1, 1985,
between the Company and US Trust, as Trustee
10.26.1.6+ First Supplemental Indenture of Trust, dated as of November
1, 1985 from the NYCIDA to US Trust
10.26.1.7+ Third Supplemental Indenture of Trust, dated as of October
12, 1990 from NYCIDA to US Trust
10.26.2+ Industrial Development Revenue Bonds (1986 ImClone Systems
Incorporated Project)
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
10.26.2.2+ First Amendment to Lease Agreement, dated as of December 1,
1986, between NYCIDA and the Company, as Lessee
10.26.2.3+ Second Supplement Indenture of Trust, dated as of December
1, 1986 between NYCIDA and US Trust, as Trustee
10.26.2.4+ Tax Regulatory Agreement, dated December 31, 1986, from
NYCIDA and the Company to US Trust, as Trustee
</TABLE>

II-3
<PAGE> 105

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- ------------------------------------------------------------
<S> <C>
10.26.2.5+ First Amendment to Lessee Guaranty Agreement, dated as of
December 1, 1986, between the Company and US Trust, as
Trustee
10.26.2.6+ Bond Purchase Agreement, dated as of December 31, 1986,
between NYCIDA and New York Muni Fund, Inc., as Purchaser
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
10.26.3+ Industrial Development Revenue Bonds (1990 ImClone Systems
Incorporated Project)
10.26.3.1+ Lease Agreement, dated as of August 1, 1990, between NYCIDA
and the Company, as lessee
10.26.3.2+ Company Sublease Agreement, dated as of August 1, 1990,
between the Company, as Sublessor, and NYCIDA
10.26.3.3+ Indenture of Trust, dated as of August 1, 1990, between
NYCIDA and US Trust, as Trustee
10.26.3.4+ Guaranty Agreement, dated as of August 1, 1990, from the
Company to US Trust, as Trustee
10.26.3.5+ Tax Regulatory Agreement, dated August 1, 1990, from the
Company and NYCIDA to US Trust, as Trustee
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
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
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
10.28+ License Agreement between The Board of Trustees of the
Leland Stanford Junior University and the Company effective
May 1, 1991
10.29+ License Agreement between Genentech, Inc. and the Company
dated December 28, 1989
10.30+ License Agreement between David Segev and the Company dated
December 28, 1989
10.31+ Letter of Intent between the Company and Dr. David Segev
dated November 18, 1991
10.32+ Agreement between the Company and Celltech Limited dated
March 11, 1992
10.33+ Agreement of Sale dated June 19, 1992 between the Company
and Korsch Tableting Inc.
10.34+ Research and License Agreement, having an effective date of
December 15, 1992, between the Company and Abbott
Laboratories
10.35+ Research and License Agreement between the Company and
Chugai Pharmaceutical Co., Ltd. dated January 25, 1993
10.36+ License Agreement between the Company and the Regents of the
University of California dated April 9, 1993
10.37+ Contract between the Company and John Brown, a division of
Trafalgar House, dated January 19, 1993
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.
10.39+ Termination Agreement between the Company and Erbamont Inc.
dated July 21, 1993
10.40+ Research and License Agreement between the Company and
Cyanamid dated September 15, 1993
10.41+ Clinical Trials Agreement between the Company and the
National Cancer Institute dated November 23, 1993
</TABLE>

