<PAGE>

================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

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

                                    FORM 10-Q

[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934
         FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2003

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934
         FOR THE TRANSITION PERIOD FROM TO

                         COMMISSION FILE NUMBER 0-19612

                          IMCLONE SYSTEMS INCORPORATED
             (Exact name of registrant as specified in its charter)

          DELAWARE                                              04-2834797
(State or other jurisdiction of                               (IRS employer
incorporation or organization)                              identification no.)

       180 VARICK STREET, NEW YORK, NY                           10014
  (Address of principal executive offices)                    (Zip code)

                                 (212) 645-1405
               Registrant's telephone number, including area code

                                 NOT APPLICABLE
Former name, former address and former fiscal year, if changed since last report

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                                 Yes [ ] No [X]

Applicable only to corporate issuers:
         Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.

<TABLE>
<CAPTION>
          CLASS                                 OUTSTANDING AS OF JUNE 27, 2003
          -----                                 -------------------------------
<S>                                             <C>
Common Stock, par value $.001                         74,177,513 Shares
</TABLE>

================================================================================

<PAGE>

                          IMCLONE SYSTEMS INCORPORATED

                                      INDEX

<TABLE>
<CAPTION>
                                                                                                             PAGE NO.
                                                                                                             --------
<S>                                                                                                          <C>
PART I - FINANCIAL INFORMATION

    Item 1.        Financial Statements

                   Unaudited Consolidated Balance Sheets - March 31, 2003 and December 31, 2002...........      1

                   Unaudited Consolidated Statements of Operations - Three months ended
                   March 31, 2003 and 2002................................................................      2

                   Unaudited Consolidated Statements of Cash Flows - Three months ended
                   March 31, 2003 and 2002................................................................      3

                   Notes to Unaudited Consolidated Financial Statements...................................      4

    Item 2.        Management's Discussion and Analysis of Financial Condition and Results of Operations..     22

    Item 3.        Quantitative and Qualitative Disclosures About Market Risk.............................     34

    Item 4.        Controls and Procedures................................................................     34

PART II - OTHER INFORMATION

    Item 1.        Legal Proceedings......................................................................     36

    Item 6.        Exhibits and Reports on Form 8-K.......................................................     38

    Signatures     .......................................................................................     39

    Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002..............................     40
</TABLE>

<PAGE>

PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

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

<TABLE>
<CAPTION>
                                                                                             MARCH 31,       DECEMBER 31,
                                                                                               2003              2002
                                                                                         ---------------    -------------
<S>                                                                                      <C>                <C>
                                        ASSETS
Current assets:
   Cash and cash equivalents...........................................................  $        45,748    $      72,877
   Securities available for sale.......................................................          183,143          174,778
   Prepaid expenses....................................................................            6,455            3,119
   Amounts due from corporate partners.................................................           14,246           12,363
   Current portion of note receivable..................................................              413              300
   Withholding tax assets..............................................................           10,150           10,150
   Other current assets ...............................................................           11,660           11,598
                                                                                         ---------------    -------------
     Total current assets .............................................................          271,815          285,185
                                                                                         ---------------    -------------
Property, plant and equipment, net ....................................................          196,045          183,539
Patent costs, net......................................................................            1,608            1,593
Deferred financing costs, net..........................................................            3,273            3,694
Note receivable, less current portion..................................................            9,587            9,700
Other assets...........................................................................              413              795
                                                                                         ---------------    -------------
                                                                                         $       482,741    $     484,506
                                                                                         ===============    =============
                    LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:
   Accounts payable....................................................................  $        19,171    $      23,717
   Accrued expenses (including $5,280 and $4,093 due to Bristol-Myers Squibb
     Company ("BMS") at March 31, 2003 and December 31, 2002, respectively)............           33,403           37,377
   Withholding tax liability...........................................................           34,311           38,811
   Industrial Development Revenue Bonds tax liability..................................              986              953
   Interest payable....................................................................            1,204            4,442
   Current portion of deferred revenue.................................................           45,855           38,362
   Current portion of long-term debt...................................................            2,200            2,200
   Current portion of long-term liabilities............................................               34               79
                                                                                         ---------------    -------------
     Total current liabilities.........................................................          137,164          145,941
                                                                                         ---------------    -------------
Deferred revenue, less current portion.................................................          326,027          284,142
Long-term debt, less current portion...................................................          240,000          240,000
Other long-term liabilities, less current portion......................................               50               52
                                                                                         ---------------    -------------
     Total liabilities.................................................................          703,241          670,135
                                                                                         ---------------    -------------
Commitments and contingencies (Note 9)

Stockholders' equity (deficit):
   Preferred stock, $1.00 par value; authorized 4,000,000 shares; reserved 1,200,000
     series B participating cumulative preferred stock ................................               --               --
   Common stock, $.001 par value; authorized 200,000,000 shares; issued 73,855,882 and
     73,839,536 at March 31, 2003 and December 31, 2002, respectively; outstanding
     73,666,632 and 73,650,286 at March 31, 2003 and December 31, 2002, respectively...               74               74
   Additional paid-in capital..........................................................          347,139          346,952
   Accumulated deficit.................................................................         (564,917)        (530,106)
   Treasury stock, at cost; 189,250 shares at March 31, 2003 and December 31, 2002 ....           (4,100)          (4,100)
   Accumulated other comprehensive income:
     Unrealized gain on securities available for sale..................................            1,304            1,551
                                                                                         ---------------    -------------
       Total stockholders' deficit.....................................................         (220,500)        (185,629)
                                                                                         ---------------    -------------
                                                                                         $       482,741    $     484,506
                                                                                         ===============    =============
</TABLE>

          See accompanying notes to consolidated financial statements.

                                     Page 1

<PAGE>

                          IMCLONE SYSTEMS INCORPORATED
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                          THREE MONTHS ENDED
                                                                                               MARCH 31,
                                                                                      --------------------------
                                                                                          2003            2002
                                                                                      -----------      ---------
<S>                                                                                   <C>              <C>
Revenues:
   License fees and milestone revenue...............................................  $    10,622      $   6,663
   Royalty revenue..................................................................          303            650
   Collaborative agreement revenue..................................................        8,646         11,238
                                                                                      -----------      ---------
     Total revenues.................................................................       19,571         18,551
                                                                                      -----------      ---------

Operating expenses:
   Research and development.........................................................       46,687         37,778
   Marketing, general and administrative............................................        7,154          8,123
   Industrial Development Revenue Bonds tax expense.................................           33             25
   Expenses associated with the amended BMS Commercial Agreement....................           --          2,250
                                                                                      -----------      ---------
     Total operating expenses.......................................................       53,874         48,176
                                                                                      -----------      ---------

Operating loss......................................................................      (34,303)       (29,625)
                                                                                      -----------      ---------

Other:
   Interest income..................................................................       (1,438)        (2,264)
   Interest expense.................................................................        2,223          3,493
   Gain on securities and investments...............................................         (379)          (801)
                                                                                      -----------      ---------
     Net interest and other expense.................................................          406            428
                                                                                      -----------      ---------
     Loss before income taxes.......................................................      (34,709)       (30,053)

     Provision for income taxes.....................................................          102             --
                                                                                      -----------      ---------
     Net loss.......................................................................  $   (34,811)     $ (30,053)
                                                                                      ===========      =========

Net loss per common share - basic and diluted.......................................  $     (0.47)     $   (0.41)
                                                                                      ===========      =========

Weighted average shares outstanding.................................................       73,653         73,307
                                                                                      ===========      =========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                     Page 2

<PAGE>

                          IMCLONE SYSTEMS INCORPORATED
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                                       THREE MONTHS ENDED
                                                                                                            MARCH 31,
                                                                                                   --------------------------
                                                                                                       2003          2002
                                                                                                   ------------  ------------
<S>                                                                                                <C>           <C>
Cash flows from operating activities:
   Net loss......................................................................................  $   (34,811)  $   (30,053)
   Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
     Depreciation and amortization...............................................................        2,769         2,190
     Amortization of deferred financing costs....................................................          421           422
     Expense associated with issuance of options and warrants....................................           --             4
     Gain on securities available for sale ......................................................         (379)         (801)
     Loss on disposal of fixed asset ............................................................           30            --
     Changes in:
       Prepaid expenses..........................................................................       (3,336)          415
       Amounts due from corporate partners (including amounts received from BMS of $5,646
         and $6,533 for the three months ended March 31, 2003 and 2002, respectively)............       (1,883)       (4,402)
       Other current assets......................................................................          (62)       (1,003)
       Other assets..............................................................................          382        (3,254)
       Interest payable..........................................................................       (3,238)       (3,243)
       Accounts payable..........................................................................       (4,546)       (3,345)
       Accrued expenses .........................................................................       (3,974)        5,001
       Withholding tax liability.................................................................       (4,500)           --
       Industrial Development Revenue Bonds tax liability........................................           33            26
       Deferred revenue (including amounts received from BMS of $60,000 and $140,000 for
         the three months ended March 31, 2003 and 2002, respectively)...........................       49,378       133,338
                                                                                                   -----------   -----------
           Net cash (used in) provided by operating activities...................................       (3,716)       95,295
                                                                                                   -----------   -----------
Cash flows from investing activities:
   Acquisitions of property, plant and equipment.................................................      (15,262)      (17,922)
   Purchases of securities available for sale....................................................      (50,259)     (138,819)
   Sales and maturities of securities available for sale.........................................       42,026       134,938
   Proceeds from property, plant and equipment disposals.........................................            5            --
   Additions to patents..........................................................................          (63)          (55)
                                                                                                   -----------   -----------
           Net cash used in investing activities.................................................      (23,553)      (21,858)
                                                                                                   -----------   -----------
Cash flows from financing activities:
   Proceeds from exercise of stock options and warrants..........................................          168         2,651
   Proceeds from issuance of common stock under the employee stock purchase plan.................           19           167
   Proceeds from short-swing profit rule.........................................................           --           486
   Payments of other liabilities.................................................................          (47)         (150)
                                                                                                   -----------   -----------
           Net cash provided by financing activities.............................................          140         3,154
                                                                                                   -----------   -----------
Net (decrease) increase in cash and cash equivalents.............................................      (27,129)       76,591
Cash and cash equivalents at beginning of period.................................................       72,877        38,093
                                                                                                   -----------   -----------
Cash and cash equivalents at end of period.......................................................  $    45,748   $   114,684
                                                                                                   ===========   ===========

Supplemental cash flow information:
   Cash paid for interest, including amounts capitalized of $1,565 and $300
     for the three months ended March 31, 2003 and 2002, respectively............................  $     6,605   $     6,613
                                                                                                   ===========   ===========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                     Page 3

<PAGE>

                          IMCLONE SYSTEMS INCORPORATED

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


         The numbers are shown in the text to these Notes to the Consolidated
Financial Statements as actual amounts. Tables and charts note where numbers
are shown in thousands.

(1) BASIS OF PRESENTATION AND LIQUIDITY

         The consolidated financial statements of ImClone Systems Incorporated
("ImClone Systems" or the "Company") as of March 31, 2003 and for the three
months ended March 31, 2003 and 2002 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, 2002, as filed with the
Securities and Exchange Commission ("SEC").

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

         The Company believes that its existing cash on hand, marketable
securities and amounts to which it is entitled should enable the Company to
maintain its current and planned operations at least through March 31, 2004 and
beyond. The Company is also entitled to reimbursement for certain marketing and
research and development expenditures and certain other payments, some of which
are payable upon the achievement of research and development milestones. Such
contingent amounts include $500,000,000 in cash-based payments under the
development, promotion, distribution and supply agreement (the "Commercial
Agreement") dated September 19, 2001 with Bristol-Myers Squibb Company ("BMS")
and E.R. Squibb & Sons L.L.C. ("E.R. Squibb"), as well as up to $16,000,000 in
equity-based milestone payments under the development and license agreement with
Merck KGaA, for the Company's lead product candidate, the investigational IgG1
monoclonal antibody ERBITUX(TM) (cetuximab), and up to $18,500,000 in cash-based
milestone payments under the development agreement with Merck KGaA, for the
Company's investigational monoclonal antibody vaccine, BEC2. There can be no
assurance that the Company will achieve these milestones. In order to fund its
future capital needs, the Company may require significant levels of additional
capital and the Company intends 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, or combinations of the
forgoing. There is no assurance that the Company will be successful in
consummating any such arrangements. If adequate funds are not available, the
Company may be required to significantly curtail its planned operations. The
Company was late in filing its 2002 annual report on Form 10-K and is also late
in filing this first quarter 2003 report on Form 10-Q. Timely filing of
securities filings under the Securities Exchange Act of 1934 (the "Exchange
Act") is required by Nasdaq Marketplace Rule 4310(c)(14). The Company believes
that by filing this Form 10-Q it is now in compliance with the rules for a
public company to remain listed with Nasdaq. If the Company were to be delisted,
such a delisting may have a material adverse effect on the Company's ability to
raise capital in the public markets.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

         In December 2002, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard ("SFAS") No. 148, "Accounting for
Stock-Based Compensation--Transition and Disclosure", effective for fiscal years
ending after December 15, 2002. This standard amends SFAS No. 123 "Accounting
for Stock-Based Compensation" to provide alternative methods of transition for a
voluntary change to the fair value based method of accounting for stock-based
employee compensation. The Company has elected to continue to follow the
intrinsic value method of accounting for employee stock options in accordance
with the provisions of Accounting Principles Board Opinion ("APB") Opinion No.
25 "Accounting for Stock Issued to Employees." APB No. 25 does not require the
recognition of compensation expense unless the exercise price of employee stock
options is less than the market price of the Company's stock on the date of
grant. During 2002 and the first quarter of 2003, the Company's stock option
grants were based on the closing market price of its stock on the date of grant.
SFAS No. 148 also amends certain disclosure requirements related to stock-based
employee compensation, which the Company has adopted and which are reflected
under "Stock-Based Compensation Plans" below.

         In August 2001, Statement of Financial Accounting Standards ("SFAS")
No. 143, "Accounting for Asset Retirement Obligations" was issued by the
Financial Accounting Standards Board ("FASB") and was effective for the Company
in the first quarter of the year ending December 31, 2003. The new rule
requires the fair value of a liability for an asset retirement obligation to be
recognized in the period in which it is incurred. When the liability is
initially recorded, a cost is capitalized by increasing the carrying amount of
the related long-lived asset. Over time, the liability is accreted to its
present value each period, and the capitalized cost is depreciated over the
useful life of the related asset. To settle the liability, the obligation for
its recorded amount is paid or a gain or loss upon settlement is incurred. The
adoption of this statement did not have a material effect on the Company's
financial statements.

                                     Page 4

<PAGE>

STOCK BASED COMPENSATION PLANS

         The Company has two types of stock-based compensation plans: a stock
option plan and a stock purchase plan. The Company accounts for its stock-based
compensation plans in accordance with the provisions of APB No. 25, and related
interpretations including the Statement of Financial Accounting Standards Board
Interpretation No. 44, "Accounting for Certain Transactions Involving Stock
Compensation -- An Interpretation of APB Opinion No. 25" ("Interpretation No.
44"). Accordingly, compensation expense would be recorded on the date of grant
of an option to an employee or member of the Board of Directors (the "Board")
only if the market price of the underlying stock on the date of grant exceeds
the exercise price. During 2002 and the first quarter of 2003 the Company's
stock option grants were based on the closing market price of its stock on the
date of grant.

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

<TABLE>
<CAPTION>
                                                           THREE MONTHS ENDED
                                                                MARCH 31,
                                                         ----------------------
                                                          2003            2002
                                                         ------          ------
<S>                                                      <C>             <C>
Expected life (years)..............................      2.69            2.86
Risk free interest rate............................      1.88%           3.14%
Volatility factor..................................        89%             88%
Dividend yield............................                  0%              0%
</TABLE>

         Changes in assumptions used could have a material effect on the
pro-forma results.

         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 fair value method of SFAS No. 123, the Company's net loss and net loss per
common share would have been increased to the pro forma amounts indicated below:
(in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                           THREE MONTHS ENDED
                                                                                MARCH 31,
                                                                   ----------------------------------
                                                                         2003              2002
                                                                   ----------------  ----------------
<S>                                                                <C>               <C>
Net loss as reported.............................................  $        34,811   $        30,053
Deduct: Total stock-based employee compensation expense
   determined under fair value based method......................            9,280            21,678
                                                                   ---------------   ---------------
          Pro forma..............................................  $        44,091   $        51,731
                                                                   ===============   ===============
Basic and diluted net loss per common share:
          As reported............................................  $         (0.47)  $         (0.41)
          Pro forma..............................................  $         (0.60)  $         (0.71)
</TABLE>

         The pro forma effect on the net loss for the three months ended March
31, 2003 and 2002 is not necessarily indicative of the pro forma effect on
future periods' operating results.

(2) PROPERTY, PLANT AND EQUIPMENT

    Property, plant and equipment are recorded at cost and consist of the
following: (in thousands)

<TABLE>
<CAPTION>
                                                                MARCH 31,        DECEMBER 31,
                                                                  2003               2002
                                                            ----------------   ----------------
<S>                                                         <C>                <C>
Land...................................................     $         4,899    $         4,899
Building and building improvements.....................              65,860             64,849
Leasehold improvements.................................              11,979             11,904
Machinery and equipment................................              41,966             40,317
Furniture and fixtures.................................               3,323              3,080
Construction in progress...............................             103,269             91,065
                                                            ---------------     --------------
     Total cost........................................             231,296            216,114
Less accumulated depreciation and amortization.........             (35,251)           (32,575)
                                                            ---------------     --------------
     Property, plant and equipment, net................     $       196,045    $       183,539
                                                            ===============     ==============
</TABLE>

                                     Page 5

<PAGE>
         The Company is building a multiple product manufacturing facility (the
"Multiple Product Facility") adjacent to its single product manufacturing
facility (the "Single Product Facility") in Somerville (Branchburg Township),
New Jersey. This new facility will be a multi-use facility with capacity of up
to 110,000 liters (production volume). The 250,000 square foot facility will
cost approximately $260,000,000, and is being built on land purchased in July
2000. The actual cost of the new facility may change depending upon various
factors. The Company has incurred approximately $96,945,000 in conceptual
design, engineering, pre-construction and construction costs (which are included
in construction in progress in the preceding table), excluding capitalized
interest of approximately $4,179,000, through March 31, 2003. Through June 24,
2003, committed purchase orders totaling approximately $107,021,000 have been
placed with subcontractors and for equipment related to this project. In
addition, $65,689,000 in engineering, procurement, construction management and
validation costs were committed. As of March 31, 2003, $90,484,000 has been paid
relating to these committed purchase orders. During August 2002, the Company
executed an escrow agreement with Branchburg Township (the "Township"). The
agreement required the Company to deposit $5,040,000 in an escrow account until
the Company supplies the Township with certain New Jersey Department of
Environmental Protection permits and also certain water and sewer permits
related to the construction of this facility. Interest that accrues on the
escrow deposit is allocated two-thirds to the Company and one-third to the
Township. The escrow deposit was requested by the Township to insure that funds
would be available to restore the site to its original condition should the
Company fail to obtain such permits required for construction at the site. The
escrow deposit, including the Company's portion of the interest, totaled
$5,094,000 at March 31, 2003 and is included in other current assets in the
consolidated balance sheet. The Company has satisfied the permit requirements of
the Township and received the escrow principal and accrued interest totaling
$5,101,000 in April 2003.

         In January 2002, the Company purchased real estate consisting of a
7.5-acre parcel of land located adjacent to the Company's Single Product
Facility and pilot facility in Somerville, New Jersey. The real estate includes
an existing 50,000 square foot building, 40,000 square feet of which is
warehouse space and 10,000 square feet of which is office space. The purchase
price for the property and building was approximately $7,020,000, of which
approximately $1,125,000 related to the purchase of the land and approximately
$5,895,000 related to the purchase of the building. The Company is using this
property for warehousing and material logistics for its Somerville campus. As of
March 31, 2003, the Company has incurred approximately $1,262,000 for the
retrofit of this facility. The logistics facility was ready for its intended use
and put into operation during January 2003 and depreciation commenced at that
time.

         The process of preparing consolidated financial statements in
accordance with accounting principles generally accepted in the United States of
America requires the Company to evaluate the carrying values of its long-lived
assets. The recoverability of the carrying values of the Company's Single
Product Facility and its Multiple Product Facility currently being built will
depend on (1) receiving United States Food and Drug Administration ("FDA")
approval of ERBITUX, (2) receiving FDA approval of the manufacturing facilities
and (3) the Company's ability to earn sufficient returns on ERBITUX. Based on
management's current estimates, the Company expects to recover the carrying
value of such assets.

(3) CONTRACT MANUFACTURING SERVICES

         In September 2000, the Company entered into a three-year commercial
manufacturing services agreement with Lonza Biologics plc ("Lonza") relating to
ERBITUX. This agreement was amended in June 2001 and again in September 2001 to
include additional services. The total cost for services to be provided under
the three-year commercial manufacturing services agreement is approximately
$86,913,000. The Company has incurred approximately $15,245,000 and $7,070,000
in the three months ended March 31, 2003 and 2002, respectively, and $77,078,000
from inception through March 31, 2003, for services provided under the
commercial manufacturing services agreement.

