Analyst Conference Summary



conference date: July 25, 2013 @ 6:00 AM Pacific Time
for quarter ending: June 30, 2013 (second quarter, Q2 2013)

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Forward-looking statements

Overview: Strong y/y revenue growth and earnings growth. Abraxane sales growth was strong. Raised guidance.

Basic data (GAAP):

Revenue was $1.599 billion, up 9.5% sequentially from $1.46 billion and up 17% from $1.367 billion in the year-earlier quarter.

Net income was $478.1 million, up 24% sequentially from $384.9 million and up 30% from $367.4 million year-earlier.

EPS (earnings per share, diluted) were $1.11, up 25% sequentially from $0.89, and up 35% from $0.82 year-earlier.


Raising full year financial guidance. $6.2 billion net product sales (up from $6.0 billion). Non-GAAP EPS $5.80 to $5.90 (from $5.55 to $5.65). Assumes 430 million diluted shares, and generic Vidaza in U.S. in Q4. 49% operating profit margin. Revlimid sales $4.2 to $4.3 billion.

Quarter Highlights:

Strong global operating momentum drove results across geographies. Continues to strengthen the early pipeline and discovery platforms for new candidates. Continues to deliver operating leverage. Most revenue growth was from volume of sales, some was from price, with currency exchange a negative.

Non-GAAP numbers: net income $652.9 million, up 10% sequentially from $592 million. EPS $1.52, up 11% from $1.37.

Product sales were $1.564 billion, up 9% sequentially from $1.43 billion

REVLIMID revenues were $1.052 billion, up 5% sequentially from $1.003 billion and up 13% y/y. U.S. sales were $625 million, international sales $427 million. Prices in the U.S. were up, but were down internationally; increased demand drove most revenue growth.

VIDAZA revenues were $211 million, up 3% sequentially from $204 million and up 5% y/y, driven by international sales, particularly in Latin America and Asia.

ABRAXANE revenues were $155 million,up 26% sequentially from $123 million and up 41% y/y. U.S. sales were $120 million, up 38% y/y. International sales were $35 million, up 55% y/y.

THALOMID revenues were $66 million, up 16% sequentially from $57 million, but down 13% y/y.

POMALYST for relapsed and refractory multiple myeloma sales were $66 million, more than doubling sequentially from $29 million. $58 million was U.S., $8 million Europe. This was the first full quarter of sales.

There are significant geographic expansion possibilities for pomalyst and abraxane, and even revlimid.

Royalty and collaboration revenue was $34.9 million, down slightly sequentially from $35.3 million.

Cash and securities balance ended at $4.08 billion. Operating cash flow was $737 million. $834 million was spent on share repurchases, with another $3 billion authorized in the quarter. However, debt was $3.6 billion.

Increased operating margin by 180 basis points y/y despite investments in trials and early pipeline. Gross margin was 95.1%, operating margin 49.6%.

$30 million negative impact y/y for currency exchange rates, mostly from Revlimid in Europe.

Revlimid has now achieved statistical significance in Phase III for newly diagnosed multiple myeloma (NDMM) in the MM-020 trial; data at ASH in December. Will submit for approval this year. Received approval in Europe in deletion 5q myelodysplastic syndrome and in U.S. for relapsed and refractory mantle cell lymphoma. Approved in China for RRMM. In Q3 should revlimid should be submitted for newly diagnosed MM in both the U.S. and Europe. Phase III revlimid plus rituximab for follicular lymphoma trial should complete enrollment in 2014. Also enrolling a DLBCL (diffuse large B-cell lymphoma) study. But while one CLL trial was stopped, others will continue with other drug combinations.

Pomalyst is now approved for RRMM (relapsed and refractory MM) in the U.S. and should get a European (EMA) decision in Q3.

Abraxane filed for FDA approval for metastatic pancreatic cancer after positive Phase III trial results, with a decision expected in late Q3. Also submitted for marketing authorization in Europe. Also hoping for good results in Melanoma in 2013 and bladder cancers. Phase III trials should start in second half for triple negative breast cancer and adjuvant pancreatic cancer.

Apremilast for psoriatic arthritis new drug application was submitted to FDA in the first quarter, with commercial launch hoped for in 2014. Also submitted for Canadian approval. Will submit for psoriasis in second half. Will complete enroll ankylosing spondylitis phase III trial in Q3 2013. Palace 3 study has added to statistically significant data. Apremilast is well-tolerated. Celgene is fully prepared for launches in 2014.

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 $80.9 million. Research and development expense was $458.1 million. Selling, general and administrative expense was $418.1 million. Amortization of acquired intangibles was $65.7 million. Acquisition & restructuring charges $12.5 million. Leaving operating income of $563.7 million. Other expense was $5.9 million. Income tax provision $79.7 million.


Strength of Abraxane revenue? Majority of gain came from lung cancer launch. In Japan we got a lung cancer and gastric cancer approval.

MM-020 data, steps in Europe? Intent is to file by end of year in U.S. and Europe, then other nations. Discussions with regulators are beginning, so exact nature of filings are open at this point.

Pomalyst market share? The launch is going extremely well, but has only been in market 4 months. Market share is meaningful. We hope to combine pomalyst with other agents.

Abraxane pancreatic cancer share? We are preparing for launch, with September 21 PDUFA date. Could launch in Europe by end of year.

Revlimid vs. pomalyst dynamics? There is no cannibalization. Revlimid is expanding in share and duration. Pomalyst is for after exhaustion of earlier therapies.

MM 020, PFS vs. overall survival? PFS (progression free survival data) can stand alone. Data will probably be part of an ASH presentation.

2017 guidance, R&D costs from MorphoSys collaboration? Possible best in class therapeutic antibody. We are looking at R&D program. We see no significant impact on 2017 guidance. There are some possible upsides to 2017 guidance.

CLL deaths in stopped Revlimid study? Believes age of population led to early deaths. Believes learned from the trial and can segment populations going forward.

Cash use, are you looking at Onyx? We don't comment on specific M&A transactions. We continue to prioritize on the kinds of agreements we have had with MorphoSys to complement our internal research for best in class products.

Apremilast partnering? We are hiring a global leadership team to maintain core commercialization of the asset.

Pomalyst sales are demand based, with new patient starts. We are seeing patients repeat cycles, but so far mostly the second cycle, a bit of third cycle. We did not have a large number of patients on compassionate use who rolled over into the commercial program.

CLL position? We believe revlimid used at the acute stage of CLL can be effective in combination therapies, but as a single agent it would be more of a maintenance agent.

We see the primary positioning of Apremilast being used before biologics. The data should support that early use.

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Copyright 2013 William P. Meyers