II-4
<PAGE> 106

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- ------------------------------------------------------------
<S> <C>
10.42+ License Agreement between the Company and UNC dated December
1, 1993
10.43+ Notice of Termination for the research collaboration between
the Company and Chugai Pharmaceutical Co., Ltd. dated
December 17, 1993
10.44+ License Agreement between the Company and Rhone-Poulenc
Rorer dated June 13, 1994
10.45+ Offshore Securities Subscription Agreement between ImClone
Systems Incorporated and GFL Ultra Fund Limited dated August
12, 1994
10.46+ Offshore Securities Subscription Agreement between ImClone
Systems Incorporated and GFL Ultra Fund Limited dated
November 4, 1994
10.47+ Offshore Securities Subscription Agreement between ImClone
Systems Incorporated and Anker Bank Zuerich dated November
10, 1994
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
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
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
10.51+ Stock Purchase Agreement, dated as of August 10, 1995, by
and between ImClone Systems Incorporated and the members of
the Oracle Group
10.52+ Form of Warrant issued to the members of the Oracle Group
10.53+ Loan Agreement, dated as of August 10, 1995, by and between
ImClone Systems Incorporated and the members of the Oracle
Group
10.54+ Security Agreement, dated as of August 10, 1995, by and
between ImClone Systems Incorporated and the members of the
Oracle Group
10.55+ Mortgage, dated August 10, 1995, made by ImClone Systems
Incorporated for the benefit of Oracle Partners, L.P., as
Agent
10.56+ Financial Advisory Agreement entered into between the
Company and Genesis Merchant Group Securities dated November
2, 1995
10.57+ Repayment Agreement (with Confession of Judgment, and
Security Agreement) entered into between the Company and
Pharmacia, Inc. on March 6, 1996
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
10.59+ Amendment of September 1993 to the Research and License
Agreement between the Company and Merck KGaA of April 1,
1990
10.60+ Amendment of October 1993 to the Research and License
Agreement between the Company and Merck KGaA of April 1,
1990
10.61+ Employment agreement dated May 17, 1996 between the Company
and Carl S. Goldfischer
10.62+ Financial Advisory Agreement dated February 26, 1997 between
the Company and Hambrecht & Quist LLC.
10.63+ Exchange Agreement exchanging debt for common stock dated as
of April 15, 1996 among the Company and members of The
Oracle Group.
10.64+ Collaborative Research and License Agreement between the
Company and CombiChem, Inc. dated October 10, 1997
</TABLE>

II-5
<PAGE> 107

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- ------------------------------------------------------------
<S> <C>
10.65+ Amendment of May 1996 to Research and License Agreement
between the Company and Merck KGaA of April 1, 1990
10.66+ Amendment of December 1997 to Research and License Agreement
between the Company and Merck KGaA of April 1, 1990
10.67+ Equipment Leasing Commitment from Finova Technology Finance,
Inc.
10.68+ Development and License Agreement between the Company and
Merck KGaA dated December 14, 1998
10.69+ Lease dated as of December 15, 1998 for the Company's
premises at 180 Varick Street, New York, New York
10.70+ Engagement Agreement, as amended between the Company and
Diaz & Altschul Capital LLC
10.71+ Amendment dated March 2, 1999 to Development and License
Agreement between the Company and Merck KGaA
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
10.73#* Development and Supply Agreement dated as of April 30, 1999
between the Company and Boehringer Ingelheim Pharma KG
21.1+ Subsidiaries
23.1 Consent of KPMG LLP
23.2* Consent of Davis Polk & Wardwell (included in Exhibit 5.1)
23.3 Consent of Kenyon & Kenyon
23.4 Consent of Hoffmann & Baron, LLP
24.1* Power of Attorney (included on signature page to
Registration Statement filed September 21, 1999)
99.1+ 1996 Incentive Stock Option Plan, as amended
99.2+ 1996 Non-Qualified Stock Option Plan, as amended
99.3+ ImClone Systems Incorporated 1998 Non-Qualified Stock Option
Plan
99.4+ ImClone Systems Incorporated 1998 Employee Stock Purchase
Plan
99.5+ Option Agreement, dated as of September 1, 1998, between the
Company and Ron Martell
99.6++ 1996 Non-Qualified Stock Option Plan, as amended
99.7++ 1996 Incentive Stock Option Plan, as amended
</TABLE>

- ------------
* Previously filed.
+ Previously filed with, or incorporated by reference in, the registrant's
Annual Report on Form 10-K for the fiscal year ended December 31, 1998.
++ Previously filed with the registrant's Quarterly Report on Form 10-Q for the
period ended June 30, 1999.
# Confidential treatment has been requested for a portion of this exhibit;
material subject to the request for confidential treatment has been filed
separately with the SEC.

ITEM 17. UNDERTAKINGS.