         Under the September 2000 agreement, Lonza manufactures ERBITUX at the
5,000 liter scale under cGMP and delivers it to the Company over a term ending
no later than December 2003. The costs associated with this agreement are
included in research and development expenses when incurred and will continue to
be so classified until such time as ERBITUX may be approved for sale or until
the Company obtains binding obligations from its corporate partners to purchase
such product. In the event of such approval or obligations from its corporate
partners, the subsequent costs associated with manufacturing ERBITUX for
commercial sale will be included in inventory and expensed when sold. In the
event the Company terminates the commercial manufacturing services agreement
without cause, the Company will be required to pay 85% of the stated costs for
each of the first ten batches cancelled, 65% of the stated costs for each of the
next ten batches cancelled and 40% of the stated costs for each of the next six
batches cancelled. The batch cancellation provisions for certain additional
batches that the Company is committed to purchase requires it to pay 100% of the
stated costs of cancelled batches scheduled within six months of the
cancellation, 85% of the stated costs of cancelled batches scheduled between six
and twelve months following the cancellation, and 65% of the stated costs of
cancelled batches scheduled between twelve and eighteen months following the
cancellation. Certain batches have been cancelled at other negotiated rates
agreed to by the parties. These amounts are subject to mitigation should Lonza
use its manufacturing capacity caused by such termination for

                                     Page 6

<PAGE>

another customer. At March 31, 2003, the estimated remaining future commitments
under the commercial manufacturing services agreement are $9,835,000 for 2003.

         In December 2001, the Company entered into an agreement with Lonza to
manufacture ERBITUX at the 2,000 liter scale for use in clinical trials by Merck
KGaA. The costs associated with the agreement are reimbursable by Merck KGaA and
accordingly are accounted for as collaborative agreement revenue and such costs
are also included in research and development expenses in the Consolidated
Statements of Operations. The Company did not incur any costs associated with
this agreement during the three months ended March 31, 2003, and $1,762,000 was
incurred during the three months ended March 31, 2002. From inception to March
31, 2003, the Company incurred approximately $7,183,000 for services provided
under this agreement. As of March 31, 2003, Merck KGaA has reimbursed the
Company in full for all the services provided under this agreement and Lonza has
completed its responsibilities under such agreement.

         On January 2, 2002, the Company executed a letter of intent with Lonza
to enter into a long-term supply agreement. The long-term supply agreement would
have applied to a large scale manufacturing facility that Lonza is constructing,
which would have been able to produce ERBITUX in 20,000 liter batches. The
Company paid Lonza $3,250,000 upon execution of the letter of intent for the
exclusive right to negotiate a long-term supply agreement for a portion of the
facility's manufacturing capacity. In September 2002, the Company wrote-off the
deposit because the exclusive negotiation period ended on September 30, 2002. In
light of the assistance the Company provided to BMS with respect to preserving
and then relinquishing the manufacturing capacity described above, BMS paid the
Company $3,250,000 in April 2003 and this amount will therefore be recognized as
a reduction to operating expenses in the second quarter of 2003.

(4) WITHHOLDING TAX ASSETS AND LIABILITY

         Federal and applicable state tax law requires an employer to withhold
income taxes at the time of an employee's exercise of non-qualified stock
options or warrants issued in connection with the performance of services by the
employee. An employer that does not do so is liable for the taxes not withheld
if the employee fails to pay his or her taxes for the year in which the
non-qualified stock options or warrants are exercised. In 2000 and prior years,
the Company generally did not require the withholding of federal, state or local
income taxes and in certain years, employment payroll taxes at the time of the
exercise of non-qualified stock options or warrants. Prior to 1996, the Company
did not comply with tax reporting requirements with respect to the exercise of
non-qualified stock options or warrants.

         In January 2003, the New York State Department of Taxation and Finance
("New York State") notified the Company that it was liable for the New York
State and City income taxes that were not withheld because one or more of the
Company's employees who exercised certain non-qualified stock options in 1999
and 2000 failed to pay New York State and City income taxes for those years. As
of December 31, 2002, the Company recorded a gross New York State and City
withholding tax liability of approximately $6,800,000 related to this matter. On
March 13, 2003, the Company entered into a closing agreement with New York
State, paying $4,500,000 by March 31, 2003, to settle the matter. The Company
believes that substantially all of the underpayment of New York State and City
income tax identified by New York State is attributable to the exercise of
non-qualified stock options by its former President and Chief Executive Officer,
Dr. Samuel D. Waksal. On June 17, 2003, New York State notified the Company
that, based on the warrant issue identified below, it is continuing a
previously conducted audit of the Company and is evaluating the terms of the
closing agreement to determine whether or not it should be re-opened. The
liability of approximately $2,300,000 representing the difference between the
gross liability of $6,800,000 and the settlement amount per the closing
agreement paid in March 2003 will remain on the Company's Consolidated Balance
Sheets, until this matter is settled.

         On March 13, 2003, the Company initiated discussions with the Internal
Revenue Service (the "IRS") relating to federal income taxes on the exercise of
non-qualified stock options on which income tax was not properly withheld.
Although the IRS has not yet asserted that the Company is required to make a
payment with respect to such failure to withhold, the IRS may assert that such a
liability exists, and may further assert that the Company is liable for interest
and penalties. The Company has requested and received confirmation from all of
its current and substantially all of its former employees who exercised
non-qualified stock options in 1999 and 2000, on which no income tax was
withheld, that they have reported the appropriate amount of income on their tax
returns and paid the taxes shown as due on those returns. Based on this
information, the Company has determined that all but an insignificant amount of
the potential liability for withholding taxes with respect to exercises of
non-qualified stock options in 1999 and 2000 is attributable to those amounts
related to Dr. Samuel D. Waksal.

          In addition, in the course of the Company's investigation into its
potential liability in respect of the non-qualified stock options described
above, the Company has identified certain warrants that were granted in 1991 and
prior years to current and former officers, directors and advisors (including
the three individuals discussed herein and the one individual discussed in Note
9) that the Company previously treated as non-compensatory warrants and thus not
subject to tax withholding and information reporting

                                     Page 7

<PAGE>

requirements upon exercise. Accordingly, when exercised in 2001 and prior years,
the Company did not deduct income and payroll taxes upon exercise or report
applicable information to the taxing authorities. Based on the information
discovered in the course of the Company's recent investigation, the Company now
believes that such treatment was incorrect, and that the exercise of such
warrants by current and former officers of the Company should have been treated
in the same manner for withholding and reporting purposes as the exercise of
non-qualified stock options. The Company has informed the relevant authorities,
including the IRS and New York State, of this matter and intends to resolve its
liability in respect of these warrants with these taxing authorities in
conjunction with its resolution of the matter described above.

         On April 2, 2003, the Company received a request from the SEC for the
voluntary production of documents and information relating to the above matters.
The Company is cooperating fully with the SEC, and intends to continue to do so,
while also updating the United States Attorney's Office on an ongoing basis.

         One of the officers and directors to whom warrants were issued and
previously treated as non-compensatory warrants is Dr. Harlan W. Waksal, the
Company's Chief Scientific Officer. In June 2003, Dr. Harlan W. Waksal
represented to the Company that he has paid the taxes associated with the
exercise of these warrants and further agreed to indemnify the Company for any
withholding taxes that may be assessed and are attributable to the Company's
failure to deduct income and payroll taxes on all warrants and options that he
or his transferee has previously exercised, subject to the consent of Dr. Harlan
W. Waksal, which cannot be unreasonably withheld.

         Two of the other officers and directors to whom warrants were issued
and previously treated as non-compensatory warrants are Dr. Samuel D. Waksal and
the Company's former General Counsel, John B. Landes. The Company has made
demands on both of these individuals to pay the taxes associated with the
exercise of these warrants and certain non-qualified stock options and to
indemnify the Company against any liability that it may incur to taxing
authorities in respect of the warrants or non-qualified stock options that were
previously exercised.

         The Company has recognized assets at the time of exercise relating to
the above individuals. These assets are based on the fact that individuals are
required by law to pay their personal income taxes, as well as the Company's
determination that these individuals had the means and intention to satisfy
their tax liabilities, and legal claims the Company has against these
individuals both during and after their employment with the Company. The Company
decided to write-down certain of these assets during the periods noted in the
paragraph below.

         Regarding Dr. Samuel D. Waksal, the Company determined that subsequent
to the Company's receipt of a "refusal to file" letter from the FDA on December
28, 2001, with respect to its rolling Biologics License Application for ERBITUX,
his financial condition deteriorated and therefore the recoverability of the
asset became doubtful. Regarding Mr. Landes, based on the limited information
available to it, due to the decrease in the Company's stock price during 2002
and corresponding decrease in the value of Mr. Landes' ownership of the
Company's securities, the Company determined that recoverability of the asset
became doubtful. Based upon these determinations, the asset write-downs of
$25,269,000 and $3,384,000 were recorded during the fourth quarter of 2001 for
Dr. Samuel D. Waksal and the second quarter of 2002 for Mr. Landes,
respectively. The withholding tax liabilities relating to Dr. Samuel D. Waksal
and Mr. Landes will remain on the Company's Consolidated Balance Sheets, until
such time as these liabilities are satisfied. Should the Company negotiate
settlements with the IRS and New York State tax authorities for amounts less
than those noted above or should such individuals pay the taxes, the Company
would reduce operating expenses for the difference between the withholding tax
liabilities and settlement amounts in the period of settlement.

(5) LONG-TERM DEBT

         Long-term debt consists of the following: (in thousands)

<TABLE>
<CAPTION>
                                                                                    MARCH 31,         DECEMBER 31,
                                                                                      2003                2002
                                                                                  --------------     ---------------
<S>                                                                               <C>                <C>
5 1/2% Convertible Subordinated Notes due March 1, 2005........................   $     240,000      $      240,000
11 1/4% Industrial Development Revenue Bond due May 1, 2004....................           2,200               2,200
                                                                                  -------------      --------------
                                                                                        242,200             242,200
Less current portion.........................................................            (2,200)             (2,200)
                                                                                  -------------      --------------
                                                                                  $     240,000      $      240,000
                                                                                  =============      ==============
</TABLE>

         In February 2000, the Company completed a private placement of
$240,000,000 in convertible subordinated notes due March 1, 2005. The Company
received net proceeds from this offering of approximately $231,500,000, after
deducting costs associated with the offering.

                                     Page 8

<PAGE>
The holders may convert all or a portion of the notes into common stock at any
time on or before March 1, 2005 at a conversion price of $55.09 per share,
subject to adjustment under certain circumstances. The notes are subordinated to
all existing and future senior indebtedness. On or after March 6, 2003, the
Company may redeem any or all of the notes at specified redemption prices, plus
accrued and unpaid interest to the day preceding the redemption date. The
Company was required to file with the SEC and obtain the effectiveness of a
shelf registration statement covering resales of the notes and the common stock.
Such registration statement was declared effective in July 2000. Upon the
occurrence of a "fundamental change" as defined in the indenture, holders of the
notes may require the Company to redeem the notes at a price equal to 100% of
the principal amount to be redeemed.

         On May 2, 2003, the Company informed the trustee for the Convertible
Subordinated Notes of its withholding tax issues and the delay in filing its
Form 10-K for the year ended December 31, 2002, and of the Company's intention
to satisfy its tax liabilities upon completion of its discussions with the
relevant taxing authorities and to file its Form 10-K as soon as possible. The
indenture for the Convertible Subordinated Notes includes covenants requiring
the Company to timely pay taxes and timely make Exchange Act filings. Under the
indenture, there can be no acceleration of payment of the notes until the
Company receives a notice of default from the trustee or a specified percentage
of the note holders and a 60-day grace period lapses. The Company has not
received any such notice. If, at some point in the future, the Company were to
receive such a notice and if it were determined at that time that the Company
was not in compliance with applicable covenants, the Company intends to and
believes it would be able to cure such non-compliance within the 60-day grace
period.

         In August 1990, the NYIDA issued $2,200,000 principal amount of its 11
1/4% Industrial Development Revenue Bonds due May 2004 (the "1990 IDA Bonds").
The proceeds from the sale of the 1990 IDA Bonds were used by the Company at its
research and development facility in downtown New York City. The Company has
granted a security interest in certain equipment located in this New York City
facility purchased with the proceeds from the 1990 IDA Bonds to secure the
obligations of the Company relating to the 1990 IDA Bonds. In April 2003, the
Company discovered that it is in breach of certain covenants in its 1990 IDA
Bonds. These bonds are tax-exempt and the Company is required to continue to use
the proceeds for a qualified tax-exempt purpose (in this case, manufacturing),
until maturity. While the bond proceeds were originally used for manufacturing
purposes, a recent internal investigation concluded that in August 1995, this
qualified purpose was abandoned and the proceeds have been used for a
non-qualified purpose in later periods. As a result, the bond proceeds likely
became taxable to the bondholders in August 1995. The Company is required to
indemnify the bondholders from any taxes imposed upon them. The Company intends
to attempt to settle any tax liability directly with the relevant taxing
authorities using procedures established for that purpose. The Company has
recognized a tax liability of $986,000 and $953,000 in its Consolidated Balance
Sheets as of March 31, 2003 and December 31, 2002, respectively. The estimate of
this tax liability was based upon the Voluntary Closing Agreement Program
("VCAP") projected penalty rate on the 1990 IDA Bonds interest payments. The
1990 IDA Bonds were redeemed in full on June 30, 2003 and the Company has
classified this debt as a current liability on the Consolidated Balance Sheets
as of March 31, 2003 and December 31, 2002, respectively.

(6) NET LOSS PER COMMON SHARE

         Basic and diluted net loss per common share are computed based on the
net loss for the relevant period, divided by the weighted average number of
common shares 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 periods
presented. Potential common shares outstanding which represent new shares that
could be issued under convertible debt, stock options and stock warrants by the
Company totaled approximately 18,286,000 and 16,927,000 for the three months
ended March 31, 2003 and 2002, respectively.

                                     Page 9

<PAGE>

(7) COMPREHENSIVE INCOME (LOSS)

    The following table reconciles net loss to comprehensive loss (in
thousands):

<TABLE>
<CAPTION>
                                                                                   THREE MONTHS ENDED
                                                                                        MARCH 31,
                                                                           ----------------------------------
                                                                                 2003              2002
                                                                           ----------------  ----------------
<S>                                                                        <C>               <C>
Net loss..............................................................     $       (34,811)  $       (30,053)
Other comprehensive income (loss):
     Unrealized holding gain (loss) arising during the period.........                 132               281
     Reclassification adjustment for realized gain included in net loss               (379)             (801)
                                                                           ---------------   ---------------
          Total other comprehensive income (loss).....................                (247)             (520)
                                                                           ---------------   ---------------
Total comprehensive loss .............................................     $       (35,058)  $       (30,573)
                                                                           ===============   ===============
</TABLE>

(8) COLLABORATIVE AGREEMENTS

(A)  MERCK KGAA

         In April 1990, the Company entered into a development and
commercialization agreement with Merck KGaA with respect to BEC2 and the
recombinant gp75 antigen product candidate. 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 make, have made, use, sell, or have
sold BEC2 and gp75 antigen outside North America. The agreement also grants
Merck KGaA a license, without the right to sublicense, to use, sell, or have
sold, but not to make BEC2 within North America in conjunction with the Company.
Pursuant to the terms of the agreement the Company has retained the rights, (1)
without the right to sublicense, to make, have made, use, sell, or have sold
BEC2 in North America in conjunction with Merck KGaA and (2) with the right to
sublicense, to make, have made, use, sell, or have sold gp75 antigen in North
America. In return, the Company has recognized research support payments
totaling $4,700,000 and is not entitled to any further research support payments
under the agreement. Merck KGaA is also required to make payments of up to
$22,500,000, of which $4,000,000 has been recognized through March 31, 2003,
based on milestones achieved in the licensed products' development. Merck KGaA
is also responsible for worldwide costs of up to DM17,000,000 associated with a
multi-site, multinational Phase III clinical trial for BEC2 in limited disease
small-cell lung carcinoma. This expense level was reached during the fourth
quarter of 2000 and all expenses incurred from that point forward are being
shared 60% by Merck KGaA and 40% by the Company. The Company did not incur any
expense for the three months ended March 31, 2003 and incurred approximately
$121,000 associated with this agreement in the three months ended March 31,
2002. Such cost sharing applies to all expenses beyond the DM17,000,000
threshold. Merck KGaA is also required to pay royalties on the eventual sales of
BEC2 outside of North America, if any. Revenues from sales, if any, of BEC2 in
North America will be distributed in accordance with the terms of a co-promotion
agreement to be negotiated by the parties.

         In December 1998, the Company entered into a development and license
agreement with Merck KGaA with respect to ERBITUX. In exchange for granting
Merck KGaA exclusive rights to market ERBITUX outside of the United States and
Canada and co-exclusive development rights in Japan, the Company received
through March 31, 2003, $30,000,000 in up-front fees and early cash-based
milestone payments based on the achievement of defined milestones. An additional
$30,000,000 can be received, of which $5,000,000 has been received through March
31, 2003, $6,000,000 was received on May 16, 2003, and $3,000,000 was received
on June 16, 2003, assuming the achievement of further milestones for which Merck
KGaA will receive equity in the Company. In August 2001, the Company received
its first equity-based milestone payment totaling $5,000,000 and accordingly
issued to Merck KGaA 63,027 shares of its common stock. The number of shares
issued for this milestone payment was determined using a price of $79.33 per
share. On April 16, 2003, the Company achieved a second equity-based milestone
that triggered a payment of $6,000,000. On May 16, 2003, the Company received
payment from Merck KGaA of $6,000,000 for this milestone. Upon receipt of this
payment, the Company issued to Merck KGaA 334,471 shares of ImClone Systems'
common stock, at a price of $17.94 per share, representing the sale of these
shares at a ten percent premium to market value as provided in the license. On
May 16, 2003, the Company achieved a third equity-based milestone that triggered
a payment of $3,000,000. On June 16, 2003, the Company received payment from
Merck KGaA of $3,000,000 for this milestone. Upon receipt of this payment, the
Company issued to Merck KGaA 150,007 shares of ImClone Systems' common stock, at
a price of $20.00 per share, representing the sale of these shares at a ten
percent premium to market value as provided in the license. The equity
underlying the remaining milestone payments will be priced at varying premiums
to the then-market price of the common stock depending upon the timing of the
achievement of the respective milestones. Merck KGaA will pay the Company a
royalty on future sales of ERBITUX outside of the United States and Canada, 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), or (2) for a one-

                                    Page 10

<PAGE>

year period after first commercial sale of ERBITUX in Merck KGaA's territory,
upon Merck KGaA's reasonable determination that the product is economically
unfeasible (in which case Merck KGaA is entitled to receive back 50% of the
cash-based up front fees and milestone payments then paid to date, but only out
of revenues received, if any, based upon a royalty rate applied to the gross
profit from ERBITUX sales or a percentage of ERBITUX fees and royalties received
from a sublicensee on account of the sale of ERBITUX in the United States and
Canada). In August 2001, the Company and Merck KGaA amended this agreement to
provide, among other things, that Merck KGaA may manufacture ERBITUX for supply
in its territory and may utilize a third party to do so upon the Company's
reasonable acceptance. The amendment further released Merck KGaA from its
obligations under the agreement relating to providing a guaranty under a
$30,000,000 credit facility relating to the build-out of the Company's Single
Product Facility. In addition, the amendment provides that the companies have
co-exclusive rights to ERBITUX in Japan, including the right to sublicense and
Merck KGaA waived its right of first offer in the case of a proposed sublicense
by the Company of ERBITUX in the Company's territory. In consideration for the
amendment, the Company agreed to a reduction in royalties payable by Merck KGaA
on sales of ERBITUX in Merck KGaA's territory.

