Analyst Conference Summary



conference date: April 30, 2015 @ 6:00 AM Pacific Time
for quarter ending: March 33, 2015 (first quarter, Q1 2015)

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Forward-looking statements

Overview: Continued strong revenue and profit growth.

Basic data (GAAP):

Revenue was $2.08 billion, down 0.5% sequentially from $2.09 billion, and up 20% from $1.73 billion in the year-earlier quarter.

Net income was $718.9 million, up 17% sequentially from $613.9 million, but up 157 % from $279.7 million year-earlier.

EPS (earnings per share, diluted) were $0.86, up 16% sequentially from $0.74, and up 161% from $0.33 year-earlier. (adjusted for 2 for 1 split in June 2014)


On track to reach prior 2015 guidance of product sales of $9.0 to $9.5 billion, with Adjusted Diluted (non-GAAP) EPS range between $4.60 and $4.75, and GAAP EPS between $2.97 and $3.19.

Quarter Highlights:

Made outstanding strategic and operational progress. Well-positioned to meet 2015 goals. Had 6 regulatory approvals in the quarter, mostly label expansions. Now has over 50 unique programs progressing towards clinical development. Revenue growth continued despite foreign exchange headwinds and the usual Q1 donut-hole impact.

Returning cash to shareholders through stock repurchases while putting plenty of money into R&D and acquiring new product candidates.

Acquired Quanticel and invested in CRISPR Therapeutics and Mesoblast Limited.

Celgene announced a new partnership with AstraZeneca (MedImmune) in April to jointly develop combination therapies, including MEDI4736, a PD-L1 inhibitor with Revlimid and Abraxane.

Non-GAAP numbers: net income $891 million, up 6% sequentially from $840 million and up 26% from $705 million year-earlier. Diluted EPS was $1.07, up 6% from $1.01, and up 29% from $0.83 year-earlier.

Total product sales were $2.05 billion, up 5% sequentially from $1.96 billion, and up 19% from $1.72 billion year-earlier. $1.23 billion of sales were in the U.S., $822 million were outside the U.S.

Revenue in millions
Q1 2015
Q4 2014
Q1 2014
change y/y

Other revenue was $25.6 million.

Cash and securities balance ended near $7.3 billion, down sequentially from $7.5 billion. Operating cash flow was $858 million. Debt was $6.8 billion. $1.1 billion was spent to repurchase shares, and $2 billion remains in the current program.

Revlimid was given regulatory approval for newly diagnosed multiple myeloma and is in the process of launching worldwide. Revlimid set a record for prescriptions in the U.S. in the quarter, and market share gains are expected now that it has the broader label. A triplet regimen including Revlimid could be approved in the U.S. this summer.

Pomalyst/Imnovid is showing strong growth in the third-line multiple myeloma, and is still in the launch phase in Europe.

This year there will be a vast array of data presentations, including 65 abstracts at ASCO in June. Otezla data will be presented at WCD, EULAR and EADV.

GED-0301 has a registration-enabling Crohn's endoscopy trial underway, with Phase III trials expected to start midyear and an ulcerative colitis Phase II study to begin in the second half of 2015.

In the second half CC-122 will advance to Phase I/II trials in DLBCL; luspatercept will begin a Phase 3 trial in beta-thalassemia; and a pivotal program will be initiated in AG-221 in AML.

Over 20 compounds are now in pre-clinical or clinical development. There are over 30 pivotal and earlier-stage trials underway, plus over 30 pre-clinical programs. See also Celgene product pipeline.

Cost of goods sold was $104.0 million. Research and development expense was $506.0 million. Selling, general and administrative expense was $529.2 million. Amortization of acquired intangibles was $63.6 million. Acquisition charges $19.0 million. Leaving operating income of $859.0 million. Other expense was $31.9 million. Income tax provision $108.2 million.


Co-pay assistance in Q1 and gross to net? We did have a slightly larger co-pay charge and gross to net did increase. First quarters are typically challenging for Pomalyst and Revlimid. The best way to measure progress is by y/y growth rate.

AstraZeneca, what does Celgene give to them? We will not share economics of our therapies. Just sharing developed PDL1 assets in hematology.

Acceleron programs should be moving forward by the end of the year.

Editorial in New England Journal? The Crohn's editorial was positive and balanced. Questions that were raised will be addressed in a presentation at GDW soon.

European patent ruling? The hearing is on May 7. We don't think it will affect the U.S. patent protection because the law looks at the combination patents differently.

Otezla vs. methotrexate? Yes, there is some substitution, Otezla is gaining market share, and also from some biologics.

Are you seeing Revlimid with Kyprolis more vs. with Velcade? It is early to make a call on trends, but the story is Revlimid is a clear backbone in triple regimens, with good data supporting that.

Biosimilar competition in 2017 vs. Otezla? We don't see biosimilars affecting Otezla, as it is mostly used ahead of biologics. The value proposition for early use is strong. The two year lead will be very helpful.

Abraxane? We see several things accelerating revenue growth this year. We see strong gains in Europe for pancreatic cancer in combo with gemcitabine. We just started the lung launch in Europe following approval this quarter. In the future there is potential from combining Abraxane with immunotherapy.

PD1, general thoughts on checkpoint inhibitors in hematology? AstraZeneca has invested heavily in the solid tumor space. Working with them in the hematology space should allow for quick development of combinations.

GED-301 endoscopy endpoints? We will present next month. There is a mucosal healing endpoint. It is a 12 week study followed by 52 weeks of observation. It is already enrolling.

Dependence on Revlimid for such a large percentage of sales? The Lymphoma program, with 5 phase 3 trials across indications, is the most significant at this moment. For the next few years we are happy with how we think Revlimid will be the backbone of the space. We see the long-term growth portfolio as evolution, rather than the eventually replacement of Revlimid. No one product would replace Revlimid for our revenue production.

Adolescent Crohn's? It is a large space with high unmet medical needs. Our GED-301 side effect profile was very encouraging, very similar placebo. The new study should initiate before the end of this year.

Ex-U.S. cash ratio vs. current cash flow? The AstraZeneca was done with offshore cash. The flow from the U.S. is much stronger than you might think and is ample for business development as well as share buy backs.

New label in Germany so far? We are seeing messaging response much like we saw in the U.S. We are in active negotiations for price reimbursements in other European countries.

We believe only 10% of the psoriasis patients are actively being treated at any time. We believe Otezla can expand the active market, but much of the expansion will be from international launches.

Abraxane threat from similar submission? We monitor that closely. We feel strongly that PK data alone should not be used to establish equivalency.

Otezla persistency of treatment? We have some early data showing we are in line with other analogs. We think there is some potential upside for Otezla persistency.

PDL-1 vs. PD1 with Abraxane? The hematological data is early. We will share more data as we move along.

We believe our spend on R&D and SG&A is appropriate, with R&D up y/y and planning to increase this year, but G&A held relatively steady.

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Copyright 2015 William P. Meyers