(a) The undersigned registrant hereby undertakes:

(1) to file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:

(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Securities Act");

II-6
<PAGE> 108

(ii) to reflect in the prospectus any facts or events arising
after the effective date of this Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;

(iii) to include any material information with respect to the plan
of distribution not previously disclosed in this Registration Statement
or any material change to such information in this Registration
Statement;

provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) above do not
apply if the registration statement is on Form S-3, Form S-8 or Form F-3
and the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed with or
furnished to the Commission by the registrant pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") that are incorporated by reference in the registration
statement;

(2) that, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof; and

(3) to remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.

(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act) (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

(d) The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

II-7
<PAGE> 109

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 4 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, State of New York, on the
16th day of November, 1999.

IMCLONE SYSTEMS INCORPORATED

By /s/ JOHN B. LANDES
------------------------------------
Name: John B. Landes
Title: Attorney-in-Fact

Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 4 to the Registration Statement has been signed by the following persons in
the capacities indicated on the 16th day of November, 1999.

<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----

<C> <S>
* Chairman of the Board and Director
- ---------------------------------------------------
Robert F. Goldhammer

* President, Chief Executive Officer and Director
- --------------------------------------------------- (Principal Executive Officer)
Samuel D. Waksal

* Executive Vice President, Chief Operating Officer
- --------------------------------------------------- and Director
Harlan W. Waksal

* Vice President of Finance and Chief Financial
- --------------------------------------------------- Officer (Principal Financial and Accounting
Carl Goldfischer Officer)

* Director
- ---------------------------------------------------
Jean Carvais

* Director
- ---------------------------------------------------
Vincent T. DeVita, Jr.

* Director
- ---------------------------------------------------
Paul B. Kopperl
* Director
- ---------------------------------------------------
William R. Miller

* Director
- ---------------------------------------------------
David M. Kies

* Director
- ---------------------------------------------------
John Mendelsohn

* Director
- ---------------------------------------------------
Richard Barth

*By /s/ JOHN B. LANDES
----------------------------------------------
John B. Landes,
Attorney-in-Fact
</TABLE>

II-8
<PAGE> 110

EXHIBIT INDEX

<PAGE> 111

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- ------------------------------------------------------------
<S> <C>
10.18+ License Agreement between Princeton and Oncotech, Inc. dated
September 3, 1987
10.19+ Supported Research Agreement between The University of North
Carolina at Chapel Hill ("UNC") and the Company effective
July 5, 1988
10.20+ License Agreement between UNC and the Company dated July 5,
1988
10.21+ License Agreement between UNC and the Company dated July 27,
1988
10.22+ Supported Research Agreement between UNC and the Company
effective April 1, 1989
10.23+ License Agreement between UNC and the Company dated July 1,
1991
10.24+ Agreement between Celltech Limited and the Company dated May
23, 1991
10.25+ Form of Non-disclosure and Discovery Agreement between
employees of the Company and the Company
10.26.1+ Industrial Development Revenue Bonds (1985 ImClone Systems
Incorporated Project)
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
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
10.26.1.3+ Company Sublease Agreement, dated as of October 1, 1985,
between the Company and NYCIDA
10.26.1.4+ Tax Regulatory Agreement, dated October 9, 1985, from NYCIDA
and the Company to US Trust, as Trustee
10.26.1.5+ Lessee Guaranty Agreement, dated as of October 1, 1985,
between the Company and US Trust, as Trustee
10.26.1.6+ First Supplemental Indenture of Trust, dated as of November
1, 1985 from the NYCIDA to US Trust
10.26.1.7+ Third Supplemental Indenture of Trust, dated as of October
12, 1990 from NYCIDA to US Trust
10.26.2+ Industrial Development Revenue Bonds (1986 ImClone Systems
Incorporated Project)
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
10.26.2.2+ First Amendment to Lease Agreement, dated as of December 1,
1986, between NYCIDA and the Company, as Lessee
10.26.2.3+ Second Supplement Indenture of Trust, dated as of December
1, 1986 between NYCIDA and US Trust, as Trustee
10.26.2.4+ Tax Regulatory Agreement, dated December 31, 1986, from
NYCIDA and the Company to US Trust, as Trustee
10.26.2.5+ First Amendment to Lessee Guaranty Agreement, dated as of
December 1, 1986, between the Company and US Trust, as
Trustee
10.26.2.6+ Bond Purchase Agreement, dated as of December 31, 1986,
between NYCIDA and New York Muni Fund, Inc., as Purchaser
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
10.26.3+ Industrial Development Revenue Bonds (1990 ImClone Systems
Incorporated Project)
10.26.3.1+ Lease Agreement, dated as of August 1, 1990, between NYCIDA
and the Company, as lessee
10.26.3.2+ Company Sublease Agreement, dated as of August 1, 1990,
between the Company, as Sublessor, and NYCIDA
</TABLE>
<PAGE> 112