         In conjunction with Merck KGaA, the Company has expanded the trial of
ERBITUX plus radiotherapy in squamous cell carcinoma of the head and neck. In
order to support clinical trials, Merck KGaA has agreed to purchase ERBITUX
manufactured by Lonza and the Company for use in these trials and has further
agreed to reimburse the Company for one-half of the outside contract service
costs incurred with respect to the Phase III clinical trial of ERBITUX for the
treatment of head and neck cancer in combination with radiation. In September
2002, the Company entered into a binding term sheet, effective as of April 15,
2002, for the supply of ERBITUX to Merck KGaA, which replaces previous supply
arrangements. The term sheet provides for Merck KGaA to purchase bulk and
finished ERBITUX ordered from the Company during the term of the December 1998
development and license agreement at a price equal to the Company's fully loaded
cost of goods. The term sheet also provides for Merck KGaA to use reasonable
efforts to enter into its own contract manufacturing agreements for supply of
ERBITUX by 2004 and obligates Merck KGaA to reimburse the Company for costs
associated with transferring technology and any other services requested by
Merck KGaA relating to establishing its own manufacturing or contract
manufacturing capacity. Amounts due from Merck KGaA related to these
arrangements totaled approximately $5,531,000 and $2,462,000 at March 31, 2003
and December 31, 2002, respectively, and are included in amounts due from
corporate partners in the Consolidated Balance Sheets. The Company recorded
collaborative agreement revenue related to these arrangements in the
Consolidated Statements of Operations totaling approximately $3,816,000 and
$5,022,000 for the three months ended March 31, 2003 and 2002, respectively. Of
these amounts, $3,121,000 and $4,309,000 for the three months ended March 31,
2003 and 2002, respectively, related to reimbursable costs associated with
supplying ERBITUX to Merck KGaA for use in clinical trials. The related
manufacturing costs of the ERBITUX sold to Merck KGaA was produced in prior
periods and have been expensed when the related raw materials were purchased and
the associated direct labor and overhead was consumed or, in the case of
contract manufacturing, when such services were performed. Reimbursable research
and development expenses were incurred and totaled approximately $596,000 and
$713,000 for the three months ended March 31, 2003 and 2002, respectively. These
amounts have been recorded as research and development expenses and also as
collaborative agreement revenue in the Consolidated Statements of Operations.
Reimbursable administrative expenses were incurred and totaled approximately
$99,000 for the three months ended March 31, 2003 and no administrative costs
were incurred for the three months ended March 31, 2002. These amounts have been
recorded as marketing, general and administrative expenses and also as
collaborative agreement revenue in the Consolidated Statements of Operations.

(B)  BRISTOL-MYERS SQUIBB COMPANY

         On September 19, 2001, the Company entered into an acquisition
agreement (the "Acquisition Agreement") with BMS and Bristol-Myers Squibb
Biologics Company, a Delaware corporation ("BMS Biologics"), which is a
wholly-owned subsidiary of BMS, providing for the tender offer by BMS Biologics
to purchase up to 14,392,003 shares of the Company's common stock for $70.00 per
share, net to the seller in cash. In connection with the Acquisition Agreement,
the Company entered into a stockholder agreement with BMS and BMS Biologics,
dated as of September 19, 2001 (the "Stockholder Agreement"), pursuant to which
all parties agreed to various arrangements regarding the respective rights and
obligations of each party with respect to, among other things, the ownership of
shares of the Company's common stock by BMS and BMS Biologics. Concurrent with
the execution of the Acquisition Agreement and the Stockholder Agreement, the
Company entered into the Commercial Agreement with BMS and E.R. Squibb, relating
to ERBITUX, pursuant to which, among other things, BMS and E.R. Squibb are
co-developing and co-promoting ERBITUX in the United States and Canada with the
Company, and are co-developing and co-promoting ERBITUX with the Company and
either together or co-exclusively with Merck KGaA.

         On March 5, 2002, the Company amended the Commercial Agreement with
E.R. Squibb and BMS. The amendment changed certain economics of the Commercial
Agreement and has expanded the clinical and strategic roles of BMS in the
ERBITUX development program. One of the principal economic changes to the
Commercial Agreement is that

                                    Page 11

<PAGE>

the Company received payments of $140,000,000 on March 7, 2002 and $60,000,000
on March 5, 2003. Such payments are in lieu of the $300,000,000 milestone
payment the Company would have received upon acceptance by the FDA of the
ERBITUX BLA under the original terms of the Commercial Agreement. In addition,
the Company agreed to resume and has resumed construction of its Multiple
Product Facility. The terms of the Commercial Agreement, as amended on March 5,
2002, are set forth in more detail below.

ACQUISITION AGREEMENT

         On October 29, 2001, pursuant to the Acquisition Agreement, BMS
Biologics accepted for payment pursuant to the tender offer 14,392,003 shares of
the Company's common stock on a pro rata basis from all tendering shareholders
and those conditionally exercising stock options.

STOCKHOLDER AGREEMENT

         Pursuant to the Stockholder Agreement, the Company's Board was
increased from ten to twelve members. BMS received the right to nominate two
directors to the Company's Board (each a "BMS director") so long as its
ownership interest in ImClone Systems is 12.5% or greater. If BMS' ownership
interest is 5% or greater but less than 12.5%, BMS will have the right to
nominate one BMS director, and if BMS' ownership interest is less than 5%, BMS
will have no right to nominate a BMS director. If the size of the Board is
increased to a number greater than twelve, the number of BMS directors would be
increased, subject to rounding, such that the number of BMS directors is
proportionate to the lesser of BMS' then-current ownership interest and 19.9%.
Notwithstanding the foregoing, BMS will have no right to nominate any BMS
directors if (i) the Company has terminated the Commercial Agreement due to a
material breach by BMS or (ii) BMS' ownership interest were to remain below 5%
for 45 consecutive days.

         Based on the number of shares of common stock acquired pursuant to the
tender offer, BMS has the right to nominate two directors. BMS designated Andrew
G. Bodnar, M.D., J.D., BMS' Senior Vice President, Strategy and Medical &
External Affairs, as one of the initial BMS directors. The nomination of Dr.
Bodnar was approved by the Board on November 15, 2001. The other BMS director
position was initially filled by Peter S. Ringrose, M.A, Ph.D. Dr. Ringrose, who
recently retired from his position of Chief Scientific Officer and President,
Pharmaceutical Research Institute at BMS, also resigned from his director
position with the Company. BMS has not yet designated a replacement to fill Dr.
Ringrose's vacated Board seat.

         Voting of Shares - During the period in which BMS has the right to
nominate at least one BMS director, BMS and its affiliates are required to vote
all of their shares in the same proportion as the votes cast by all of the
Company's other stockholders with respect to the election or removal of non-BMS
directors.

         Committees of the Board of Directors - During the period in which BMS
has the right to nominate at least one BMS director, BMS also has the right,
subject to certain exceptions and limitations, to have one member of each
committee of the Board be a BMS director.

         Approval Required for Certain Actions - The Company may not take any
action that constitutes a prohibited action under the Stockholder Agreement
without the consent of the BMS directors, until September 19, 2006 or earlier,
if any of the following occurs: (i) a reduction in BMS's ownership interest to
below 5% for 45 consecutive days, (ii) a transfer or other disposition of shares
of the Company's common stock by BMS or any of its affiliates such that BMS and
its affiliates own or have control over less than 75% of the maximum number of
shares of the Company's common stock owned by BMS and its affiliates at any time
after September 19, 2001, (iii) an acquisition by a third party of more than 35%
of the outstanding shares of the Company's common stock, (iv) a termination of
the Commercial Agreement by BMS due to significant regulatory or safety concerns
regarding ERBITUX, or (v) a termination of the Commercial Agreement due to a
material breach by BMS. Such prohibited actions include (i) issuing additional
shares or securities convertible into shares in excess of 21,473,002 shares of
the Company's common stock in the aggregate, subject to certain exceptions; (ii)
incurring additional indebtedness if the total of (A) the principal amount of
indebtedness incurred since September 19, 2001 and then-outstanding, and (B) the
net proceeds from the issuance of any redeemable preferred stock
then-outstanding, would exceed the Company's amount of indebtedness for borrowed
money outstanding as of September 19, 2001 by more than $500 million; (iii)
acquiring any business if the aggregate consideration for such acquisition, when
taken together with the aggregate consideration for all other acquisitions
consummated during the previous twelve months, is in excess of 25% of our
aggregate value at the time the binding agreement relating to such acquisition
was entered into; (iv) disposing of all or any substantial portion of the
Company's non-cash assets; (v) entering into non-competition agreements that
would be binding on BMS, its affiliates or any BMS director; (vi) taking certain
actions that would have a discriminatory effect on BMS or any of its affiliates
as a stockholder; and (vii) issuing capital stock with more than one vote per
share.

                                    Page 12

<PAGE>

         Limitation on Additional Purchases of Shares and Other Actions -
Subject to the exceptions set forth below, until September 19, 2006 or, if
earlier, the occurrence of any of (i) an acquisition by a third party of more
than 35% of the Company's outstanding shares, (ii) the first anniversary of a
reduction in BMS's ownership interest in the Company to below 5% for 45
consecutive days, or (iii) the Company's taking a prohibited action under the
Stockholder Agreement without the consent of the BMS directors, neither BMS nor
any of its affiliates will acquire beneficial ownership of any shares of the
Company's common stock or take any of the following actions: (i) encourage any
proposal for a business combination with the Company's or an acquisition of our
shares; (ii) participate in the solicitation of proxies from holders of shares
of the Company's common stock; (iii) form or participate in any "group" (within
the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934) with
respect to shares of the Company's common stock; (iv) enter into any voting
arrangement with respect to shares of the Company's common stock; or (v) seek
any amendment to or waiver of these restrictions.

         The following are exceptions to the standstill restrictions described
above: (i) BMS Biologics may acquire beneficial ownership of shares of the
Company's common stock either in the open market or from the Company pursuant to
the option described below, so long as, after giving effect to any such
acquisition of shares, BMS' ownership interest would not exceed 19.9%; (ii) BMS
may make, subject to certain conditions, a proposal to the Board to acquire
shares of the Company's common stock if the Company provides material non-public
information to a third party in connection with, or begin active negotiation of,
an acquisition by a third party of more than 35% of the outstanding shares;
(iii) BMS may acquire shares of the Company's common stock if such acquisition
has been approved by a majority of the non-BMS directors; and (iv) BMS may make,
subject to certain conditions, including that an acquisition of shares be at a
premium of at least 25% to the prevailing market price, non-public requests to
the Board to amend or waive any of the standstill restrictions described above.
Certain of the exceptions to the standstill provisions described above will
terminate upon the occurrence of: (i) a reduction in BMS's ownership interest in
the Company to below 5% for 45 consecutive days, (ii) a transfer or other
disposition of shares of the Company's common stock by BMS or any of its
affiliates such that BMS and its affiliates own or have control over less than
75% of the maximum number of shares owned by BMS and its affiliates at any time
after September 19, 2001, (iii) a termination of the Commercial Agreement by BMS
due to significant regulatory or safety concerns regarding ERBITUX, or (iv) a
termination of the Commercial Agreement by the Company due to a material breach
by BMS.

         Option to Purchase Shares in the Event of Dilution - BMS Biologics has
the right under certain circumstances to purchase additional shares of common
stock from the Company at market prices, pursuant to an option granted to BMS by
the Company, in the event that BMS's ownership interest is diluted (other than
by any transfer or other disposition by BMS or any of its affiliates). BMS can
exercise this right (i) once per year, (ii) if the Company issues shares of
common stock in excess of 10% of the then-outstanding shares in one day, and
(iii) if BMS's ownership interest is reduced to below 5% or 12.5%. BMS
Biologics' right to purchase additional shares of common stock from the Company
pursuant to this option will terminate on September 19, 2006 or, if earlier,
upon the occurrence of (i) an acquisition by a third party of more than 35% of
the outstanding shares, or (ii) the first anniversary of a reduction in BMS's
ownership interest in the Company to below 5% for 45 consecutive days.

         Transfers of Shares - Until September 19, 2004, neither BMS nor any of
its affiliates may transfer any shares of the Company's common stock or enter
into any arrangement that transfers any of the economic consequences associated
with the ownership of shares. After September 19, 2004, neither BMS nor any of
its affiliates may transfer any shares or enter into any arrangement that
transfers any of the economic consequences associated with the ownership of
shares, except (i) pursuant to registration rights granted to BMS with respect
to the shares, (ii) pursuant to Rule 144 under the Securities Act of 1933, as
amended or (iii) for certain hedging transactions. Any such transfer is subject
to the following limitations: (i) the transferee may not acquire beneficial
ownership of more than 5% of the then-outstanding shares of common stock; (ii)
no more than 10% of the total outstanding shares of common stock may be sold in
any one registered underwritten public offering; and (iii) neither BMS nor any
of its affiliates may transfer shares of common stock (except for registered
firm commitment underwritten public offerings pursuant to the registration
rights described below) or enter into hedging transactions in any twelve-month
period that would, individually or in the aggregate, have the effect of reducing
the economic exposure of BMS and its affiliates by the equivalent of more than
10% of the maximum number of shares of common stock owned by BMS and its
affiliates at any time after September 19, 2001. Notwithstanding the foregoing,
BMS Biologics may transfer all, but not less than all, of the shares of common
stock owned by it to BMS or to E.R. Squibb or another wholly-owned subsidiary of
BMS.

         Registration Rights - The Company granted BMS customary registration
rights with respect to shares of common stock owned by BMS or any of its
affiliates.

                                    Page 13

<PAGE>

COMMERCIAL AGREEMENT

         Rights Granted to E.R. Squibb - Pursuant to the Commercial Agreement,
as amended on March 5, 2002, the Company granted to E.R. Squibb (i) the
exclusive right to distribute, and the co-exclusive right to develop and promote
(together with the Company) any prescription pharmaceutical product using the
compound ERBITUX (the "product") in the United States and Canada, (ii) the
co-exclusive right to develop, distribute and promote (together with the Company
and together or co-exclusively with Merck KGaA and its affiliates) the product
in Japan, and (iii) the non-exclusive right to use the Company's registered
trademarks for the product in the United States, Canada and Japan (collectively,
the "territory") in connection with the foregoing. In addition, the Company
agreed not to grant any right or license to any third party, or otherwise permit
any third party, to develop ERBITUX for animal health or any other application
outside the human health field without the prior consent of E.R. Squibb (which
consent may not be unreasonably withheld).

         Rights Granted to the Company - Pursuant to the Commercial Agreement,
E.R. Squibb has granted to the Company and the Company's affiliates a license,
without the right to grant sublicenses (other than to Merck KGaA and its
affiliates for use in Japan and to any third party for use outside the
territory), to use solely for the purpose of developing, using, manufacturing,
promoting, distributing and selling ERBITUX or the product, any process,
know-how or other invention developed solely by E.R. Squibb or BMS that has
general utility in connection with other products or compounds in addition to
ERBITUX or the product ("E.R. Squibb Inventions").

         Up-Front and Milestone Payments - The Commercial Agreement provides for
up-front and milestone payments by E.R. Squibb to the Company of $900,000,000 in
the aggregate, of which $200,000,000 was paid on September 19, 2001,
$140,000,000 was paid on March 7, 2002, $60,000,000 was paid on March 5, 2003,
$250,000,000 is payable upon receipt of marketing approval from the FDA with
respect to an initial indication for ERBITUX and $250,000,000 is payable upon
receipt of marketing approval from the FDA with respect to a second indication
for ERBITUX. All such payments are non-refundable and non-creditable.

         Distribution Fees - The Commercial Agreement provides that E.R. Squibb
shall pay the Company distribution fees based on a percentage of "annual net
sales" of the product (as defined in the Commercial Agreement) by E.R. Squibb in
the United States and Canada. The distribution fee is 39% of net sales in the
United States and Canada.

         The Commercial Agreement also provides that the distribution fees for
the sale of the product in Japan by E.R. Squibb or ImClone Systems shall be
equal to 50% of operating profit or loss with respect to such sales for any
calendar month. In the event of an operating profit, E.R. Squibb shall pay the
Company the amount of such distribution fee, and in the event of an operating
loss, the Company shall credit E.R. Squibb the amount of such distribution fee.

         Development of the Product - Responsibilities associated with clinical
and other ongoing studies are apportioned between the parties as determined by
the product development committee described below. The Commercial Agreement
provides for the establishment of clinical development plans setting forth the
activities to be undertaken by the parties for the purpose of obtaining
marketing approvals, providing market support and developing new indications and
formulations of the product. After transition of responsibilities for certain
clinical and other studies, each party is primarily responsible for performing
the studies designated to it in the clinical development plans. In the United
States and Canada, the Commercial Agreement provides that E.R. Squibb is
responsible for 100% of the cost of all clinical studies other than those
studies undertaken post-launch which are not pursuant to an IND (e.g. Phase IV
studies), the cost of which is shared equally between E.R. Squibb and ImClone
Systems. As between E.R. Squibb and ImClone Systems, each is responsible for 50%
of the costs of all studies in Japan. The Company has also agreed, and may agree
in the future, to share with E.R. Squibb, on terms other than the foregoing,
costs of clinical trials that the Company believes are not potentially
registrational but should be undertaken prior to launch in the United States,
Canada or Japan. Except as otherwise agreed upon by the parties, the Company
will own all registrations for the product and are primarily responsible for the
regulatory activities leading to registration in each country. E.R. Squibb will
be primarily responsible for the regulatory activities in each country after the
product has been registered in that country. Pursuant to the terms of the
Commercial Agreement, as amended, Andrew G. Bodnar, M.D., J.D., Senior Vice
President, Strategy and Medical & External Affairs of BMS, and a member of the
Company's Board of Directors, will oversee the implementation of the clinical
and regulatory plan for ERBITUX.

         Distribution and Promotion of the Product - Pursuant to the Commercial
Agreement, E.R. Squibb has agreed to use all commercially reasonable efforts to
launch, promote and sell the product in the territory with the objective of
maximizing the sales potential of the product and promoting the therapeutic
profile and benefits of the product in the most commercially beneficial manner.
In connection with its responsibilities for distribution, marketing and sales of
the product in the territory, E.R. Squibb is performing all relevant functions,
including but not limited to the provision of all sales force personnel,
marketing (including all advertising and promotional expenditures), warehousing
and physical distribution of the product.

                                    Page 14

<PAGE>

However, the Company has the right, at its election and sole expense, to
co-promote with E.R. Squibb the product in the territory. Pursuant to this
co-promotion option, which the Company has exercised, the Company is entitled on
and after April 11, 2002 (at the Company's sole expense) to have the Company's
sales force participate in the promotion of the product consistent with the
marketing plan agreed upon by the parties, provided that E.R. Squibb will retain
the exclusive rights to sell and distribute the product. Except for the
Company's expenses incurred pursuant to the co-promotion option, E.R. Squibb is
responsible for 100% of the distribution, sales and marketing costs in the
United States and Canada, and as between E.R. Squibb and ImClone Systems, each
is responsible for 50% of the distribution, sales, marketing costs and other
related costs and expenses in Japan.

         Manufacture and Supply - The Commercial Agreement provides that the
Company is responsible for the manufacture and supply of all requirements of
ERBITUX in bulk form ("API") for clinical and commercial use in the territory,
and that E.R. Squibb will purchase all of its requirements of API for commercial
use from the Company. The Company will supply API for clinical use at the
Company's fully burdened manufacturing cost, and will supply API for commercial
use at the Company's fully burdened manufacturing cost plus a mark-up of 10%.
Upon the expiration, termination or assignment of any existing agreements
between ImClone Systems and third party manufacturers, E.R. Squibb will be
responsible for processing API into the finished form of the product.

         Management - The parties have formed the following committees for
purposes of managing their relationship and their respective rights and
obligations under the Commercial Agreement:

         -        a Joint Executive Committee (the "JEC"), which consists of
                  certain senior officers of each party. The JEC is co-chaired
                  by a representative of each of BMS and the Company. The JEC is
                  responsible for, among other things, managing and overseeing
                  the development and commercialization of ERBITUX pursuant to
                  the terms of the Commercial Agreement, approving the annual
                  budgets and multi-year expense forecasts, and resolving
                  disputes, disagreements and deadlocks arising in the other
                  committees;

         -        a Product Development Committee (the "PDC"), which consists of
                  members of senior management of each party with expertise in
                  pharmaceutical drug development and/or marketing. The PDC is
                  chaired by the Company's representative. The PDC is
                  responsible for, among other things, managing and overseeing
                  the development and implementation of the clinical development
                  plans, comparing actual versus budgeted clinical development
                  and regulatory expenses, and reviewing the progress of the
                  registrational studies;

         -        a Joint Commercialization Committee (the "JCC"), which
                  consists of members of senior management of each party with
                  clinical experience and expertise in marketing and sales. The
                  JCC is chaired by a representative of BMS. The JCC is
                  responsible for, among other things, overseeing the
                  preparation and implementation of the marketing plans,
                  coordinating the sales efforts of E.R. Squibb and the Company,
                  and reviewing and approving the marketing and promotional
                  plans for the product in the territory; and

         -        a Joint Manufacturing Committee (the "JMC"), which consists of
                  members of senior management of each party with expertise in
                  manufacturing. The JMC is chaired by the Company's
                  representative (unless a determination is made that a
                  long-term inability to supply API exists, in which case the
                  JMC will be co-chaired by representatives of E.R. Squibb and
                  the Company). The JMC is responsible for, among other things,
                  overseeing and coordinating the manufacturing and supply of
                  API and the product, and formulating and directing the
                  manufacturing strategy for the product.

         Any matter, which is the subject of a deadlock (i.e., no consensus
decision) in the PDC, the JCC or the JMC, will be referred to the JEC for
resolution. Subject to certain exceptions, deadlocks in the JEC will be resolved
as follows: (i) if the matter was also the subject of a deadlock in the PDC, by
the co-chairperson of the JEC designated by the Company, (ii) if the matter was
also the subject of a deadlock in the JCC, by the co-chairperson of the JEC
designated by BMS, or (iii) if the matter was also the subject of a deadlock in
the JMC, by the co-chairperson of the JEC designated by the Company. All other
deadlocks in the JEC will be resolved by arbitration.

