Analyst Conference Summary

conference date: July 26, 2012 @ 6:00 AM Pacific Time
for quarter ending: June 30, 2012 (second quarter, Q2 2012)

Forward-looking statements

Overview: Another quarter with strong y/y profit growth. Increased full year EPS guidance. Looking to major product launches in 2013.

Basic data (GAAP):

Revenue was $1.37 billion, up 8% sequentially from $1.27 million and up 16% from $1.18 billion year-earlier.

Net income was $367.4 million, down 8% sequentially from $401.5 million but up 32% from $279.2 million year-earlier.

EPS (earnings per share) were $0.82, down 9% sequentially from $0.90, but up 39% from $0.59 year-earlier.

Comparisons:

Q1 2012 Celgene summary
Q2 2011 Celgene summary

Guidance:

Revenue $5.4 to 5.6 billion full year 2012. Non-GAAP EPS $4.80 to $4.85, up $0.05 from prior guidance.

Quarter Highlights:

Record quarter results and preparing new indications and product launches.

Non-GAAP numbers: EPS $1.22, up 13% sequentially from $1.08 and up 37% from $0.89 year-earlier, net income $545 million, up 13% sequentially from $484 million and up 31% from $417 million year-earlier. Non-GAAP results excluded the usual and $75 million in upfront collaboration payments.

Expenses continue to trend downward as a percentage of revenue.

Product sales were $1.34 billion, up 7% sequentially from $1.25 billion

REVLIMID revenues were $934 million, up 8% sequentially from $861 million and up 17% from year-earlier. Growth came from market share and duration gains around the world, with Japan particularly strong. Saw $8 million positive inventory impact, following the negative inventory hit in Q1. Revlimid has multiple drivers for continued sales growth. New publications have reinforced Revlimid's role. More data should be released this year. CLL Phase III trial should complete this year. Submitted application for myelodysplastic syndromes (MDS) deletion 5q to European Medicines Agency.

VIDAZA revenues were $201 million, up 8% sequentially from $186 million and up 24% y/y. Doing well despite loss of exclusivity in U.S. Expanding to new national markets. Vidaza is in multiple studies to expand the franchise.

ABRAXANE revenues were $110 million, up 5% sequentially from $104 million and up 16% y/y. PDUFA for non-small cell lung cancer is November 12. Completed Phase III pancreatic cancer trial enrollment.

THALOMID revenues were $76 million, down 3% sequentially from $78 million and down 13% y/y.

Royalty and collaboration revenue was $30.2 million.

Cash and securities balance ended at $2.56 billion. $588 million used for share repurchases. Operating cash flow for Q2 not given, but for 1st half was $947 million. Made upfront payments to Epizume and Inhibrx of $75 million. Long term debt was $1.3 billion.

Pomalidomide for relapsed and refractory multiple myeloma Phase II data showed 7.9 month median duration of response. Submitted application to FDA. Should launch in first half of 2013. Completed enrollment in Phase III trial for myelofibrosis.

Apremilast for psoriatic arthritis trial produced high quality Phase III results. Submission to the FDA for commercial approval is expected in the first half of 2013. For psoriasis the submission is expected in the second half of 2013. Also planning to develop for rheumatoid arthritis. Apremilast is an oral therapy with an good safety profile that has the potential to become a major commercial product.

Many compounds are now in pre-clinical or clinical development. See also Celgene product pipeline.

Received payments from Spain that had been overdue.

Cost of goods sold was $71.9 million. Research and development expense $447.1 million. Selling, general, and administrative $323.0 million. Amortization of acquired intangibles $44.1 million. Acquisition related charges $39.3 million. For total expenses $925.4 million, leaving operating income of $441.4 million. Other expense $0.7 million. Income taxes $73.3 million.

Q&A:

Revlimid global growth, and drop in U.S.? Q1 had a $15 to 21 million inventory impact. In Q2 was $8 million positive. Believes inventories now near normal, but may become more efficient over time. Growth was balanced across Europe, with France a bit better. U.S. was up sequentially around 10%, so even taking inventory into account it is around 6%, with a strong jump in new patient starts, perhaps better in the U.S. than globally. Scripts are up and duration is up.

Guidance for revenue was unchanged, vs. higher EPS. What changed? We have more expense side visability now that we are half way through the year. Avalon acquisition expenses are fully figured in, and launch and pre-launch activity.

Apremilast partnership? We are looking at options, but waiting until we see the full range of data, so no decision until 2013.

Impact of withdrawal of new Revlimid indication? We have a lot of confidence in data and the brand. Withdrawal has actually stengthened physician confidence because of the clinical data.

Pomalidomide, reason for blockbuster revenues? Has potential to expand the MM market, does not see as a competitor to Revlimid, but as a preferential, complementary therapy for relapsed refractory MM patients starting in 2013.

Apremilast vs. biologics? We have not made our strategic decision on how to commercialize Apremilast. Tolerability and safety combined with efficacy will really differentiate the oral therapy. We will see all the data in the next 6 months or so.

Payment from Spain, how recognized? No impact on revenue recognition, just accounts receivable, we did have small reserves against them. It is just a cash and balance sheet item. "Most of our sales in Spain are for Revlimid." Most was from 2011 receivables. We also saw improvement in receivables across Europe.

2012 to 2015 guidance includes no M&A activity. We are considering no major M&A activity at this time.

MM020 remains blinded pending sufficent events. When we resubmit Revlimid it will be treated as a new application.

Revlimid price increase effects? We are happy with the mid-range of Revlimid guidance. Y/Y contribution of price was 3%, which was all from the U.S. We continue to see downward pricing pressure in Europe.

Abraxane pancreatic trial? We did increase the sample size to around 800 patients, to increase power to detect a survival advantage. The Phase II data is quite strong. We look for this combination therapy to be a major benefit for patients.

Apremilast could, if the data is good, allow patients to get off methotrexate, which has considerable side effects.

NHL and CLL upside from Revlimid is tremendous, but is not in the 2015 guidance since data is not in for approval yet.

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