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- ------------------------------------------------------------
<S> <C>
10.26.3.3+ Indenture of Trust, dated as of August 1, 1990, between
NYCIDA and US Trust, as Trustee
10.26.3.4+ Guaranty Agreement, dated as of August 1, 1990, from the
Company to US Trust, as Trustee
10.26.3.5+ Tax Regulatory Agreement, dated August 1, 1990, from the
Company and NYCIDA to US Trust, as Trustee
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
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
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
10.28+ License Agreement between The Board of Trustees of the
Leland Stanford Junior University and the Company effective
May 1, 1991
10.29+ License Agreement between Genentech, Inc. and the Company
dated December 28, 1989
10.30+ License Agreement between David Segev and the Company dated
December 28, 1989
10.31+ Letter of Intent between the Company and Dr. David Segev
dated November 18, 1991
10.32+ Agreement between the Company and Celltech Limited dated
March 11, 1992
10.33+ Agreement of Sale dated June 19, 1992 between the Company
and Korsch Tableting Inc.
10.34+ Research and License Agreement, having an effective date of
December 15, 1992, between the Company and Abbott
Laboratories
10.35+ Research and License Agreement between the Company and
Chugai Pharmaceutical Co., Ltd. dated January 25, 1993
10.36+ License Agreement between the Company and the Regents of the
University of California dated April 9, 1993
10.37+ Contract between the Company and John Brown, a division of
Trafalgar House, dated January 19, 1993
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.
10.39+ Termination Agreement between the Company and Erbamont Inc.
dated July 21, 1993
10.40+ Research and License Agreement between the Company and
Cyanamid dated September 15, 1993
10.41+ Clinical Trials Agreement between the Company and the
National Cancer Institute dated November 23, 1993
10.42+ License Agreement between the Company and UNC dated December
1, 1993
10.43+ Notice of Termination for the research collaboration between
the Company and Chugai Pharmaceutical Co., Ltd. dated
December 17, 1993
10.44+ License Agreement between the Company and Rhone-Poulenc
Rorer dated June 13, 1994
10.45+ Offshore Securities Subscription Agreement between ImClone
Systems Incorporated and GFL Ultra Fund Limited dated August
12, 1994
10.46+ Offshore Securities Subscription Agreement between ImClone
Systems Incorporated and GFL Ultra Fund Limited dated
November 4, 1994
10.47+ Offshore Securities Subscription Agreement between ImClone
Systems Incorporated and Anker Bank Zuerich dated November
10, 1994
</TABLE>
<PAGE> 113