         Right of First Offer - E.R. Squibb has a right of first offer with
respect to our investigational IMC-KDR monoclonal antibodies should the Company
decide to enter into a partnering arrangement with a third party with respect to
IMC-KDR antibodies at any time prior to the earlier to occur of September 19,
2006 and the first anniversary of the date which is 45 days after any date on
which BMS's ownership interest in ImClone Systems is less than 5%. If the
Company decides to enter into a partnering arrangement during such period, the
Company must notify E.R. Squibb. If E.R. Squibb notifies the Company that it is
interested in such an arrangement, the Company will provide its proposed terms
to E.R. Squibb and the parties will negotiate in good faith for 90 days to
attempt to agree on the terms and conditions of such an arrangement. If the

                                    Page 15

<PAGE>

parties do not reach agreement during this period, E.R. Squibb must propose the
terms of an arrangement which it is willing to enter into, and if the Company
rejects such terms the Company may enter into an agreement with a third party
with respect to such a partnering arrangement (provided that the terms of any
such agreement may not be more favorable to the third party than the terms
proposed by E.R. Squibb).

         Right of First Negotiation - If at any time during the restricted
period (as defined below), the Company is interested in establishing a
partnering relationship with a third party involving certain compounds or
products not related to ERBITUX, the product or IMC-KDR antibodies, the Company
must notify E.R. Squibb and E.R. Squibb will have 90 days to enter into a
non-binding heads of agreement with the Company with respect to such a
partnering relationship. In the event that E.R. Squibb and ImClone Systems do
not enter into a non-binding heads of agreement, the Company is free to
negotiate with third parties without further obligation to E.R. Squibb. The
"restricted period" means the period from September 19, 2001 until the earliest
to occur of (i) September 19, 2006, (ii) a reduction in BMS's ownership interest
in ImClone Systems to below 5% for 45 consecutive days, (iii) a transfer or
other disposition of shares of the Company's common stock by BMS or any of its
affiliates such that BMS and its affiliates own or have control over less than
75% of the maximum number of shares of the Company's common stock owned by BMS
and its affiliates at any time after September 19, 2001, (iv) an acquisition by
a third party of more than 35% of the outstanding Shares, (v) a termination of
the Commercial Agreement by BMS due to significant regulatory or safety concerns
regarding ERBITUX, or (vi) the Company's termination of the Commercial Agreement
due to a material breach by BMS.

         Restriction on Competing Products - During the period from the date of
the Commercial Agreement until September 19, 2008, the parties have agreed not
to, directly or indirectly, develop or commercialize a competing product
(defined as a product that has as its only mechanism of action an antagonism of
the EGF receptor) in any country in the territory. In the event that any party
proposes to commercialize a competing product or purchases or otherwise takes
control of a third party which has developed or commercialized a competing
product, then such party must either divest the competing product within 12
months or offer the other party the right to participate in the
commercialization and development of the competing product on a 50/50 basis
(provided that if the parties cannot reach agreement with respect to such an
agreement, the competing product must be divested within 12 months).

         Ownership - The Commercial Agreement provides that the Company own all
data and information concerning ERBITUX and the product and (except for the E.R.
Squibb Inventions) all processes, know-how and other inventions relating to the
product and developed by either party or jointly by the parties. E.R. Squibb,
however, has the right to use all such data and information, and all such
processes, know-how or other inventions, in order to fulfill its obligations
under the Commercial Agreement.

         Product Recalls - If E.R. Squibb is required by any regulatory
authority to recall the product in any country in the territory (or if the JCC
determines such a recall to be appropriate), then E.R. Squibb and ImClone
Systems shall bear the costs and expenses associated with such a recall (i) in
the United States and Canada, in the proportion of 39% for ImClone Systems and
61% for E.R. Squibb and (ii) in Japan, in the proportion for which each party is
entitled to receive operating profit or loss (unless, in the territory, the
predominant cause for such a recall is the fault of either party, in which case
all such costs and expenses shall be borne by such party).

         Mandatory Transfer - Each of BMS and E.R. Squibb has agreed under the
Commercial Agreement that in the event it sells or otherwise transfers all or
substantially all of its pharmaceutical business or pharmaceutical oncology
business, it must also transfer to the transferee its rights and obligations
under the Commercial Agreement.

         Indemnification - Pursuant to the Commercial Agreement, each party has
agreed to indemnify the other for (i) its negligence, recklessness or wrongful
intentional acts or omissions, (ii) its failure to perform certain of its
obligations under the agreement, and (iii) any breach of its representations and
warranties under the agreement.

         Termination - Unless earlier terminated pursuant to the termination
rights discussed below, the Commercial Agreement expires with regard to the
product in each country in the territory on the later of September 19, 2018 and
the date on which the sale of the product ceases to be covered by a validly
issued or pending patent in such country. The Commercial agreement may also be
terminated prior to such expiration as follows:

         -        by either party, in the event that the other party materially
                  breaches any of its material obligations under the Commercial
                  Agreement and has not cured such breach within 60 days after
                  notice;

                                    Page 16

<PAGE>

         -        by E.R. Squibb, if the JEC determines that there exists a
                  significant concern regarding a regulatory or patient safety
                  issue that would seriously impact the long-term viability of
                  all products; or

         -        by either party, in the event that the JEC does not approve
                  additional clinical studies that are required by the FDA in
                  connection with the submission of the initial regulatory
                  filing with the FDA within 90 days of receiving the formal
                  recommendation of the DC concerning such additional clinical
                  studies.

         The Company has also agreed, and may agree in the future, to share with
E.R. Squibb, on terms other than the foregoing, costs of clinical trials that
the Company believes are not potentially registrational but should be undertaken
prior to launch in the United States, Canada or Japan. The Company has incurred
$1,147,000 pursuant to such cost sharing for the three months ended March 31,
2003. The Company has also incurred $40,000 related to the agreement with
respect to development in Japan for the three months ended March 31, 2003.

         The Company incurred approximately $2,250,000 during the three months
ended March 31, 2002 in legal and other advisor fees associated with the
amendment to the Commercial Agreement with BMS and affiliates, which has been
expensed and included as a separate line item in operating expenses in the
Consolidated Statements of Operations.

         Amounts due from BMS related to this agreement totaled approximately
$8,548,000 and $9,739,000 at March 31, 2003 and December 31, 2002, respectively,
and are included in amounts due from corporate partners in the Consolidated
Balance Sheets. The Company recorded collaborative agreement revenue related to
this agreement in the Consolidated Statements of Operations totaling
approximately $4,826,000 and $6,095,000 in the three months ended March 31, 2003
and 2002, respectively. Of these amounts, $1,200,000 and $1,847,000 in the three
months ended March 31, 2003 and 2002, respectively, related to reimbursable
costs associated with supplying ERBITUX for use in clinical trials associated
with this agreement. The related manufacturing costs have been expensed in prior
periods when the related raw materials were purchased and the associated direct
labor and overhead was consumed or, in the case of contract manufacturing, when
such services were provided. Reimbursable research and development and marketing
expenses were incurred and totaled approximately $3,626,000 and $4,248,000 in
the three months ended March 31, 2003 and 2002, respectively. These amounts have
been recorded as research and development and marketing, general and
administrative expenses and also as collaborative agreement revenue in the
Consolidated Statements of Operations.

         License fees and milestone revenue consists of the following: (in
thousands)

<TABLE>
<CAPTION>
                                                                       THREE MONTHS ENDED
                                                                            MARCH 31,
                                                                 ------------------------------
                                                                     2003             2002
                                                                 -------------    -------------
<S>                                                              <C>              <C>
BMS:
     ERBITUX license fee revenue............................     $      10,526    $       6,567
Merck KGaA:
     ERBITUX license fee revenue............................                55               55
     BEC2 license fee revenue...............................                41               41
                                                                 -------------    -------------
          Total license fees and milestone revenues.........     $      10,622    $       6,663
                                                                 =============    =============
</TABLE>

         Collaborative agreement revenue from corporate partners consists of the
following: (in thousands)

<TABLE>
<CAPTION>
                                                                              THREE MONTHS ENDED
                                                                                   MARCH 31,
                                                                       -------------------------------
                                                                            2003             2002
                                                                       --------------   --------------
<S>                                                                    <C>              <C>
BMS:
     ERBITUX research and development expenses...................       $       3,358    $       4,105
     ERBITUX supplied for use in clinical trials.................               1,200            1,847
     ERBITUX marketing expenses..................................                 268              143
Merck KGaA:
     ERBITUX research and development expenses...................                 596              713
     ERBITUX supplied for use in clinical trials.................               3,121            4,309
     ERBITUX administrative expenses.............................                  99               --
     BEC2 research and development expenses......................                  --              121
     BEC2 administrative expenses................................                   4               --
                                                                        -------------    -------------
          Total collaborative agreement revenue..................       $       8,646    $      11,238
                                                                        =============    =============
</TABLE>

         Amounts due from corporate partners consist of the following:
(in thousands)

                                    Page 17

<PAGE>

<TABLE>
<CAPTION>
                                                                  MARCH 31,        DECEMBER 31,
                                                                    2003               2002
                                                              ----------------   --------------
<S>                                                           <C>                <C>
BMS:
     ERBITUX...........................................       $         8,548    $        9,739
Merck KGaA:
     ERBITUX...........................................                 5,531             2,462
     BEC2..............................................                   167               162
                                                              ---------------    --------------
          Total amounts due from corporate partners....       $        14,246    $       12,363
                                                              ===============    ==============
</TABLE>

         Deferred revenue consists of the following (in thousands):

<TABLE>
<CAPTION>
                                                                                           MARCH 31,        DECEMBER 31,
                                                                                             2003               2002
                                                                                       ----------------   ---------------
<S>                                                                                    <C>                <C>
BMS:
     ERBITUX commercial agreement........................................               $       366,313   $       316,839
Merck KGaA:
     ERBITUX development and license agreement...........................                         3,500             3,556
     BEC2 development and commercialization agreement....................                         2,069             2,109
                                                                                        ---------------   ---------------
          Total deferred revenue.........................................                       371,882           322,504
Less: current portion....................................................                       (45,855)          (38,362)
                                                                                        ---------------   ---------------
          Total long-term deferred revenue...............................               $       326,027   $       284,142
                                                                                        ===============   ===============
</TABLE>

         The Company receives royalty revenue from a strategic corporate
alliance with Abbott Laboratories in diagnostics. Royalty revenue for the three
months ended March 31, 2003 and 2002 primarily includes amounts associated with
the Abbott Laboratories alliance totaling $302,000 and $650,000, respectively.

 (9)     COMMITMENTS AND CONTINGENCIES

         Beginning in January 2002, a number of complaints asserting claims
under the federal securities laws against the Company and certain of its
directors and officers were filed in the U.S. District Court for the Southern
District of New York. Those actions were consolidated under the caption Irvine
v. ImClone Systems Incorporated et al., No. 02 Civ. 0109 (RO), and on September
16, 2002, a consolidated amended complaint was filed in that consolidated
action, which plaintiffs corrected in limited respects on October 22, 2002. The
corrected consolidated amended complaint named the Company, as well as its
former President and Chief Executive Officer, Dr. Samuel D. Waksal, its former
President and Chief Executive Officer and current Chief Scientific Officer, Dr.
Harlan W. Waksal, its former Chairman of the Board of Directors and current
director, Robert F. Goldhammer, current or former directors Richard Barth, David
Kies, Paul Kopperl, John Mendelsohn and William Miller, its former General
Counsel, John Landes, and its Vice President for Marketing and Sales, Ronald
Martell, as defendants. The complaint asserted claims for securities fraud under
sections 10(b), 20(a) and Rule 10b-5 of the Securities Exchange Act of 1934, on
behalf of a purported class of persons who purchased our publicly traded
securities between March 27, 2001 and January 25, 2002. The complaint also
asserted claims against Dr. Samuel D. Waksal under section 20A of the Exchange
Act on behalf of a separate purported sub-class of purchasers of the Company's
securities between December 27, 2001 and December 28, 2001. The complaint
generally alleged that various public statements made by or on behalf of the
Company or the other defendants during 2001 and early 2002 regarding the
prospects for FDA approval of ERBITUX were false or misleading when made, that
the individual defendants were allegedly aware of material non-public
information regarding the actual prospects for ERBITUX at the time that they
engaged in transactions in the Company's common stock and that members of the
purported stockholder class suffered damages when the market price of the
Company's common stock declined following disclosure of the information that
allegedly had not been previously disclosed. The complaint sought to proceed on
behalf of the alleged class described above, sought monetary damages in an
unspecified amount and seeks recovery of plaintiffs' costs and attorneys' fees.
On November 25, 2002, all defendants other than Dr. Samuel D. Waksal filed a
motion to dismiss the complaint for failure to state a claim. On June 3, 2003,
the court granted that motion in part, dismissing the complaint as to defendants
Messrs. Goldhammer, Barth, Kies, Kopperl, Landes, Martell, Mendlesohn and
Miller, but not dismissing it as to the Company, Dr. Harlan W. Waksal and Dr.
Samuel D. Waksal.

         Separately, on September 17, 2002, an individual purchaser of the
Company's common stock filed an action on his own behalf asserting claims
against the Company, Dr. Samuel D. Waksal and Dr. Harlan W. Waksal under
sections 10(b) and 20(a) of the Exchange Act and SEC Rule 10b-5. That action is
styled Flynn v. ImClone Systems Incorporated, et al., No. 02 Civ. 7499 and, in
contrast to the Irvine case discussed above, this case was not filed against any
of our outside directors. In this case, plaintiff alleges that he purchased
shares on various dates in late 2001, that various public statements made by the
Company or the other defendants during 2001 regarding the prospects for FDA
approval of ERBITUX were false or misleading when made and that plaintiff relied
on such allegedly false and misleading information in making his purchases.

                                    Page 18

<PAGE>

Plaintiff seeks compensatory damages of not less than $180,000 and punitive
damages of $5,000,000, together with interest, costs and attorneys' fees. On
November 25, 2002, both defendants other than Dr. Samuel D. Waksal filed a
motion to dismiss the complaint for failure to state a claim. Briefing on that
motion was completed on March 5, 2003. Oral argument on the motion to dismiss
was held on May 5, 2003. On June 3, 2003, the court denied that motion.

Beginning on January 13, 2002, and continuing thereafter, nine separate
purported shareholder derivative actions have been filed against members of the
Company's board of directors, certain of its present and former officers, and
the Company, as nominal defendant, among others, advancing claims based on
allegations similar to the allegations in the federal securities class action
complaints. Four of these derivative cases were filed in the Delaware Court of
Chancery and have been consolidated in that court under the caption In re
ImClone Systems Incorporated Derivative Litigation, Cons. C.A. No. 19341-NC.
Three of these derivative actions were filed in New York State Supreme Court in
Manhattan, (styled Boghosian v. Barth, et al., Index No. 100759/02, Johnson v.
Barth, et al. Index No. 601304/02, and Henshall v. Bodnar, et al., Index No.
603121/02) and have been consolidated under the caption In re ImClone Systems,
Inc. Shareholder Derivative Litigation, Index No. 02-100759. All of these state
court actions have been stayed in deference to proceeding in two purported
derivative actions, Lefanto v. Waksal, et al., No. 02 Civ. 0163 (RO) and Forbes
v. Barth, et al., No. 02 Civ. 1400 (RO), have been filed in the U.S. District
Court for the Southern District of New York and have been consolidated under the
caption In re ImClone Systems, Inc. Shareholder Derivative Litigation, Master
File No. 02 CV 163 (RO). A verified consolidated amended complaint in these
federal actions was filed on June 16, 2003. It asserts, purportedly on behalf
the Company, claims including breach of fiduciary duty by certain members of the
Company's board of directors and current and former officers, among others,
based on allegations including that they engaged in transactions in the
Company's common stock while in possession of material, non-public information
concerning the regulatory and marketing prospects for ERBITUX, or improperly
disclosed such information to others, and that they failed to maintain adequate
controls and to exercise due care with regard to the Company's ERBITUX
application to the FDA and certain public statements by or on behalf of the
Company. No response to the complaints in those actions has been required to
date. Under the current schedule in the consolidated federal actions, a response
to the verified consolidated complaint is due on September 12, 2003.

         The Company intends to vigorously defend itself against the claims
asserted in these actions, which are in their earliest stages. The Company is
unable to predict the outcome of these actions at this time. Because the Company
does not believe that a loss is probable, no legal reserve has been established.

         The Company has received subpoenas and requests for information in
connection with investigations by the SEC, the Subcommittee on Oversight and
Investigations of the U.S. House of Representatives Committee on Energy and
Commerce and the U.S. Department of Justice relating to the circumstances
surrounding the disclosure of the FDA "refusal to file" letter dated December
28, 2001, and trading in the Company's securities by certain Company insiders in
2001. The Company has also received subpoenas and requests for information
pertaining to document retention issues in 2001 and 2002, and to certain
communications regarding ERBITUX in 2000. The Company is cooperating with all of
these inquiries and intends to continue to do so.

         On June 19, 2002, the Company received a written "Wells Notice" from
the staff of the SEC, indicating that the staff of the SEC is considering
recommending that the SEC bring an action against the Company relating to the
Company's disclosures immediately following the receipt of a "refusal to file"
letter from the FDA on December 28, 2001 for the Company's BLA for ERBITUX. The
Company filed a Wells submission on July 12, 2002 in response to the staff's
Wells Notice.

         On August 7, 2002, a federal grand jury in the Southern District of New
York returned an indictment charging Dr. Samuel D. Waksal with, inter alia,
securities fraud and conspiracy to commit securities fraud. On October 15, 2002,
Dr. Samuel D. Waksal entered a plea of guilty to several counts in that
indictment, including that on December 27, 2001 he directed a family member to
sell shares of the Company's common stock and attempted to sell shares that he
owned in advance of an expected announcement that the FDA had issued a "refusal
to file" letter with respect to the Company's application for approval of
ERBITUX. The Company received such a "refusal to file" letter from the FDA on
December 28, 2001, and announced the receipt of that letter following the close
of trading that day. On June 10, 2003, Dr. Samuel D. Waksal was sentenced to an
eighty-seven month prison term and ordered to pay $4,200,000 in fines and
restitution.

         On August 14, 2002, after the federal grand jury indictment of Dr.
Samuel D. Waksal had been issued but before Dr. Samuel D. Waksal's guilty plea
to certain counts of that indictment, the Company filed an action in New York
State Supreme Court seeking recovery of certain compensation, including
advancement of certain defense costs, that the Company had paid to or on behalf
of Dr. Samuel D. Waksal. That action, styled ImClone Systems Incorporated v.
Samuel D. Waksal, Index No. 02/602996, is in its earliest stages.

                                    Page 19

<PAGE>

         The Company incurred legal fees associated with these matters of
approximately $1,679,000 and $3,279,000 during the three months ended March 31,
2003 and 2002, respectively. The Company has estimated and recorded a receivable
totaling $5,754,000 and $5,340,000 as of March 31, 2003 and December 31, 2002,
respectively, for a portion of the above mentioned legal fees that the Company
believes are recoverable from its insurance carriers. This receivable is
included in other current assets in the Consolidated Balance Sheets.

         In October 2001, the Company entered into a sublease for a four-story
 building at 325 Spring Street, New York, New York, which includes between
 75,000 and 100,000 square feet of usable space. The Company is currently
 analyzing its options with respect to relocating the Company's headquarters and
 research laboratory to this subleased space. This subleased space may or may
 not be designed, improved and used by the Company in the future, depending on
 the Company's business needs. The sublease has a term of 22 years, followed by
 two five-year renewal option periods. The future minimum lease payments
 remaining at March 31, 2003, are approximately $50,175,000 over the term of the
 sublease. In order to induce the sublandlord to enter into the sublease, the
 Company made a loan to the sublandlord in the principal amount of a $10,000,000
 note receivable. The loan is secured by a leasehold mortgage on the prime lease
 as well as a collateral assignment of rents by the sublandlord. The loan is
 payable by the sublandlord over 20 years and bears interest at 5 1/2% in years
 one through five, 6 1/2% in years six through ten, 7 1/2% in years eleven
 through fifteen and 8 1/2% in years sixteen through twenty. In addition, the
 Company paid the owner a consent fee in the amount of $500,000.

         In January 2003, New York State notified the Company that it was liable
for the New York State and City income taxes that were not withheld because one
or more of the Company's employees who exercised certain non-qualified stock
options in 1999 and 2000 failed to pay New York State and City income taxes for
those years. On March 13, 2003, the Company entered into a closing agreement
with New York State, paying $4,500,000 to settle the matter. The Company
promptly informed the IRS, the SEC and the United States Attorney's Office,
responsible for the prosecution of Dr. Samuel D. Waksal, of this issue. In order
to confirm whether its liability in this regard was limited to Dr. Samuel D.
Waksal's failure to pay income taxes, the Company contacted current and former
officers, directors and employees who had exercised non-qualified stock options
in 1999 and 2000 to confirm that those individuals had satisfied their personal
income tax liabilities, which payments would reduce or eliminate the Company's
potential liability for failure to withhold income taxes on the exercise of
non-qualified stock options. In the course of doing so, the Company became aware
of another potential income and employment tax withholding liability associated
with the exercise of certain warrants granted in the early years of the
Company's existence that were held by certain officers, directors and employees,
including Dr. Samuel D. Waksal, John B. Landes, Dr. Harlan W. Waksal and Robert
F. Goldhammer. Again, the Company promptly informed the IRS, the SEC and the
United States Attorney's Office of this issue. On June 17, 2003, New York State
notified the Company that, based on the issue identified above, it is
continuing a previously conducted audit of the Company and is evaluating the
terms of the closing agreement to determine whether or not it should be
re-opened. On March 31, 2003, the Company received notification from the SEC
that it was conducting an informal inquiry into both of these matters and, on
April 2, 2003, the Company received a request from the SEC for the voluntary
production of related documents and information. The Company is cooperating
fully with this SEC inquiry and is updating the SEC, United States Attorney's
Office and the applicable taxing authorities on an ongoing basis and intends to
continue to do so.

