Analyst Conference Summary



conference date: January 24, 2013 @ 6:00 AM Pacific Time
for quarter ending: December 31, 2012 (fourth quarter, Q4 2012)

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Forward-looking statements

Overview: Strong revenue but GAAP results hurt by acquisition charges and higher operating expenses.

Basic data (GAAP):

Revenue was $1.42 billion, flat sequentially from $1.42 billion but up 14% from $1.28 billion in the year-earlier quarter.

Net income was $263.1 million, down 38% sequentially from $424.2 million and down 36% from $410.2 million year-earlier.

EPS (earnings per share, diluted) were $0.61, down 27% sequentially from $0.97 and down 23% from $0.91 year-earlier.


Affirmed 2013 guidance: net product sales of $6.0 billion. Revlimid $4.1 to $4.2 billion. Adjusted diluted EPS $5.50 to $5.60. GAAP EPS $4.67 to $4.79. Operating margin expected to improve.

Expects 19% constant annual revenue growth rate through 2017. $12 billion in revenue in 2017. 55% operating margin by 2017. EPS up 25% per year.

Quarter Highlights:

In the quarter Revlimid presented positive Phase III data for relapsed/refractory mantle cell lymphoma and submitted a supplemental NDA to the FDA.

Since the end of the quarter Abraxane for pancreatic cancer was announced as positive. In the quarter the FDA approved Abraxane for first-line NSCLC. Positive phase III data for treatment-naive metastatic melanoma was reported in November, with mature data expected mid-2013.

Non-GAAP numbers: net income $572 million, up 2% sequentially from $561 million, and up 21% from $473 million year-earlier. EPS $1.32, up 2% sequentially from $1.29, and up 26% from $1.05.

Product sales were $1.42 billion, up 2% sequentially from $1.39 billion, and up 14% from $1.24 billion year-earlier.

REVLIMID revenues were $1.002 billion, up 3% sequentially from $970 million, and up 17% y/y. Growth was driven by volume from share gains and longer duration of therapy. New clinical data in newly diagnosed multiple myeloma is expected to continue to drive growth.

VIDAZA revenues were $216 million, down 2% sequentially from $220 million, but up 14% from year earlier. Expects generic competition in U.S. no later than 2014. AML-001 Phase III data is expected by end of 2013.

ABRAXANE revenues were $106 million, flat sequentially from $106 million and up 3% from year-earlier. A Phase II study for triple-negative breast cancer will be initiated this year.

THALOMID revenues were $73 million, down 3% sequentially from $75 million and down 12% y/y.

Royalty and collaboration revenue was $31.9 million.

Cash and securities balance ended at $3.9 billion. Debt ended at $3.1 billion. $580 million share repurchases.

Pomalidomide (now Pomalyst) for relapsed and refractory multiple myeloma is a potential blockbuster. U.S. PDUFA date for FDA is February 10, 2013. EMA (european) decision is also expected in 2013. Believes Pomalyst is positioned to become a hematology blockbuster. Myelofibrosis Phase III data expected in first half of 2013.

Apremilast for psoriatic arthritis and psoriasis. Will submit to FDA and EMA for psoriatic arthritis and psoriasis this year, with commercial launch hoped for in 2014. Will complete enroll ankylosing spondylitis phase III trial in the second half of 2013.

Over 20 compounds are now in pre-clinical or clinical development. See also Celgene product pipeline. New and updated data from over ten pivotal phase III trials is expected in 2013.

Cost of goods sold was $80.1 million. R&D expense $473.4 million. SG&A expense $370.1 million. Amortization of acquired intangibles $62.4 million. Acquisition and restructuring charges $140.1 million. Leaving operating income of $321.2 million. Other expense $31.0 million. Income tax $27.2 million.

Special charges excluded from non-GAAP earnings: $59.5 million collaboration payments, $69.2 million IP R&D impairments, $62.4 million amortization, $140.1 million change in fair value of contingent consideration, $60 million share-based compensation.


Margin trends? We have a variety of drivers in the model. We will deliver at least 100 basis points of improvement.

Q1 typically has some impacts that are not seen in other quarters. But we are very positive about Q1 overall. As our portfolio diversifies we are increasingly confident in our ability to deliver on guidance. Cost pressures in Europe are built in.

Margin improvement drivers to 2017? The size of the fixed costs versus the increased revenues is the main driver. We can reinvest with R&D and even increase SG&A but still gain earnings leverage. 100 to 150 basis point improvements per year are part of the natural model for Celgene at this point.

Apremilast 2017 revenue guidance implications? We plan to commercialize globally ourselves. We want to maximize the strategic value, so we still have time to partner if that offers value.

Melanoma case for Abraxane? We should have the data by the middle of the year. Mature survival data would be particularly helpful outside the U.S.

Abraxane duration of therapy less than progression free survival? There will be a full presentation tomorrow.

Thalidomide vs. Revlimid for first line MM depends on the market. Thalidomide in first line is insignificant in U.S., but required in U.K., for instance. We are very confident that MM20 will produce the results expected.

$1.5 to $2.0 billion for Apremilast in 2017 assumes approvals, pricing, and conservative market share. The data will be presented in the first half of this year.

CLL and NHL in 2017 guidance? There is some, but we see the bulk of revenue from them post-2017. Data would not be in until 2014 and 2015.

Abraxane 2013 lung vs. pancreatic? Upside from current numbers is from pancreatic. We are modeling physician uptake pretty dramatically. Q1 results will allow us to give more color. Main pancreatic ramp, given approval, would be in 2014.

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Copyright 2013 William P. Meyers