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- ------------------------------------------------------------
<S> <C>
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
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
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
10.51+ Stock Purchase Agreement, dated as of August 10, 1995, by
and between ImClone Systems Incorporated and the members of
the Oracle Group
10.52+ Form of Warrant issued to the members of the Oracle Group
10.53+ Loan Agreement, dated as of August 10, 1995, by and between
ImClone Systems Incorporated and the members of the Oracle
Group
10.54+ Security Agreement, dated as of August 10, 1995, by and
between ImClone Systems Incorporated and the members of the
Oracle Group
10.55+ Mortgage, dated August 10, 1995, made by ImClone Systems
Incorporated for the benefit of Oracle Partners, L.P., as
Agent
10.56+ Financial Advisory Agreement entered into between the
Company and Genesis Merchant Group Securities dated November
2, 1995
10.57+ Repayment Agreement (with Confession of Judgment, and
Security Agreement) entered into between the Company and
Pharmacia, Inc. on March 6, 1996
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
10.59+ Amendment of September 1993 to the Research and License
Agreement between the Company and Merck KGaA of April 1,
1990
10.60+ Amendment of October 1993 to the Research and License
Agreement between the Company and Merck KGaA of April 1,
1990
10.61+ Employment agreement dated May 17, 1996 between the Company
and Carl S. Goldfischer
10.62+ Financial Advisory Agreement dated February 26, 1997 between
the Company and Hambrecht & Quist LLC
10.63+ Exchange Agreement exchanging debt for common stock dated as
of April 15, 1996 among the Company and members of The
Oracle Group.
10.64+ Collaborative Research and License Agreement between the
Company and CombiChem, Inc. dated October 10, 1997
10.65+ Amendment of May 1996 to Research and License Agreement
between the Company and Merck KGaA of April 1, 1990
10.66+ Amendment of December 1997 to Research and License Agreement
between the Company and Merck KGaA of April 1, 1990
10.67+ Equipment Leasing Commitment from Finova Technology Finance,
Inc.
10.68+ Development and License Agreement between the Company and
Merck KGaA dated December 14, 1998
10.69+ Lease dated as of December 15, 1998 for the Company's
premises at 180 Varick Street, New York, New York
</TABLE>
<PAGE> 114

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- ------------------------------------------------------------
<S> <C>
10.70+ Engagement Agreement, as amended between the Company and
Diaz & Altschul Capital LLC
10.71+ Amendment dated March 2, 1999 to Development and License
Agreement between the Company and Merck KGaA
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
10.73#* Development and Supply Agreement dated as of April 30, 1999
between the Company and Boehringer Ingelheim Pharma KG
21.1+ Subsidiaries
23.1 Consent of KPMG LLP
23.2* Consent of Davis Polk & Wardwell (included in Exhibit 5.1)
23.3 Consent of Kenyon & Kenyon
23.4 Consent of Hoffmann & Baron, LLP
24.1* Power of Attorney (included on signature page to
Registration Statement filed September 21, 1999)
99.1+ 1996 Incentive Stock Option Plan, as amended
99.2+ 1996 Non-Qualified Stock Option Plan, as amended
99.3+ ImClone Systems Incorporated 1998 Non-Qualified Stock Option
Plan
99.4+ ImClone Systems Incorporated 1998 Employee Stock Purchase
Plan
99.5+ Option Agreement, dated as of September 1, 1998, between the
Company and Ron Martell
99.6++ 1996 Non-Qualified Stock Option Plan, as amended
99.7++ 1996 Incentive Stock Option Plan, as amended
</TABLE>

<PAGE> 1

EXHIBIT 23.1

ACCOUNTANTS' CONSENT

The Board of Directors
ImClone Systems Incorporated:

We consent to the use of our report included herein and to the reference to
our firm under the heading "Experts" in the prospectus.

/s/ KPMG LLP

Princeton, New Jersey

November 16, 1999

<PAGE> 1
Exhibit 23.3

[Letterhead of Kenyon & Kenyon]

CONSENT OF SPECIAL PATENT COUNSEL

We hereby consent to the reference to our firm under the caption "Experts"
in the Registration Statement on Form S-3 and related Prospectus of ImClone
Systems Incorporated.

By: /s/ Kenyon & Kenyon
--------------------------
Kenyon & Kenyon

New York, New York
November 15, 1999

<PAGE> 1
Exhibit 23.4

[Letterhead of Hoffmann & Baron, LLP]

CONSENT OF PATENT COUNSEL

We hereby consent to the reference to our firm under the caption "Experts"
in the Registration Statement on Form S-3 and related Prospectus of ImClone
Systems Incorporated.

By: /s/ Hoffmann & Baron, LLP
--------------------------
Hoffmann & Baron, LLP

Syosset, New York
November 16, 1999