         The Company has not recognized withholding tax liabilities in respect
of exercises of certain warrants by Robert F. Goldhammer, one of the four
officers or directors to whom warrants were issued and previously treated as
non-compensatory warrants. Based on the Company's investigation, it believes
that, although such warrants were compensatory, such warrants were received by
Mr. Goldhammer in connection with the performance of services by him in his
capacity as a director, rather than as an employee, and, as such, are not
subject to tax withholding requirements. In addition, in 1999, Mr. Goldhammer
erroneously received a portion of a stock option grant in the form of incentive
stock options, which under federal law may only be granted to employees. There
can be no assurance, however, that the taxing authorities will agree with the
Company's position and will not assert that the Company is liable for the
failure to withhold income and employment taxes with respect to the exercise of
such warrants and any stock options by Mr. Goldhammer. If the Company became
liable for the failure to withhold taxes on the exercise of such warrants and
any stock options by Mr. Goldhammer, the potential liability, exclusive of any
interest or penalties, would be approximately $12,600,000.

         The Company has not recognized accruals for penalties and interest that
may be imposed with respect to the withholding tax issues described in Note 4
and other related contingencies, including the period covered by the statute of
limitations and the Company's determination of certain exercise dates because it
does not believe that losses from such contingencies are probable. With respect
to the statute of limitations and the Company's determination of certain
exercise dates, while the Company does not believe a loss is probable, there is
a potential additional liability with respect to these issues that may be
asserted by a taxing authority. If taxing authorities assert such issues and
prevail related to these withholding tax issues and other related contingencies,
including penalties, the liability that could be imposed by taxing authorities
would be substantial. The potential interest on the withholding tax liabilities
recorded on the Consolidated

                                    Page 20

<PAGE>
Balance Sheets could be up to a maximum amount of approximately $8,200,000 at
March 31, 2003. Potential additional withholding tax liability on other related
contingencies amounts to approximately $11,000,000, exclusive of any interest or
penalties, and excluding the amount potentially attributable to Mr. Goldhammer
noted above.

(10)     CERTAIN RELATED PARTY TRANSACTIONS

         In September 2001 and February 2002, the Company entered into
employment agreements with six senior executive officers, including, in
September 2001, then-President and Chief Executive Officer, Dr. Samuel D.
Waksal, and then-Chief Operating Officer and current Chief Scientific Officer,
Dr. Harlan W. Waksal. Dr. Samuel D. Waksal resigned and entered into a
separation agreement with the Company in May 2002 and Dr. Harlan W. Waksal was
appointed President and Chief Executive Officer. Dr. Harlan W. Waksal has
recently resigned from the position of President and Chief Executive Officer and
has been named the Company's Chief Scientific Officer, with responsibility for
research, clinical, regulatory, quality assurance and manufacturing. The
September 2001 agreements each have three-year terms and the February 2002
agreement has a one-year term. The February 2002 agreement was amended in April
2002 and is now expired. The term of employment for Dr. Harlan W. Waksal will be
automatically extended for one additional day each day during the term of
employment unless either the Company or Dr. Harlan W. Waksal otherwise gives
notice. The employment agreements provided for stated base salaries, minimum
bonuses and benefits aggregating $3,765,000 annually. In October 2002, the
Company accepted the resignation and entered into a separation agreement with
the Company's former General Counsel, John B. Landes, who held one of the
aforementioned employment agreements. See Note 11 for discussion of the
separation agreements.

         In August 2002 and September 2002, the Company entered into one-year
agreements with two executive officers. The employment agreements provide for
aggregate stated base salaries of $390,000.

         Certain transactions engaged in by the Company's former President and
Chief Executive Officer, Dr. Samuel D. Waksal, in securities of the Company were
deemed to have resulted in "short-swing profits" under Section 16 of the
Exchange Act. In accordance with Section 16(b) of the Exchange Act, Dr. Samuel
D. Waksal paid the Company an aggregate amount of approximately $486,000 in
March 2002, and an additional amount of approximately $79,000 in July 2002, as
disgorgement of "short-swing profits" he was deemed to have realized. The
amounts received were recorded as an increase to Additional paid-in capital.

(11)  SEPARATION AGREEMENTS

         On May 22, 2002, the Company accepted the resignation of its
then-President and Chief Executive Officer, Dr. Samuel D. Waksal. In connection
with the resignation, on May 24, 2002 the Company and Dr. Samuel D. Waksal
executed a separation agreement whereby Dr. Samuel D. Waksal received a lump sum
payment totaling $7,000,000 and was entitled to receive for defined periods of
time the continuation of certain benefits including health care and life
insurance coverage with an estimated cost of $283,000. The related expense of
$7,283,000 was included in Marketing, general and administrative expenses in the
Consolidated Statements of Operations for the year ended December 31, 2002. In
addition, 1,250,000 stock option awards granted to Dr. Samuel D. Waksal on
September 19, 2001 which were exercisable at a per share exercise price of
$50.01 and constituted all outstanding stock option awards held by Dr. Samuel D.
Waksal, were deemed amended such that the unvested portion vested immediately as
of the date of termination. The amended stock option awards can be exercised at
any time until the end of the term of such awards. No compensation expense was
recorded because the fair market value of the Company's common stock was below
the $50.01 exercise price on the date the option award was amended. On August 7,
2002, a federal grand jury indicted Dr. Samuel D. Waksal. The Company has
learned that Dr. Samuel D. Waksal, in contravention of Company policy, directed
the destruction of certain of his personal records that were, or could be
perceived to be relevant to the pending government investigations. Accordingly,
on August 14, 2002, the Company filed an action against Dr. Samuel D. Waksal in
New York State Supreme Court seeking repayment of amounts paid to him by the
Company pursuant to the separation agreement, cancellation or recovery of other
benefits provided under that agreement (including cancellation of all stock
options that vested as a result of the agreement), disgorgement of amounts
previously advanced by the Company on behalf of Dr. Samuel D. Waksal for his
legal fees and expenses, and repayment of certain amounts paid under Dr. Samuel
D. Waksal's previous employment agreement. The action, styled ImClone Systems
Incorporated v. Samuel D. Waksal, Index No. 02/602996, is in its earliest
stages.

         In October 2002, the Company accepted the resignation of an executive
officer. The Company and the officer executed a separation agreement whereby the
officer will receive his stated base salary from the date of termination through
October 2003 and certain benefits including healthcare and life insurance
coverage through December 2002. In May 2003, the Company suspended payments
under this separation agreement in response to the withholding tax liabilities
discussed in Note 4.

                                    Page 21

<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

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

CRITICAL ACCOUNTING POLICIES

         During January 2002, the Securities and Exchange Commission ("SEC")
published a Commission Statement in the form of Financial Reporting Release No.
61, which requested that all registrants discuss their most "critical accounting
policies" in management's discussion and analysis of financial condition and
results of operations. The SEC has defined critical accounting policies as those
that are both important to the portrayal of a company's financial condition and
results, and that require management's most difficult, subjective or complex
judgments, often as a result of the need to make estimates about the effect of
matters that are inherently uncertain. While our significant accounting policies
are summarized in Note 2 to our consolidated financial statements included in
Form 10-K for the fiscal year ended December 31, 2002, we believe the following
accounting policies to be critical:

         Revenue Recognition - We adopted Staff Accounting Bulletin No. 101
("SAB 101") in the fourth quarter of 2000 with an effective date of January 1,
2000, implementing a change in accounting policy with respect to revenue
recognition. Beginning January 1, 2000, non-refundable fees received upon
entering into collaborative agreements in which the Company has continuing
involvement are recorded as deferred revenue and recognized over the estimated
service period. See Note 8 to our Consolidated Financial Statements.

         Payments received under the development, promotion, distribution and
supply agreement (the "Commercial Agreement") dated September 19, 2001 and as
amended on March 5, 2002 with Bristol-Myers Squibb Company ("BMS") and E.R.
Squibb & Sons, L.L.C., a Delaware limited liability company and a wholly-owned
subsidiary of BMS ("E.R. Squibb"), relating to ERBITUX, are being deferred and
recognized as revenue based upon the actual product research and development
costs incurred since September 19, 2001 to date by BMS, E.R. Squibb and ImClone
Systems as a percentage of the estimated total of such costs to be incurred over
the term of the agreement. Of the $400,000,000 in upfront payments we received
from BMS through March 31, 2003, approximately $10,526,000 was recognized as
revenue during the three months ended March 31, 2003 and $33,687,000 from the
commencement of the Commercial Agreement through March 31, 2003.

         The methodology used to recognize deferred revenue involves a number of
estimates and judgments, such as the estimate of total product research and
development costs to be incurred under the Commercial Agreement. Changes in
these estimates and judgments can have a significant effect on the size and
timing of revenue recognition.

         Non-refundable milestone payments, which represent the achievement of a
significant step in the research and development process, pursuant to
collaborative agreements other than the Commercial Agreement, are recognized as
revenue upon the achievement of the specified milestone.

         Withholding Taxes - The estimated amounts recorded in the accompanying
Consolidated Financial Statements do not include penalties and interest that may
be imposed with respect to the withholding tax issues and other related
contingencies described in Notes 4 and 9 to our Consolidated Financial
Statements, including the period covered by the statute of limitations and our
determination of certain exercise dates, because we do not believe that losses
from such contingencies are probable. With respect to the statute of limitations
and our determination of certain exercise dates, while we do not believe a loss
is probable, there is a potential additional liability with respect to these
issues that may be asserted by a taxing authority. If taxing authorities assert
such issues and prevail related to these withholding tax issues and other
related contingencies, including penalties, the liability which could be imposed
by taxing authorities would be substantial. The potential interest on the
withholding tax liabilities recorded on our Consolidated Balance Sheet could be
up to a maximum amount of $8,200,000 at March 31, 2003. Potential additional
withholding tax liability on other related contingencies amount to approximately
$11,000,000, exclusive of any interest or penalties, and excluding the amount
potentially attributable to Mr. Goldhammer as discussed in Note 9 to the
consolidated financial statements.

         Production Costs - The costs associated with the manufacture of ERBITUX
are included in research and development expenses when incurred and will
continue to be so classified until such time as ERBITUX may be approved for sale
or until we obtain binding obligations from our corporate partners for
commercial supply of such product. In the event of such approval or obligations
from our corporate partners, the subsequent costs associated with manufacturing
ERBITUX for commercial sale will be included in inventory and expensed as cost
of goods sold at the time of sale. If ERBITUX is approved by the United States
Food and Drug Administration ("FDA"), any subsequent sale of this inventory that
was previously expensed will result in revenue from product sales with no
corresponding cost of goods sold.

                                    Page 22

<PAGE>
\         Litigation - We are currently involved in certain legal proceedings as
discussed in "Commitments and Contingencies," Note 9 to our Consolidated
Financial Statements. In accordance with Statement of Financial Accounting
Standards No. 5, no reserve has been established in our financial statements for
these legal proceedings because the Company does not believe that a loss is
probable. However, if in a future period events in any such legal proceedings
render it probable that a loss will be incurred, and if such loss is reasonably
estimable at that time, we will establish such a reserve. Thus, it is possible
that legal proceedings discussed in Note 9 may have a material adverse impact on
the operating results for that period.

         Long-Lived Assets - We review 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 undiscounted cash flows are less than carrying
amounts. Fair value is generally determined as the present value of the expected
associated cash flows. We recently built a Single Product Facility, are building
a Multiple Product Facility, and purchased a material logistics and warehousing
facility as summarized in "Property, Plant and Equipment," Note 2 to the
Consolidated Financial Statements. The Single Product Facility is dedicated to
the clinical and commercial production of ERBITUX and the Multiple Product
Facility will be a multi-use production facility. ERBITUX is currently being
produced for clinical trials and potential commercialization. The material
logistics and warehousing facility includes office space, a storage location and
sampling laboratory for ERBITUX. The newly renovated administrative facility
houses the clinical, regulatory, sales, marketing, finance, human resources,
project management and MIS departments, as well as certain executive and legal
offices and other necessities. Based on management's current estimates, the
Company expects to recover the carrying value of such assets. Changes in
regulatory or other business conditions in the future could change our judgments
about the carrying value of these facilities, which could result in the
recognition of material impairment losses.

         Manufacturing Contracts - As summarized under "Contract Manufacturing
Services," Note 3 to the Consolidated Financial Statements, we have entered into
certain development and manufacturing services agreements with Lonza Biologics
plc ("Lonza") for the clinical and commercial production of ERBITUX. We have
commitments from Lonza to manufacture ERBITUX at the 5,000 liter scale through
December 2003. As of March 31, 2003, the estimated remaining future commitments
under the amended commercial manufacturing services agreement with Lonza were
$9,835,000. If ERBITUX were not to receive regulatory approval, it is possible
that a liability would need to be recognized for any remaining commitments to
Lonza.

         Valuation of Stock Options and Warrants - We apply Accounting
Principles Board Opinion No. 25 and related interpretations in accounting for
our stock options and warrants. Accordingly, compensation expense is recorded on
the date of grant of an option to an employee or member of the Board of
Directors only if the fair market value of the underlying stock at the time of
grant exceeds the exercise price. During 2002 and the first quarter of 2003, our
stock option grants were based on the closing market price of the Company's
stock on the date of grant. In addition, we have granted options to certain
Scientific Advisory Board members and outside consultants, which are required to
be measured at fair value and recognized as compensation expense in our
Consolidated Statements of Operations. Estimating the fair value of stock
options and warrants involves a number of judgments and variables that are
subject to significant change. A change in the fair value estimate could have a
significant effect on the amount of compensation expense recognized.

                              RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2003 AND 2002

REVENUES

         Revenues for the three months ended March 31, 2003 and 2002 were
$19,571,000 and $18,551,000, respectively, an increase of $1,020,000, or 5% in
2003. Revenues for the three months ended March 31, 2003 primarily included
$10,526,000 in license fee revenue and $4,826,000 in collaborative agreement
revenue from our amended ERBITUX Commercial Agreement with BMS and its
wholly-owned subsidiary, E.R. Squibb. The collaborative agreement revenue
represents the fully burdened manufacturing cost of ERBITUX supplied for or used
in clinical trials and certain research and development and marketing expenses
that have been incurred by us and are reimbursable by BMS as provided for in the
amended Commercial Agreement. License fee revenue from payments under this
agreement (of which $60,000,000 was received on March 5, 2003, $140,000,000 was
received in March 2002 and $200,000,000 was received in September 2001) is being
recognized over the product research and development life of ERBITUX. An
additional $250,000,000 is payable upon receipt of marketing approval from the
FDA with respect to an initial indication for ERBITUX and $250,000,000 is
payable upon receipt of marketing approval from the FDA with respect to a second
indication for ERBITUX. All such payments are non-refundable and non-creditable.
In addition, revenues for the three months ended March 31, 2003 included
$3,816,000 in

                                    Page 23

<PAGE>

collaborative agreement revenue from our ERBITUX development and license
agreement with Merck KGaA and $55,000 of the $4,000,000 up-front payment
received upon entering into this agreement with Merck KGaA. This revenue is
being recognized ratably over the anticipated life of the agreement. Revenues
for the three months ended March 31, 2003 also included $302,000 in royalty
revenue from our strategic corporate alliance with Abbott Laboratories
("Abbott") in diagnostics. Finally, revenues for the quarter ended March 31,
2003 included $41,000 in license fee revenue and $4,000 in collaborative
agreement revenue from our strategic corporate alliance with Merck KGaA for our
principal cancer vaccine product candidate, BEC2.

         Revenues for the three months ended March 31, 2002 primarily included
$6,567,000 in license fee revenue and $6,095,000 in collaborative agreement
revenue from our amended ERBITUX Commercial Agreement with BMS and E.R. Squibb.
Revenues for the three months ended March 31, 2002 also included $5,022,000 in
collaborative agreement revenue from our ERBITUX development and license
agreement with Merck KGaA and $55,000 of the $4,000,000 up-front payment
received upon entering into this agreement with Merck KGaA. In addition,
revenues for the three months ended March 31, 2002 included $650,000 in royalty
revenue from our strategic corporate alliance with Abbott in diagnostics.
Finally, revenues for the quarter ended March 31, 2002 included $41,000 in
license fee revenue and $121,000 in collaborative agreement revenue from our
strategic corporate alliance with Merck KGaA for our principal cancer vaccine
product candidate, BEC2.

OPERATING EXPENSES:

         Total operating expenses for the three months ended March 31, 2003 and
2002 were $53,874,000 and $48,176,000, respectively, an increase of $5,698,000,
or 12% in 2003. Operating expenses for the three months ended March 31, 2002
included $2,250,000 in legal and other advisor fees associated with completing
the amended Commercial Agreement with BMS and E.R. Squibb.

OPERATING EXPENSES: RESEARCH AND DEVELOPMENT

         Research and development expenses for the three months ended March 31,
2003 and 2002 were $46,687,000 and $37,778,000, respectively, an increase of
$8,909,000 or 24% in 2003. Research and development expenses for the three
months ended March 31, 2003 and 2002, as a percentage of total operating
expenses, excluding the legal and other advisor fee associated with the amended
Commercial Agreement and the Industrial Development Revenue Bonds tax expense,
were 87% and 82%, respectively. Research and development expenses include costs
associated with our in-house and collaborative research programs, product and
process development expenses, costs to manufacture ERBITUX and other product
candidates (prior to any approval that we may obtain of a product candidate for
commercial sale or committed purchase obligations of our corporate partners),
quality assurance and quality control costs, and costs to conduct our clinical
trials and associated regulatory activities. Research and development expenses
include costs that are reimbursable by our corporate partners. The increase in
research and development expenses for the three months ended March 31, 2003 was
primarily attributable to (1) the costs associated with full scale production at
our Single Product Facility, (2) costs related to the manufacturing services
agreements with Lonza, (3) expenditures in the functional areas of clinical,
regulatory, and pilot plant manufacturing associated with ERBITUX and (4)
increased expenditures associated with discovery research. We expect research
and development costs to increase in future periods as we continue to
manufacture ERBITUX prior to any approval of the product that we may obtain for
commercial use or until we receive committed purchase obligations of our
corporate partners. In the event of such approval or committed purchase
obligations from our corporate partners, the subsequent costs associated with
manufacturing ERBITUX for supply to our corporate partners for commercial use
will be included in inventory and expensed as cost of goods sold at the time of
sale. We expect research and development costs associated with discovery
research and product development also to continue to increase in future periods.

         The largest component of our total operating expenses is our ongoing
investments in research and development and, in particular, the clinical
development of our product pipeline. The process of conducting the clinical
research necessary to obtain FDA approval is costly and time consuming. Current
FDA requirements for a new human drug or biological product to be marketed in
the United States include: (1) the successful conclusion of pre-clinical
laboratory and animal tests, if appropriate, to gain preliminary information on
the product's safety; (2) filing with the FDA of an IND, to conduct human
clinical trials for drugs or biologics; (3) the successful completion of
adequate and well-controlled human clinical investigations to establish the
safety and efficacy of the product for its recommended use; and (4) filing by a
company and acceptance 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.

               In light of the factors mentioned above, we consider the active
management and development of our clinical pipeline to be crucial to the
long-term success of the Company. As described in Part I of our December 31,
2002 annual

                                    Page 24

<PAGE>

report on form 10-K we currently have three candidates in clinical development,
including our most advanced candidate, ERBITUX. Due to the inherent risks
associated with candidate discovery and development, as well as the regulatory
approval process, we, by necessity, manage our overall research, development and
in-licensing efforts in a manner designed to generate new clinical candidates
into development.

         The actual probability of success for each candidate and clinical
program may be impacted by a variety of factors, including the quality of the
candidate, the validity of the target and disease indication, early clinical
data, investment in the program, competition and commercial viability. Due to
these factors, it is difficult to give accurate guidance on the anticipated
proportion of our research and development investments assigned to any one
program prior to the Phase III stage of development or the future cash inflows
from these programs.

OPERATING EXPENSES: MARKETING, GENERAL AND ADMINISTRATIVE

         Marketing, general and administrative expenses include marketing and
administrative personnel costs, including related facility costs, additional
costs to develop internal marketing and sales capabilities, costs to pursue
arrangements with strategic corporate partners and technology licensors, and
expenses associated with applying for patent protection for our technology and
products. Marketing, general and administrative expenses also include amounts
reimbursable from our corporate partners. Marketing, general and administrative
expenses for the three months ended March 31, 2003 and 2002 were $7,154,000 and
$8,123,000, respectively, a decrease of $969,000, or 12% in 2003. The decrease
in marketing, general and administrative expenses primarily reflected (1) first
quarter 2002 legal expenses associated with the pending class action lawsuits,
shareholder derivative lawsuits and investigations by the SEC, the Subcommittee
on Oversight and Investigation of the U.S. House of Representatives Committee on
Energy and Commerce and the U.S. Department of Justice, and (2) expenses
associated with higher public relations costs due to the factors noted in (1)
above. The Company incurred significant expenses in the second quarter of 2003
relating to the withholding tax matters discussed in Note 4 to the consolidated
financial statements. Other than the expenses discussed in (1) and (2) above and
expenses incurred in relation to the withholding tax matters discussed in Note 4
to the Unaudited Consolidated Financial Statements, whose level in the future is
uncertain because it depends upon the matter in which investigations and
proceedings progress, we expect marketing, general and administrative expenses
to increase in future periods to support our continued commercialization efforts
for ERBITUX.

OPERATING EXPENSES: INDUSTRIAL DEVELOPMENT REVENUE BONDS TAX EXPENSE

         In April 2003, we discovered that we are in breach of tax covenants in
our 1990 IDA Bonds. We therefore recorded additional tax expense of $33,000 and
$25,000 for the three months ended March 31, 2003 and 2002, respectively,
relating to the 1990 IDA Bonds.

INTEREST INCOME, INTEREST EXPENSE AND OTHER (INCOME) EXPENSE

         Interest income was $1,438,000 for the three months ended March 31,
2003 compared with $2,264,000 for the three months ended March 31, 2002, a
decrease of $826,000, or 36% in 2003. The decrease was primarily attributable to
a decrease in interest rates associated with our portfolio of debt securities.

         Interest expense was $2,223,000 and $3,493,000 for the three months
ended March 31, 2003 and 2002, respectively, a decrease of $1,270,000 or 36% in
2003. The overall decrease in interest expense from the three months ended March
31, 2002 to 2003 was primarily attributable to an increase in the amount of
interest capitalized during the construction of our Multiple Product Facility
from $300,000 to $1,565,000. Interest expense for both periods included (1)
interest on the 5 1/2% convertible subordinated notes due March 1, 2005 (the
"Convertible Subordinated Notes") issued in February 2000, (2) interest on the
1990 IDA Bonds and (3) interest recorded on various capital lease obligations
under a 1996 financing agreement and a 1998 financing agreement with Finova
Technology Finance, Inc. ("Finova"). We recorded gains on securities and
investments of $379,000 and $801,000 for the three months ended March 31, 2003
and 2002, respectively.

PROVISION FOR INCOME TAXES

    Income taxes of $102,000 for the three months ended March 31, 2003 are
the result of various tax law changes in the State of New Jersey, one of which
is the establishment of the Alternative Minimum Assessment tax ("AMA") to which
we are subject.

                                    Page 25

<PAGE>

NET LOSSES

         We had a net loss of $34,811,000 or $0.47 per share for the three
months ended March 31, 2003, compared with a net loss of $30,053,000 or $0.41
per share for the three months ended March 31, 2002. The increase in the net
loss and net loss per share to common stockholders was due to the factors noted
above.

                         LIQUIDITY AND CAPITAL RESOURCES

         At March 31, 2003, our principal sources of liquidity consisted of cash
and cash equivalents and securities available for sale of approximately
$229,000,000. From our inception on April 26, 1984 through March 31, 2003, we
have financed our operations primarily through the following means:

    -    Public and private sales of equity securities and convertible notes in
         financing transactions have raised approximately $492,652,000 in net
         proceeds.

    -    We have earned approximately $174,022,000 from license fees, contract
         research and development fees, reimbursements from our corporate
         partners and royalties from collaborative partners. Additionally, we
         have approximately $371,882,000 in deferred revenue related to up-front
         payments received from our amended Commercial Agreement for ERBITUX
         with BMS, our ERBITUX development and license agreement with Merck KGaA
         and our BEC2 development and commercialization agreement with Merck
         KGaA. These amounts are being recognized as revenue during the terms of
         the respective agreements.

    -    We have earned approximately $57,853,000 in interest income.

    -    The sale of the IDA Bonds in each of 1985, 1986 and 1990 raised an
         aggregate of $6,300,000, the proceeds of which were used primarily for
         the acquisition, construction and installation of our research and
         development facility in New York City, and all of which have now been
         redeemed.

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

         Until September 19, 2006, or earlier upon the occurrence of certain
specified events, we may not take any action that constitutes a prohibited
action under our stockholder agreement with BMS and BMS Biologics, without the
consent of the BMS directors. Such prohibited actions include (i) issuing
additional shares or securities convertible into shares in excess of 21,473,002
shares of our common stock in the aggregate, subject to certain exceptions; (ii)
incurring additional indebtedness if the total of the principal amount of such
indebtedness incurred since September 19, 2001 and then-outstanding, and the net
proceeds from the issuance of any redeemable preferred stock then-outstanding,
would exceed the amount of indebtedness outstanding as of September 19, 2001 by
more than $500 million; (iii) acquiring any business if the aggregate
consideration for such acquisition, when taken together with the aggregate
consideration for all other acquisitions consummated during the previous twelve
months, is in excess of 25% of the aggregate value of the Company at the time we
enter into the binding agreement relating to such acquisition; (iv) disposing of
all or any substantial portion of our non-cash assets; and (v) issuing capital
stock with more than one vote per share.

         In September 2001, we entered into the ERBITUX Commercial Agreement
with BMS and E.R. Squibb, pursuant to which, among other things, together with
E.R. Squibb we are (a) co-developing and co-promoting ERBITUX in the United
States and Canada, and (b) co-developing ERBITUX (either together or
co-exclusively with Merck KGaA) in Japan. The Commercial Agreement was amended
on March 5, 2002 to change certain economics of the agreement and has expanded
the clinical and strategic roles of BMS in the ERBITUX development program.
Pursuant to the amended Commercial Agreement, we can receive up-front and
milestone payments totaling $900,000,000 in the aggregate, of which $200,000,000
was received upon the signing of the agreement. The remaining $700,000,000 in
payments comprises $140,000,000 paid on March 7, 2002, $60,000,000 paid on March
5, 2003, $250,000,000 payable upon receipt of marketing approval from the FDA
with respect to an initial indication for ERBITUX and $250,000,000 payable upon
receipt of marketing approval from the FDA with respect to a second indication
for ERBITUX. All such payments are non-refundable and non-creditable. Except for
our expenses incurred pursuant to the co-promotion option that we have
exercised, E.R. Squibb is responsible for 100% of the distribution, sales and
marketing costs in the United States and Canada, and E.R. Squibb and the
Company, each will be responsible for 50% of the distribution, sales, marketing
costs and other related costs and expenses in Japan. The Commercial Agreement
provides that E.R. Squibb shall pay us distribution fees based on a percentage
of annual sales of

                                    Page 26

<PAGE>

ERBITUX by E.R. Squibb in the United States and Canada. The distribution fee is
39% of net sales in the United States and Canada. The Commercial Agreement also
provides that the distribution fees for the sale of ERBITUX in Japan by E.R.
Squibb or us shall be equal to 50% of operating profit or loss with respect to
such sales for any calendar month. In the event of an operating profit, E.R.
Squibb will pay us the amount of such distribution fee, and in the event of an
operating loss, we will credit E.R. Squibb the amount of such distribution fee.
The Commercial Agreement provides that we will be responsible for the
manufacture and supply of all requirements of ERBITUX in bulk form for clinical
and commercial use in the United States, Canada and Japan and that E.R. Squibb
will purchase all of its requirements of ERBITUX in bulk form for commercial use
from us. We will supply ERBITUX for clinical use at our fully burdened
manufacturing cost, and will supply ERBITUX for commercial use at our fully
burdened manufacturing cost plus a mark-up of 10%. In addition to the up-front
and milestone payments, distribution fees for the United States, Canada and
Japan and the 10% mark-up on the commercial supply of ERBITUX, E.R. Squibb is
also responsible for 100% of the cost of all clinical studies other than those
studies undertaken post-launch, which are not pursuant to an IND (e.g., Phase IV
studies), the cost of which will be shared equally between E.R. Squibb and
ImClone Systems. As between E.R. Squibb and the Company, each will be
responsible for 50% of the cost of all clinical studies in Japan. We have also
agreed, and may agree in the future, to share with E.R. Squibb, on terms other
than the foregoing, costs of clinical trials that we believe are not potentially
registrational but should be undertaken prior to launch in the United States,
Canada or Japan. We have incurred $1,147,000 during the three months ended March
31, 2003, pursuant to such cost sharing. We have also incurred $40,000 during
the three months ended March 31, 2003, related to the agreement with respect to
development in Japan.

         In February 2000, we completed a private placement of $240,000,000 in 5
1/2% convertible subordinated notes due March 1, 2005. We received net proceeds
of approximately $231,500,000, after deducting expenses associated with the
offering. Accrued interest on the notes was approximately $1,100,000 and
$4,400,000 at March 31, 2003 and December 31, 2002, respectively. A holder may
convert all or a portion of a note into common stock at any time on or before
March 1, 2005 at a conversion price of $55.09 per share, subject to adjustment
under certain circumstances. On or after March 6, 2003, we may redeem some or
all of the notes at specified redemption prices.

         On May 2, 2003, we informed the trustee for the Convertible
Subordinated Notes of our withholding tax issues and the delay in filing our
Form 10-K for the year ended December 31, 2002, and of our intention to satisfy
our tax liabilities upon completion of discussions with the relevant taxing
authorities. The indenture for the Convertible Subordinated Notes includes
covenants requiring us to timely pay taxes and timely make Exchange Act filings.
Under the indenture, there can be no acceleration of payment of the notes until
we receive a notice of default from the trustee or a specified percentage of the
note holders and a 60-day grace period lapses. We have not received any such
notice. If, at some point in the future, we were to receive such a notice and if
it was determined at that time that we were not in compliance with applicable
covenants, we intend to and believe we would be able to cure such non-compliance
within the 60-day grace period.

         In September 2000, we entered into a three-year commercial
manufacturing services agreement with Lonza relating to ERBITUX. This agreement
was amended in June 2001 and again in September 2001 to include additional
services. As of March 31, 2003, we incurred approximately $77,078,000 for
services provided under the commercial manufacturing services agreement. Lonza
is currently manufacturing ERBITUX at the 5,000 liter scale under cGMP and is
delivering it to us over a term ending no later than December 2003. The costs
associated with both of these agreements are included in research and
development expenses when incurred and will continue to be so classified until
such time as ERBITUX may be approved for sale or until we obtain obligations
from our corporate partners for commercial supply of such product. In the event
of such approval or obligations from our corporate partners, the subsequent
costs associated with manufacturing ERBITUX for commercial sale will be included
in inventory and expensed as cost of goods sold at the time of sale. In the
event we terminate (i.e., the cancellation of batches of bulk product) the
commercial manufacturing services agreement without cause, we will be required
to pay 85% of the stated costs for each of the first ten batches cancelled, 65%
of the stated costs for each of the next ten batches cancelled and 40% of the
stated costs for each of the next six batches cancelled. The batch cancellation
provisions for certain additional batches that we are committed to purchase
require us to pay 100% of the stated costs of cancelled batches scheduled within
six months of the cancellation, 85% of the stated costs of cancelled batches
scheduled between six and twelve months following the cancellation and 65% of
the stated costs of cancelled batches scheduled between twelve and eighteen
months following the cancellation. These amounts are subject to mitigation
should Lonza use its manufacturing capacity caused by such termination for
another customer. Certain batches have been cancelled at other negotiated rates
agreed to by the parties. At March 31, 2003, the estimated remaining future
commitments under the amended commercial manufacturing services agreement were
$9,835,000.

         In December 2001, we entered into an agreement with Lonza to
manufacture ERBITUX at the 2,000 liter scale for use in clinical trials by Merck
KGaA. We had incurred approximately $7,183,000 for services provided under this
agreement. During 2002, Merck KGaA reimbursed the Company this entire
obligation. At March 31, 2003, there are no remaining future commitments under
this agreement.

                                    Page 27

<PAGE>

         On January 2, 2002, we executed a letter of intent with Lonza to enter
into a long-term supply agreement. The long-term supply agreement would apply to
a large scale manufacturing facility that Lonza is constructing, which would be
able to produce ERBITUX in 20,000 liter batches. We paid Lonza $3,250,000 upon
execution of the letter of intent for the exclusive right to negotiate a
long-term supply agreement for a portion of the facility's manufacturing
capacity. In September 2002, we wrote-off the deposit because the exclusive
negotiation period ended on September 30, 2002. The $3,250,000 is included in
Marketing, general and administrative expenses in the Consolidated Statement of
Operations for the year ended December 31, 2002. In light of the assistance we
provided to BMS with respect to preserving and then relinquishing the
manufacturing capacity described above, BMS paid us $3,250,000 in
April 2003 and this amount will therefore be recognized as a reduction to
operating expenses in April 2003.

         Effective April 1990, we entered into a development and
commercialization agreement with Merck KGaA with respect to BEC2 and the
recombinant gp75 antigen. 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 make, have made, use, sell, or have sold BEC2 and gp75
antigen outside North America. The agreement also grants Merck KGaA a license,
without the right to sublicense, to use, sell, or have sold, but not to make,
BEC2 within North America in conjunction with ImClone Systems. Pursuant to the
terms of the agreement, we have retained the rights, (1) without the right to
sublicense, to make, have made, use, sell, or have sold BEC2 in North America in
conjunction with Merck KGaA and (2) with the right to sublicense, to make, have
made, use, sell, or have sold gp75 antigen in North America. In return, we have
received research support payments totaling $4,700,000 and are entitled to no
further research support payments under the agreement. Merck KGaA is also
required to make payments of up to $22,500,000, of which $4,000,000 has been
received, based on milestones achieved in the licensed products' development.
Merck KGaA is also responsible for worldwide costs of up to DM17,000,000
associated with a multi-site, multinational Phase III clinical trial for BEC2 in
limited disease small-cell lung carcinoma. This expense level was reached during
the fourth quarter of 2000 and all expenses incurred from that point forward are
being shared 60% by Merck KGaA and 40% by ImClone Systems. Such cost sharing
applies to all expenses beyond the DM17,000,000 threshold. Merck KGaA is also
required to pay royalties on the eventual sales of BEC2 outside of North
America, if any. Revenues from sales, if any, of BEC2 in North America will be
distributed in accordance with the terms of a co-promotion agreement to be
negotiated by the parties.

         In December 1998, we entered into a development and license agreement
with Merck KGaA with respect to ERBITUX. In exchange for granting Merck KGaA
exclusive rights to market ERBITUX outside of the United States and Canada and
co-development rights in Japan, we received through March 31, 2003, $30,000,000
in up-front fees and early cash-based milestone payments based on the
achievement of defined milestones. An additional $30,000,000 could be received,
depending upon the achievement of further milestones for which Merck KGaA
receives equity in ImClone Systems. Of this additional $30,000,000, $5,000,000
had been received as of December 31, 2002 and $6,000,000 was received on May 16,
2003 and $3,000,000 was received on June 16, 2003. On April 16, 2003, we
achieved a second equity-based milestone that triggered a payment of $6,000,000.
On May 16, 2003, we received payment from Merck KGaA of $6,000,000 for this
milestone. Upon receipt of this payment, we issued to Merck KGaA 334,471 shares
of ImClone Systems' common stock, at a price of $17.94 per share, representing
the sale of these shares at a ten percent premium to market value as provided in
the license. As stated above, on May 16, 2003, we achieved a third equity-based
milestone when Merck KGaA acknowledged that the results of a Phase II study
sponsored by Merck KGaA in patients with chemotherapy-naive non-small cell lung
cancer enabled the further development of ERBITUX in the European Union for the
treatment of non-small cell lung cancer. The achievement of this third
equity-based milestone triggered a payment by Merck KGaA of $3,000,000, which we
received on June 16, 2003. Upon receipt of this payment, we issued to Merck KGaA
150,007 shares of our common stock, based upon a price of $20.00 per share,
representing the sale of these shares at a ten percent premium to market value
as provided in the license. The equity underlying these milestone payments have
been or will be priced at varying premiums to the then-market price of the
common stock depending upon the timing of the achievement of the respective
milestones. Merck KGaA will pay us a royalty on future sales of ERBITUX outside
of the United States and Canada, 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),
or (2) for a one-year period after first commercial sale of ERBITUX 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 a return of 50%
of the cash-based up-front fees and milestone payments then paid to date, but
only out of revenues received, if any, based upon a royalty rate applied to the
gross profit from ERBITUX sales or a percentage of ERBITUX fees and royalties
from a sublicensee on account of the sale of ERBITUX in the United States and
Canada). In August 2001, ImClone Systems and Merck KGaA amended this agreement
to provide, among other things, that Merck KGaA may manufacture ERBITUX for
supply in its territory and may utilize a third party to do so upon ImClone
Systems' reasonable acceptance. The amendment further released Merck KGaA from
its obligations under the agreement relating to providing a guaranty under a
$30,000,000 credit facility relating to the build-out of our Single Product
Facility. In addition, the amendment provides that the companies have
co-exclusive rights to

                                    Page 28

<PAGE>

develop ERBITUX in Japan, including the right to sublicense and Merck KGaA
waived its right of first offer in the case of a proposed sublicense by ImClone
Systems of ERBITUX in ImClone Systems' territory. In consideration for the
amendment, we agreed to a reduction in royalties payable by Merck KGaA on sales
of ERBITUX in Merck KGaA's territory.

         In September 2002, we entered into a binding term sheet, effective as
of April 15, 2002, with Merck KGaA for the supply of ERBITUX. The term sheet
sets forth certain terms and obligations of each party including procedures for
forecasting and ordering ERBITUX for clinical and commercial supply, cost of
product, delivery terms, insurance and indemnification obligations and
technology transfer to allow Merck KGaA or a third party to manufacture ERBITUX
for supply in Merck's territory in accordance with the development and license
agreement. The term sheet will continue in effect for the term of the
development and license agreement, unless terminated for cause.

         We have obligations under various capital leases for certain
laboratory, office and computer equipment and also certain building
improvements, primarily under a 1998 financing agreement with Finova. This
agreement allowed us to finance the lease of equipment and make certain building
and leasehold improvements to existing facilities. Each lease has a fair market
value purchase option at the expiration of its 48-month term. We have entered
into six individual leases under the financing agreement with an aggregate cost
of $1,942,000. This financing arrangement has now expired. We have elected to
exercise the fair market value purchase option on four of these leases in 2002
and two of these leases in 2003, each at the expiration of the lease term.

         We rent our current New York corporate headquarters and research
facility at 180 Varick Street, New York under an operating lease that expires in
December 2004. In 2000, we completed renovations of the facility at a cost of
approximately $2,800,000. Effective January 1, 2003, we amended the lease to add
an additional 5,800 square feet of laboratory space for a lump sum advance rent
payment of approximately $233,000, plus annual rent through December 2004.

         In October 2001, we entered into a sublease for a four-story building
at 325 Spring Street, New York, New York, which includes between 75,000 and
100,000 square feet of usable space. We are currently analyzing our options with
respect to relocating our headquarters and research laboratory to this subleased
space. This subleased space may or may not be designed, improved and used by us
in the future, depending on our business needs. The sublease has a term of 22
years, followed by two five-year renewal option periods. The future minimum
lease payments remaining at March 31, 2003 are approximately $50,175,000 over
the term of the sublease. In order to induce the sublandlord to enter into the
sublease, we made a loan to the sublandlord in the principal amount of a
$10,000,000 note receivable. The loan is secured by a leasehold mortgage on the
prime lease as well as a collateral assignment of rents by the sublandlord. The
loan is payable by the sublandlord over 20 years and bears interest at 5 1/2%
in years one through five, 6 1/2% in years six through ten, 7 1/2% in years
eleven through fifteen and 8 1/2% in years sixteen through twenty. In addition,
we paid the owner a consent fee in the amount of $500,000.

         On May 1, 2001, we entered into a lease for an approximately 4,000
square foot portion of a 15,000 square foot building known as 710 Parkside
Avenue, Brooklyn, New York, and we have leased an adjacent 6,250 square foot
building known as 313-315 Clarkson Avenue, Brooklyn, New York, to serve as our
new chemistry and high-throughput screening facility. The term of the lease is
for five years with five successive one-year extensions. As of December 31,
2002, we have incurred approximately $4,395,000 for the retrofit of this
facility to better fit our needs. The chemistry and high-throughput screening
facility was ready for its intended use and put in operation in December 2002
and we commenced depreciation at that time.

         We built a new 80,000 square foot Single Product Facility adjacent to
the pilot facility at 36 Chubb Way Somerville, New Jersey. The Single Product
Facility was built on a 5.7 acre parcel of land we purchased in December 1999
for approximately $700,000. The Single Product Facility contains three 10,000
liter (production volume) fermenters and is a single product facility dedicated
to the clinical and commercial production of ERBITUX. The cost of the facility
was approximately $53,000,000, excluding capitalized interest of approximately
$1,966,000. The cost of the facility was funded from our cash reserves,
consisting primarily of the proceeds from the issuance of debt and equity
securities. The Single Product Facility was ready for its intended use and put
in operation in July 2001 and we commenced depreciation at that time.

         We have completed detailed design plans for, and are proceeding with
construction of, our Multiple Product Facility. The Multiple Product Facility
will be a multi-use facility of approximately 250,000 square feet and will
contain up to 10 fermenters with a total capacity of up to 110,000 liters
(production volume). The facility is being built on a 7.12 acre parcel of land
that we purchased in July 2000 for approximately $950,000. The cost of this
facility, consisting of two completely fitted out suites and a third suite with
utilities only, is expected to be approximately $260,000,000 excluding
capitalized interest with anticipated mechanical completion by the end of 2005.
The actual cost of the Multiple Product Facility may change depending upon
various factors. We have incurred approximately $96,945,000, excluding
capitalized

                                    Page 29

<PAGE>

interest of approximately $4,719,000, in conceptual design, engineering,
equipment and construction costs through March 31, 2003.

         On January 31, 2002, we purchased a 7.5-acre parcel of land located
adjacent to the Single Product Facility and our Multiple Product Facility at
1181 Route 202 North, Somerville, New Jersey. The real estate included an
existing 50,000 square foot building, 40,000 square feet of which is warehouse
space and 10,000 square feet of which is office space. The purchase price for
the property and building was approximately $7,020,000, of which approximately
$1,125,000 was related to the purchase of the land and approximately $5,895,000
was related to the purchase of the building. We are using this property for
warehousing and material logistics for our Somerville campus. Extensive
renovations to the 12,000 square feet of office area were completed in the first
quarter of 2003 to accommodate the relocation and consolidation of Engineering,
Warehousing, Logistics and Quality Assurance personnel from other campus
locations. The logistics facility was ready for its intended use and put in
operation during the three months ended March 31, 2003 and we commenced
depreciation at that time. Interior renovations included office space, as well
as the construction of a raw materials sampling laboratory, associated
temperature-controlled storage locations and the addition of emergency power
generation. Extensive site work at the recently occupied facility allowed for
the physical connection of this location to the campus' other buildings to
facilitate the use of this location as our central warehouse. The total cost to
retrofit this facility was approximately $1,262,00.

         On May 20, 2002 we purchased real estate consisting of a 6.94 acre
parcel of land located across the street from our Single Product Facility at 33
Chubb Way, Somerville, New Jersey. The real estate includes an existing building
with approximately 45,800 square feet of warehouse space. The purchase price for
the property was approximately $4,515,000, of which approximately $1,041,000 was
related to the purchase of the land and approximately $3,474,000 was related to
the purchase of the building. As of March 31, 2003, we have incurred
approximately $4,652,000 for the renovation and fit-out of this facility
converting the 45,800 square feet of warehouse space into office space. The
administration facility was ready for its intended use and put in operation in
December 2002 and we commenced depreciation at that time.

         Total capital expenditures made during the three months ended March 31,
2003 were $15,262,000 including $317,000 related to the purchase of equipment
for and leasehold improvement costs associated with our corporate office and
research laboratories in our 180 Varick Street facility, $13,861,000 related to
the conceptual design, preliminary engineering plans, capitalized interest costs
and construction costs for our Multiple Product Facility, $181,000 related to
the retrofit of our warehousing and material logistics facility, $166,000
related to the retrofit of our administration facility, $75,000 for the retrofit
of our Brooklyn chemistry laboratory, $185,000 related to improving and
equipping our Single Product Facility, $127,000 related to improving and
equipping our pilot plant facility, and approximately $348,000 for updating and
upgrading our computer and telephonic software and hardware systems.

         We incurred legal fees totaling $1,679,000 and $3,279,000 during the
three months ended March 31, 2003 and 2002, respectively. In addition, we have
estimated and recorded a receivable totaling $5,754,000 and $5,340,000 as of
March 31, 2003 and December 31, 2002, respectively, each of which included a
portion of the above-mentioned legal fees that we believe are recoverable from
our insurance carriers. This receivable is included in other current assets in
the consolidated balance sheets.

         Federal and applicable state tax laws require an employer to withhold
income taxes at the time of an employee's exercise of non-qualified stock
options or warrants issued in connection with the performance of services by the
employee. An employer that does not do so is liable for the taxes not withheld
if the employee fails to pay his or her taxes for the year in which the
non-qualified stock options or warrants are exercised. In 2000 and prior years,
we generally did not require the withholding of federal, state or local income
taxes and in certain years, employment payroll taxes at the time of the exercise
of non-qualified stock options or warrants. Prior to 1996, we did not comply
with tax reporting requirements with respect to the exercise of non-qualified
stock options or warrants.

         In January 2003, the New York State Department of Taxation and Finance
("New York State") notified us that we were liable for the New York State and
City income taxes that were not withheld because one or more of our employees
who exercised certain non-qualified stock options in 1999 and 2000 failed to pay
New York State and City income taxes for those years. At December 31, 2002, we
have recorded a gross New York State and City withholding tax liability of
approximately $6,800,000. On March 13, 2003, we entered into a closing agreement
with New York State, paying $4,500,000 to settle the matter. We believe that
substantially all of the underpayment of New York State and City income tax
identified by New York State is attributable to the exercise of non-qualified
stock options by our former President and Chief Executive Officer, Dr. Samuel D.
Waksal. On June 17, 2003, New York State notified us that, based on the warrant
issue identified below, they are continuing a previously conducted audit of the
Company and are evaluating the terms of the closing agreement to determine
whether or not it should be re-opened.

                                    Page 30

<PAGE>

         On March 13, 2003, we initiated discussions with the IRS relating to
federal income taxes on the exercise of non-qualified stock options on which
income tax was not properly withheld. Although the IRS has not yet asserted that
we are required to make a payment with respect to such failure to withhold, the
IRS may assert that such a liability exists, and may further assert that we are
liable for interest and penalties. We have requested and received confirmation
from all of our current and substantially all of our former employees who
exercised non-qualified stock options in 1999 and 2000, on which no income tax
was withheld, that they have reported the appropriate amount of income on their
tax returns and paid the taxes shown as due on those returns. Based on this
information, we determined that all but an insignificant amount of the potential
liability for withholding taxes with respect to exercises of non-qualified stock
options in 1999 and 2000 is attributed to those amounts related to Dr. Samuel D.
Waksal.

         In addition, in the course of our investigation into our potential
liability in respect of the non-qualified stock options described above, we
identified certain warrants that were granted in 1991 and prior years to current
and former officers, directors and advisors (including the four individuals
discussed below) that we previously treated as non-compensatory warrants and
thus not subject to tax withholding and information reporting requirements upon
exercise. Accordingly, when exercised in 2001 and prior years, we did not deduct
income and payroll taxes upon exercise or report applicable information to the
taxing authorities. Based on the information discovered in the course of our
recent investigation, we now believe that such treatment was incorrect, and that
the exercise of such warrants by current and former officers of the Company
should have been treated in the same manner for withholding and reporting
purposes as the exercise of non-qualified stock options. We have informed the
relevant authorities, including the IRS and New York State, of this matter and
intend to resolve our liability in respect of these warrants with these taxing
authorities in conjunction with our resolution of the matter described above.

         On April 2, 2003, we received a request from the SEC for the voluntary
production of documents and information relating to the above matters. We are
cooperating fully with the SEC, and intend to continue to do so, while also
updating the United States Attorney's Office on an ongoing basis.

         One of the officers and directors to whom warrants were issued and
previously treated as non-compensatory warrants is Dr. Harlan W. Waksal, the
Company's Chief Scientific Officer. In June 2003, Dr. Harlan W. Waksal
represented that he has paid the taxes associated with the exercise of these
warrants and further agreed to indemnify the Company for any withholding taxes
that may be assessed and are attributable to our failure to deduct income and
payroll taxes on all warrants and options that he or his transferee have
previously exercised, subject to the consent of Dr. Harlan W. Waksal, which
cannot be unreasonably withheld.

         Two of the other officers and directors to whom warrants were issued
and previously treated as non-compensatory warrants are Dr. Samuel D. Waksal,
and our former General Counsel, John B. Landes. We have made demands on both of
these individuals to pay the taxes associated with the exercise of these
warrants and certain non-qualified stock options and to indemnify us against any
liability that we may incur to taxing authorities in respect of the warrants or
non-qualified stock options that were previously exercised.

         We have not recognized withholding tax liabilities in respect of
exercises of certain warrants by our then-current and now-former Chairman of the
Board, Robert F. Goldhammer, the final of the four officers or directors to whom
warrants were issued and previously treated as non-compensatory warrants. Based
on our investigation, we believe that, although such warrants were compensatory,
such warrants were received by Mr. Goldhammer in connection with the performance
of services by him in his capacity as a director, rather than as an employee,
and, as such, are not subject to tax withholding requirements. In addition, in
1999, Mr. Goldhammer erroneously received a portion of a stock option grant to
him in the form of incentive stock options, which under federal law may only be
granted to employees. There can be no assurance, however, that the taxing
authorities will agree with our position and will not assert that we are liable
for the failure to withhold income and employment taxes with respect to the
exercise of such warrants and any stock options by Mr. Goldhammer. If we became
liable for the failure to withhold taxes on the exercise of such warrants and
any stock options by Mr. Goldhammer, the potential liability, exclusive of any
interest or penalties, would be approximately $12,600,000.

         We have not recognized accruals for penalties and interest that may be
imposed with respect to the withholding tax issues described in Note 4 to the
consolidated financial statements and other related contingencies, including the
period covered by the statute of limitations and the our determination of
certain exercise dates because we do not believe that losses from such
contingencies are probable. With respect to the statute of limitations and our
determination of certain exercise dates, while we do not believe a loss is
probable, there is a potential additional liability with respect to these issues
that may be asserted by a taxing authority. If taxing authorities assert such
issues and prevail related to these withholding tax issues and other related
contingencies, including penalties, the liability that could be imposed by
taxing authorities would be substantial. The potential interest on the
withholding tax liabilities recorded on the Consolidated Balance Sheets could be
up to a maximum amount of $8,200,000 at

                                    Page 31

<PAGE>

March 31, 2003. Potential additional withholding tax liability on other related
contingencies amounts to approximately $11,000,000, exclusive of any interest or
penalties, and excluding the amount potentially attributable to Mr. Goldhammer
noted above.

         We believe that our existing cash on hand, marketable securities and
amounts to which we are entitled should enable us to maintain our current and
planned operations through at least June 2004. We are also entitled to
reimbursement for certain marketing and research and development expenditures
and certain other payments, some of which are payable contingent upon the
achievement of research and development milestones. Such contingent amounts
include $500,000,000 in cash-based payments under our Commercial Agreement with
BMS and E.R. Squibb, as well as up to $16,000,000 in equity-based milestone
payments under our ERBITUX development and license agreement with Merck KGaA and
up to $18,500,000 in cash-based milestone payments under our BEC2 development
agreement with Merck KGaA. There can be no assurance that we will achieve these
milestones. Our future working capital and capital requirements will depend upon
numerous factors, including, but not limited to:

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

    -    our corporate partners fulfilling their obligations to us

    -    timing and cost of seeking and obtaining regulatory approvals

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

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

    -    costs involved in filing, prosecuting and enforcing patent claims

    -    technological advances

    -    legal costs and the outcome of outstanding legal proceedings and
         investigations

    -    status of competition

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

    -    the adequacy of our estimations of liabilities for tax-related matters
         discussed above

         In order to fund our capital needs after June 2004, we may 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 or some combination of the foregoing. 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. If our common stock were to be delisted by Nasdaq, this
may have a material adverse effect on our ability to raise capital in the public
markets.

         Below is a table that presents our contractual obligations and
commercial commitments as of March 31, 2003: (in thousands)

<TABLE>
<CAPTION>
                                                                       PAYMENTS DUE BY YEAR

                                                                                                             2006 AND
                                               TOTAL           2003           2004           2005           THEREAFTER
                                          -------------    ------------   ------------   ------------    --------------
<S>                                       <C>              <C>            <C>            <C>             <C>
Current portion of long-term debt*....    $       2,200    $      2,200   $         --   $         --    $           --
Long-term debt, less current portion*.          240,000              --             --        240,000                --
Capital lease obligations including
  interest............................               63              12             16             15                20
Operating leases......................           53,526           2,587          3,571          2,486            44,882
Construction commitments..............           65,209          31,782         32,414          1,013                --
Lonza.................................            9,835           9,835             --             --                --
                                          -------------    ------------   ------------   ------------    --------------
Total contractual cash obligations        $     363,621    $     39,998   $     35,663   $    243,058    $       44,902
                                          =============    ============   ============   ============    ==============
</TABLE>

(1)      Amounts in the above table do not include milestone-type payments under
collaborative agreements.

*        See Note 5 to Consolidated Financial Statements

                                    Page 32

<PAGE>

         At December 31, 2002, our estimated net operating loss carryforwards
for United States Federal income tax purposes were approximately $369,000,000,
which expire at various dates from 2003 through 2022. Of our $369,000,000 in
estimated net operating loss carryforwards, we have approximately $327,000,000
available to use in 2003, approximately $5,159,000 available to use in each year
from 2004 through 2011 and approximately $672,000 available to use in 2012. Any
of these net operating loss carryforwards that are not utilized are available
for utilization in future years, subject to applicable statutory expiration
dates.

NEW JERSEY STATE TAX LAW CHANGES

         In July 2002, the State of New Jersey ("NJ") enacted various income tax
law changes, which are retroactive to January 1, 2002. One of the provisions of
the new law is the suspension of the utilization of net operating losses for
2002 and 2003. This provision would negatively affect the Company if it
generates NJ taxable income in 2003 because the Company would not be able to
utilize its NJ net operating loss carryover to offset such taxable income. A
second provision establishes the Alternative Minimum Assessment ("AMA"), which
applies to companies like ours that currently pay no corporate business tax.
This provision requires that we assess an alternate tax liability with a formula
that uses either reported gross receipts or gross profits as a determining
factor. We are then required to pay the greater of the regular NJ Corporation
Business Tax or the AMA. The AMA tax paid is creditable and can be carried
forward to reduce the income tax in future periods. We have recorded a tax
provision of approximately $102,000 for the three months ended March 31, 2003
associated with the NJ AMA.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

         In August 2001, Statement of Financial Accounting Standards ("SFAS")
No. 143, "Accounting for Asset Retirement Obligations" was issued by the
Financial Accounting Standards Board ("FASB") and was effective for us in the
first quarter of the year ending December 31, 2003. The new rule requires the
fair value of a liability for an asset retirement obligation to be recognized in
the period in which it is incurred. When the liability is initially recorded, a
cost is capitalized by increasing the carrying amount of the related long-lived
asset. Over time, the liability is accreted to its present value each period,
and the capitalized cost is depreciated over the useful life of the related
asset. To settle the liability, the obligation for its recorded amount is paid
or a gain or loss upon settlement is incurred. The adoption of this statement
did not have a material effect on the company's financial statements.

         In July 2002, the FASB issued SFAS No. 146, "Accounting for
Restructuring Costs," which applies to costs associated with an exit activity
(including restructuring) or with a disposal of long-lived assets. Those
activities can include eliminating or reducing product lines, terminating
employees and contracts, and relocating plant facilities or personnel. Under
SFAS No. 146, a company will record a liability for a cost associated with an
exit, disposal or other covered activity when that liability is incurred and can
be measured at fair value. SFAS No. 146 will require a company to disclose
information about its exit, disposal and other covered activities, the related
costs, and changes in those costs in the notes to the interim and annual
financial statements that include the period in which an exit activity is
initiated and in any subsequent period until the activity is completed. SFAS No.
146 is effective prospectively for exit, disposal or other covered activities
initiated after December 31, 2002.

         In November 2002, the FASB issued Interpretation No. 45, Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others (FIN 45). FIN 45 requires a guarantor to
recognize a liability at the inception of the guarantee for the fair value of
the obligation undertaken in issuing the guarantee and include more detailed
disclosure with respect to guarantees. FIN 45 is effective for guarantees issued
or modified after December 31, 2002. The initial adoption of this accounting
pronouncement will not have a material effect on the Company's consolidated
financial statements.


PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 - SAFE HARBOR CAUTIONARY
STATEMENT

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

                                    Page 33

<PAGE>

         Important factors that may affect these expectations include, but are
not limited to: the risks and uncertainties associated with completing
pre-clinical and clinical trials of our compounds that demonstrate such
compounds' safety and effectiveness; manufacturing losses and risks associated
therewith; obtaining additional financing to support our operations; obtaining
and maintaining regulatory approval for such compounds and complying with other
governmental regulations applicable to our business; obtaining the raw materials
necessary in the development of such compounds; consummating and maintaining
collaborative arrangements with corporate partners for product development;
achieving milestones under collaborative arrangements with corporate partners;
developing the capacity to manufacture, market and sell our products, either
directly or with collaborative partners; developing market demand for and
acceptance of such products; competing effectively with other pharmaceutical and
biotechnological products; obtaining adequate reimbursement from third party
payers; attracting and retaining key personnel; legal costs and the duration and
outcome of legal proceedings and investigations, including, but not limited to,
our investigations pertaining to tax withholding issues; avoiding delisting of
our securities on the Nasdaq Stock Market; complying with covenants in the
indenture for our Convertible Subordinated Notes; obtaining patent protection
for discoveries and risks associated with commercial limitations imposed by
patents owned or controlled by third parties; and those other factors set forth
in "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and those other factors set forth in "Risk Factors" in the Company's
most recent Registration Statement.

         We do not undertake to discuss matters relating to certain completed
clinical trials or our regulatory strategies beyond those which have already
been made public or discussed herein or in our annual report on Form 10-K for
2002.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         Our holdings of financial instruments comprise a mix of U.S. dollar
denominated securities that may include U.S. corporate debt, foreign corporate
debt, U.S. government debt, foreign government/agency guaranteed debt and
commercial paper. All such instruments are classified as securities available
for sale. Generally, we do not invest in portfolio equity securities,
commodities, foreign exchange contacts or use financial derivatives for trading
purposes. Our debt security portfolio represents funds held temporarily pending
use in our business and operations. We manage these funds accordingly. We seek
reasonable assuredness of the safety of principal and market liquidity by
investing in investment grade fixed income securities while at the same time
seeking to achieve a favorable rate of return. Our market risk exposure consists
principally of exposure to changes in interest rates. Our holdings are also
exposed to the risks of changes in the credit quality of issuers. We invest in
securities that have a range of maturity dates. Typically, those with a
short-term maturity are fixed-rate, highly liquid, debt instruments and those
with longer-term maturities are highly liquid debt instruments with fixed
interest rates or with periodic interest rate adjustments. The table below
presents the principal amounts and related weighted average interest rates by
year of maturity for our investment portfolio as of March 31, 2003: (table in
thousands, except interest rates)

<TABLE>
<CAPTION>
                                                                                        2008 AND
                           2003        2004        2005         2006        2007        THEREAFTER         TOTAL      FAIR VALUE
                         -------     -------     -------      ---------    -------      ----------        --------    -----------
<S>                      <C>         <C>         <C>          <C>          <C>          <C>               <C>         <C>
Fixed Rate.............  $    --     $    --     $    --      $      --    $    --      $     7,858       $  7,858    $     8,452
Average Interest Rate..       --          --          --             --         --             6.13%          6.13%            --
Variable Rate..........      414(1)   12,659(1)    8,667(1)      12,492(1)   6,471(1)       133,278(1)     173,981        174,691
Average Interest Rate..     5.50%       4.94%       1.63%          1.77%      1.75%            2.35%          2.44%            --
                         -------     -------     -------      ---------    -------      -----------       --------    -----------
                         $   414     $12,659     $ 8,667      $  12,492    $ 6,471      $   141,136       $181,839    $   183,143
                         =======     =======     =======      =========    =======      ===========       ========    ===========
</TABLE>

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

         Our outstanding 5 1/2% convertible subordinated notes in the principal
amount of $240,000,000 due March 1, 2005 and other long-term debt have fixed
interest rates. The subordinated notes are convertible into our common stock at
a conversion price of $55.09 per share. The fair value of fixed interest rate
instruments are affected by changes in interest rates and in the case of the
convertible notes by changes in the price of our common stock as well. The fair
value of the 5 1/2% convertible subordinated notes (which have a carrying value
of $240,000,000) was approximately $240,890,000 at June 30, 2003

ITEM 4.  CONTROLS AND PROCEDURES

         We have strengthened and will continue to strengthen our controls and
procedures and improve our corporate governance in order to ensure the accuracy
and timeliness of our financial reporting, as well as our compliance with tax
and other regulatory requirements. As part of this commitment, we have initiated
a number of steps, including those in response

                                    Page 34

<PAGE>

to the Sarbanes-Oxley Act of 2002 and corresponding SEC and Nasdaq requirements
or proposals. Specific actions taken or planned by us include the following:

         -        We have adopted Corporate Governance Guidelines, a Code of
                  Business Conduct and Ethics, and formal charters for all of
                  our Board committees. In addition, all employees, officers,
                  directors, consultants and Scientific Advisory Board members
                  are required to sign an acknowledgement on an annual basis
                  that they have read the Code of Business Conduct and Ethics
                  policy, understand its contents, and agree to abide by its
                  terms as a condition of employment or association with the
                  Company

         -        We strengthened our Audit Committee Charter and in February
                  2003, appointed a new member to our Board of Directors and
                  Audit Committee, John A. Fazio. Mr. Fazio is a former Senior
                  General Practice Partner of PricewaterhouseCoopers, qualifies
                  as a "financial expert" under the Sarbanes-Oxley Act, and
                  brings considerable financial expertise in the pharmaceutical
                  industry. We expect to add one or more qualified "financial
                  experts" to the committee in due course.

         -        In October 2002, we established a Disclosure Committee to
                  formally organize and oversee the disclosure process. The
                  Committee consists of senior finance, investor relations,
                  operations and legal management personnel, with a mandate to
                  design and establish controls and other procedures to assist
                  our senior officers in overseeing the accuracy and timeliness
                  of our disclosures.

         -        In September 2002 we created an Internal Audit function with a
                  formal charter, which mandates that the department provide
                  independent, objective and timely analyses and assurances to
                  senior management and the Board of Directors as to the
                  adequacy and effectiveness of our risk management, control and
                  governance processes.

         -        We are conducting a comprehensive review of the adequacy of
                  our policies and procedures with respect to the administration
                  of our equity compensation plans (including stock option and
                  warrant plans) and purchases and sales of our securities. We
                  revised our Insider Trading Policy and require that all
                  employees, officers, directors, consultants and Scientific
                  Advisory Board members sign an acknowledgement that they have
                  read the policy, understand its contents and agree to abide by
                  its terms as a condition of employment or association with the
                  Company. In addition, we significantly increased the number of
                  senior managers designated as executive officers obligated to
                  file reports under Section 16(a) of the Exchange Act. In
                  addition, we are conducting an internal review of our
                  withholding and reporting policies and established procedures
                  to ensure that we are in compliance with federal, state and
                  local tax codes and regulations.

         -        We are taking steps to ensure that we are in compliance with
                  the requirements of Section 404 of the Sarbanes-Oxley Act. The
                  Company intends to modify and enhance its internal control
                  structure based on the recommendations of the Committee of
                  Sponsoring Organizations of the Treadway Commission ("COSO").
                  The COSO Integrated Framework -- Internal Controls report
                  provides a sound basis for establishing internal control
                  systems and determining their effectiveness. It is generally
                  regarded as providing the most recognizable and suitable set
                  of control criteria against which internal controls and
                  procedures for financial reporting may be judged, and it meets
                  the test of an authoritative framework that is widely
                  accepted. The SEC's rules for Section 404 refer to the COSO
                  framework and U.S. professional auditing literature embraces
                  COSO. For this purpose, we will engage the assistance of a
                  professional services firm that, in addition to providing
                  expert advice and guidance, will ensure that an objective
                  assessment is performed.

         -        We have established the position of and appointed a Chief Tax
                  Officer, a new position charged with the responsibility of
                  supervising our policies and procedures with respect to
                  federal, state, local and foreign tax administration and
                  compliance, including, but not limited to, compliance with tax
                  withholding requirements.

         Our Acting Chief Executive Officer and Acting Chief Financial Officer
have evaluated the effectiveness of our "disclosure controls and procedures" (as
defined in Exchange Act Rules 13a-14(c) and 15d-14(c)) as of a date (the
"Evaluation Date") within 90 days of the filing date of this quarterly report.
Based on the steps outlined in the preceding paragraph, our Acting Chief
Executive Officer and Acting Chief Financial Officer have concluded that, as of
the Evaluation Date, our disclosure controls and procedures were effective and
designed to ensure that material information relating to us and our consolidated
subsidiary would be made known to them by others within those entities. We are
committed to performing ongoing periodic reviews of the effectiveness of our
disclosure controls and procedures and we will continue to make improvements to
our control structure as needed.

                                    Page 35

<PAGE>

PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

A.  LITIGATION

1.  FEDERAL SECURITIES ACTIONS

         Beginning in January 2002, a number of complaints asserting claims
under the federal securities laws against us and certain of our directors and
officers were filed in the U.S. District Court for the Southern District of New
York. Those actions were consolidated under the caption Irvine v. ImClone
Systems Incorporated et al., No. 02 Civ. 0109 (RO), and on September 16, 2002, a
consolidated amended complaint was filed in that consolidated action, which
plaintiffs corrected in limited respects on October 22, 2002. The corrected
consolidated amended complaint named us, as well as our former President and
Chief Executive Officer, Dr. Samuel D. Waksal, our former President and Chief
Executive Officer and current Chief Scientific Officer, Dr. Harlan W. Waksal,
the former Chairman of our Board of Directors and current Director, Robert
Goldhammer, current or former directors Richard Barth, David Kies, Paul Kopperl,
John Mendelsohn and William Miller, our former General Counsel, John Landes, and
our Vice President for Marketing and Sales, Ronald Martell, as defendants. The
complaint asserted claims for securities fraud under sections 10(b), 20(a) and
Rule 10b-5 of the Securities Exchange Act of 1934, on behalf of a purported
class of persons who purchased our publicly traded securities between March 27,
2001 and January 25, 2002. The complaint also asserted claims against Dr. Samuel
D. Waksal under section 20A of the Exchange Act on behalf of a separate
purported sub-class of purchasers of our securities between December 27, 2001
and December 28, 2001. The complaint generally alleged that various public
statements made by or on behalf of us or the other defendants during 2001 and
early 2002 regarding the prospects for FDA approval of ERBITUX were false or
misleading when made, that the individual defendants were allegedly aware of
material non-public information regarding the actual prospects for ERBITUX at
the time that they engaged in transactions in our common stock and that members
of the purported stockholder class suffered damages when the market price of our
common stock declined following disclosure of the information that allegedly had
not been previously disclosed. The complaint sought to proceed on behalf of the
alleged class described above, sought monetary damages in an unspecified amount
and seeks recovery of plaintiffs' costs and attorneys' fees. On November 25,
2002, all defendants other than Dr. Samuel D. Waksal filed a motion to dismiss
the complaint for failure to state a claim. On June 3, 2003, the court granted
that motion in part, dismissing the complaint as to defendants Messrs.
Goldhammer, Barth, Kies, Kopperl, Landes, Martell, Mendlesohn and Miller, but
not dismissing it as to the Company, Dr. Harlan W. Waksal and Dr. Samuel D.
Waksal.

         Separately, on September 17, 2002, an individual purchaser of our
common stock filed an action on his own behalf asserting claims against the
Company, Dr. Samuel D. Waksal and Dr. Harlan W. Waksal under sections 10(b) and
20(a) of the Exchange Act and SEC Rule 10b-5. That action is styled Flynn v.
ImClone Systems Incorporated, et al., No. 02 Civ. 7499 and, in contrast to the
Ivrine case discussed above, this case was not filed against any of our outside
directors. In this case, the plaintiff alleges that he purchased shares on
various dates in late 2001, that various public statements made by us or the
other defendants during 2001 regarding the prospects for FDA approval of ERBITUX
were false or misleading when made and that plaintiff relied on such allegedly
false and misleading information in making his purchases. Plaintiff seeks
compensatory damages of not less than $180,000 and punitive damages of $5
million, together with interest, costs and attorneys' fees. On November 25,
2002, both defendants other than Dr. Samuel D. Waksal filed a motion to dismiss
the complaint for failure to state a claim. Briefing on that motion was
completed on March 5, 2003. Oral argument on the motion to dismiss was held on
May 5, 2003. On June 3, 2003, the court denied that motion.

         We intend to vigorously defend against the claims asserted in these
actions, which are in their earliest stages. We are unable to predict the
outcome of these actions at this time. Because we do not believe that a loss is
probable, no legal reserve has been established.

2.  DERIVATIVE ACTIONS

         Beginning on January 13, 2002, and continuing thereafter, nine separate
purported shareholder derivative actions have been filed against members of our
board of directors, certain of our present and former officers, and us, as
nominal defendant, among others, advancing claims based on allegations similar
to the allegations in the federal securities class action complaints. Four of
these derivative cases were filed in the Delaware Court of Chancery and have
been consolidated in that court under the caption In re ImClone Systems
Incorporated Derivative Litigation, Cons. C.A. No. 19341-NC. Three of these
derivative actions were filed in New York State Supreme Court in Manhattan,
(styled Boghosian v. Barth, et al., Index No. 100759/02, Johnson v. Barth, et
al., Index No. 601304/02, and Henshall v. Bodnar, et al., Index No. 603121/02)
and have

                                    Page 36

<PAGE>
been consolidated under the caption In re ImClone Systems, Inc. Shareholder
Derivative Litigation, Index No. 02-100759. All of these state court actions
have been stayed in deference to proceeding in two purported derivative actions,
Lefanto v. Waksal, et al., No. 02 Civ. 0163 (RO) and Forbes v. Barth, et al.,
No. 02 Civ. 1400 (RO), have been filed in the U.S. District Court for the
Southern District of New York and have been consolidated under the caption In
re ImClone Systems, Inc. Shareholder Derivative Litigation, Master File No. 02
CV 163 (RO). A verified consolidated amended complaint in these consolidated
federal actions was filed on June 16, 2003. It asserts purportedly on behalf of
the Company, claims including breach of fiduciary duty by certain members of
our board of directors and current and former officers, among others, based on
allegations including that they engaged in transactions in our common stock
while in possession of material, non-public information concerning the
regulatory and marketing prospects for ERBITUX, or improperly disclosed such
information to others, and that they failed to maintain adequate controls and
to exercise due care with regard to the Company's ERBITUX application to the
FDA and certain public statements by or on behalf of the Company. No response
to the complaints in those actions has been required to date. Under the current
schedule in the consolidated federal actions, a response to the verified
consolidated complaint is due on September 12, 2003.

         We intend to vigorously defend against the claims asserted in these
actions, which are in their earliest stages. We are unable to predict the
outcome of these actions at this time. Because we do not believe that a loss is
probable, no legal reserve has been established.

B.  GOVERNMENT INQUIRIES AND INVESTIGATIONS

         As previously reported, we have received subpoenas and requests for
information in connection with investigations by the Securities and Exchange
Commission (the "SEC"), the Subcommittee on Oversight and Investigations of the
U.S. House of Representatives Committee on Energy and Commerce and the U.S.
Department of Justice relating to the circumstances surrounding the disclosure
of the FDA "refusal to file" letter dated December 28, 2001 and trading in our
securities by certain ImClone Systems insiders in 2001. We have also received
subpoenas and requests for information pertaining to document retention issues
in 2001 and 2002, and to certain communications regarding ERBITUX in 2000. We
are cooperating with all of these inquiries and intend to continue to do so.

         On June 19, 2002, we received a written "Wells Notice" from the staff
of the SEC, indicating that the staff of the SEC is considering recommending
that the SEC bring an action against us relating to our disclosures immediately
following the receipt of a "refusal to file" letter from the FDA on December 28,
2001 for our BLA for ERBITUX. We filed a Wells submission on July 12, 2002 in
response to the staff's Wells Notice.

         In January 2003, the New York State Department of Taxation and Finance
("New York State") notified us that we were liable for the New York State and
City income taxes that were not withheld because one or more of our employees
who exercised certain non-qualified stock options in 1999 and 2000 failed to pay
New York State and City income taxes for those years. On March 13, 2003, we
entered into a closing agreement with New York Sate, paying $4,500,000 to settle
the matter. We believe that substantially all of the underpayment of New York
State and City income tax identified by New York State is attributable to the
exercise of non-qualified stock options by our former President and Chief
Executive Officer, Dr. Samuel D. Waksal. At the same time, we informed the
Internal Revenue Service, the SEC and the United States Attorney's Office,
responsible for the prosecution of Dr. Samuel D. Waksal, of this issue. In order
to confirm whether our liability in this regard was limited to Dr. Samuel D.
Waksal's failure to pay income taxes, we contacted current and former officers
and employees who had exercised non-qualified stock options to confirm that
those individuals had properly reported and paid their personal income tax
liabilities for the years 1999 and 2000 in which they exercised options, which
would reduce or eliminate our potential liability for failure to withhold income
taxes on the exercise of those options. In the course of doing so, we became
aware of another potential income and employment tax withholding liability
associated with the exercise of certain warrants granted in the early years of
our existence that were held by certain officers, directors and employees,
including our former President and Chief Executive Officer, Samuel D. Waksal,
our former General Counsel, John B. Landes, our Chief Scientific Officer, Harlan
W. Waksal, and our former Chairman of the Board, Robert F. Goldhammer. Again, we
promptly informed the Internal Revenue Service, the SEC and the United States
Attorney's Office of this issue. We also informed New York State of this issue.
On June 17, 2003, New York State notified us that, based on this issue, they are
continuing a previously conducted audit of the Company and are evaluating the
terms of the closing agreement to determine whether or not it should be
re-opened.

         On March 31, 2003, we received notification from the SEC that it was
conducting an informal inquiry into both of these matters and on April 2, 2003,
we received a request from the SEC for the voluntary production of related
documents and information. We are cooperating fully with this SEC inquiry and
are updating the SEC, United States Attorney's Office and the applicable taxing
authorities on an ongoing basis and intend to continue to do so.

                                    Page 37

<PAGE>

C.  INDICTMENT AND PLEA OF DR. SAMUEL D. WAKSAL; ACTION AGAINST DR. SAMUEL D.
    WAKSAL

         On August 7, 2002, a federal grand jury in the Southern District of New
York returned an indictment charging Dr. Samuel D. Waksal with, inter alia,
securities fraud and conspiracy to commit securities fraud. On October 15, 2002,
Dr. Samuel D. Waksal entered a plea of guilty to several counts in that
indictment, including that on December 27, 2001 he directed a family member to
sell shares of our common stock and attempted to sell shares that he owned in
advance of an expected announcement that the FDA had issued a "refusal to file"
letter with respect to our application for approval of ERBITUX. We received such
a "refusal to file" letter from the FDA on December 28, 2001 and announced our
receipt of that letter following the close of trading that day. On June 10,
2003, Dr. Samuel D. Waksal was sentenced to an eighty-seven month prison term
and ordered to pay $4,200,000 in fines and restitution.

         On August 14, 2002, after the federal grand jury indictment of Dr.
Samuel D. Waksal had been issued but before Dr. Samuel D. Waksal's guilty plea
to certain counts of that indictment, we filed an action in New York State
Supreme Court seeking recovery of certain compensation, including advancement of
certain defense costs, that we had paid to or on behalf of Dr. Samuel D. Waksal.
That action, styled ImClone Systems Incorporated v. Samuel D. Waksal, Index No.
02/602996, is in its earliest stages.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits (numbered in accordance with Item 601 of Regulation S-K)

<TABLE>
<CAPTION>
EXHIBIT NO.                               DESCRIPTION
----------                                -----------
<S>               <C>
   99.1           Certification pursuant to 18 U.S.C. Section 1350, as adopted
                  pursuant to section 906 of the Sarbanes-Oxley Act of 2002.

   99.2           Certification pursuant to 18 U.S.C. Section 1350, as adopted
                  pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
</TABLE>

(b)  Reports on Form 8-K

    On April 1, 2003, the Company filed a Current Report on Form 8-K with the
Securities and Exchange Commission reporting events under Item 5.

                                    Page 38

<PAGE>

                                   SIGNATURES

    Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                       IMCLONE SYSTEMS INCORPORATED
                                       (Registrant)

Date: July 3, 2003                  By        /s/ DANIEL S. LYNCH
                                       ----------------------------------------
                                                Daniel S. Lynch
                                       Senior Vice President and Chief
                                       Administrative Officer Acting Chief
                                       Executive Officer

Date: July 3, 2003                 By        /s/ MICHAEL J. HOWERTON
                                       ----------------------------------------
                                              Michael J. Howerton
                                       Vice President, Finance and Business
                                       Development Acting Chief Financial
                                       Officer and Secretary

                                    Page 39

<PAGE>

SECTION 302 CERTIFICATIONS -

CERTIFICATION

I, Daniel S. Lynch, Senior Vice President, Chief Administrative Officer and
Acting Chief Executive Officer of ImClone Systems Incorporated, certify that:

    1.  I have reviewed this quarterly report on Form 10-Q for the Quarter Ended
        March 31, 2003 of ImClone Systems Incorporated;

    2.  Based on my knowledge, this quarterly report does not contain any untrue
        statement of a material fact or omit to state a material fact necessary
        to make the statements made, in light of the circumstances under which
        such statements were made, not misleading with respect to the period
        covered by this quarterly report;

    3.  Based on my knowledge, the financial statements, and other financial
        information included in this quarterly report, fairly present in all
        material respects the financial condition, results of operations and
        cash flows of the registrant as of, and for, the periods presented in
        this quarterly report;

    4.  The registrant's other certifying officer and I are responsible for
        establishing and maintaining disclosure controls and procedures (as
        defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
        we have:

          a)   designed such disclosure controls and procedures to ensure that
               material information relating to the registrant, including its
               consolidated subsidiaries, is made known to us by others within
               those entities, particularly during the period in which this
               quarterly report is being prepared;

          b)   evaluated the effectiveness of the registrant's disclosure
               controls and procedures as of a date within 90 days prior to the
               filing date of this quarterly report (the "Evaluation Date"); and

          c)   presented in this quarterly report our conclusions about the
               effectiveness of the disclosure controls and procedures based on
               our evaluation as of the Evaluation Date;

    5.  The registrant's other certifying officers and I have disclosed, based
        on our most recent evaluation, to the registrant's auditors and the
        Audit Committee of registrant's board of directors (or persons
        performing the equivalent function):

          a)   all significant deficiencies in the design or operation of
               internal controls which could adversely affect the registrant's
               ability to record, process, summarize and report financial data
               and have identified for the registrant's auditors any material
               weaknesses in internal controls; and

          b)   any fraud, whether or not material, that involves management or
               other employees who have a significant role in the registrant's
               internal controls.

    6.  The registrant's other certifying officer and I have indicated in this
        quarterly report whether or not there were significant changes in
        internal controls or in other factors that could significantly affect
        internal controls subsequent to the date of our most recent evaluation,
        including any corrective actions with regard to significant deficiencies
        and material weaknesses.

Date: July 3, 2003

                                                /s/ DANIEL S. LYNCH
                                                --------------------------------
                                                Daniel S. Lynch
                                                Acting Chief Executive Officer

                                    Page 40

<PAGE>

SECTION 302 CERTIFICATIONS -

CERTIFICATION

I, Michael J. Howerton, Vice President, Finance and Business Development,
Secretary and Acting Chief Financial Officer of ImClone Systems Incorporated,
certify that:

    1.  I have reviewed this quarterly report on Form 10-Q for the Quarter Ended
        March 31, 2003 of ImClone Systems Incorporated;

    2.  Based on my knowledge, this quarterly report does not contain any untrue
        statement of a material fact or omit to state a material fact necessary
        to make the statements made, in light of the circumstances under which
        such statements were made, not misleading with respect to the period
        covered by this quarterly report;

    3.  Based on my knowledge, the financial statements, and other financial
        information included in this quarterly report, fairly present in all
        material respects the financial condition, results of operations and
        cash flows of the registrant as of, and for, the periods presented in
        this quarterly report;

    4.  The registrant's other certifying officer and I are responsible for
        establishing and maintaining disclosure controls and procedures (as
        defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
        we have:

          a)   designed such disclosure controls and procedures to ensure that
               material information relating to the registrant, including its
               consolidated subsidiaries, is made known to us by others within
               those entities, particularly during the period in which this
               quarterly report is being prepared;

          b)   evaluated the effectiveness of the registrant's disclosure
               controls and procedures as of a date within 90 days prior to the
               filing date of this quarterly report (the "Evaluation Date"); and

          c)   presented in this quarterly report our conclusions about the
               effectiveness of the disclosure controls and procedures based on
               our evaluation as of the Evaluation Date;

    5.  The registrant's other certifying officers and I have disclosed, based
        on our most recent evaluation, to the registrant's auditors and the
        Audit Committee of registrant's board of directors (or persons
        performing the equivalent function):

          a)   all significant deficiencies in the design or operation of
               internal controls which could adversely affect the registrant's
               ability to record, process, summarize and report financial data
               and have identified for the registrant's auditors any material
               weaknesses in internal controls; and

          b)   any fraud, whether or not material, that involves management or
               other employees who have a significant role in the registrant's
               internal controls

    6.  The registrant's other certifying officer and I have indicated in this
        quarterly report whether or not there were significant changes in
        internal controls or in other factors that could significantly affect
        internal controls subsequent to the date of our most recent evaluation,
        including any corrective actions with regard to significant deficiencies
        and material weaknesses.

Date: July 3, 2003

                                                /s/ MICHAEL J. HOWERTON
                                                --------------------------------
                                                Michael J. Howerton
                                                Acting Chief Financial Officer

                                    Page 41