Analyst Conference Summary

conference date: January 31, 2019 @ 6:00 AM Pacific Time
for quarter ending: December 31, 2018 (fourth quarter, Q4)

Forward-looking statements

Overview: To be acquired by Bristol-Myers Squibb. Strong revenue growth.

Basic data (GAAP):

Revenue was $4.04 billion, up 4% sequentially from $3.89 billion, and up 16% from $3.48 billion in the year-earlier quarter.

Net income was $1.07 billion, down 1% sequentially from $1.08 billion, and way up from negative $81 million year-earlier.

EPS (earnings per share, diluted) were $1.50, flat sequentially from $1.50, and up from negative $0.10 year-earlier.

Guidance:

For full year 2019, total product sales expected between $17.0 and $17.2 billion. 57.5% adjusted operating margin. 17% non-GAAP tax rate. Adjusted diluted EPS $10.60 to $10.80.

However, as usual Q1 will be hit by the donut hole, and so will be about in line with Q1 2018.

Quarter Highlights:

Celgene CEO Mark J. Alles said "With five near-term product launches and many promising assets advancing, we are very optimistic about our potential for long-term growth as part of the new Bristol-Myers Squibb." Ozanimod U.S. and EU regulatory submissions are on-track for Q1 2019. Operating performance was excellent. Believes the combined company will have even greater strength while unlocking value for Celgene shareholders.

Full year 2018 revenue was $15.3 billion, up % from $13.0 billion in 2017. GAAP Net income was $4.04 billion, up 37% from $2.94 billion in 2017. GAAP EPS was $5.51, up 51% from $3.64 in 2017. Operating cash flow was $5.2 billion. Repurchased $6.1 billion of shares.

In January, Celgene and Bristol-Myers Squibb (BMS) announced that they have entered into a definitive merger agreement to acquire Celgene for approximately $74 billion (based on closing price of BMS on date of the agreement). Under the terms of the agreement, Celgene shareholders will receive for each Celgene share $50 in cash plus one BMS share and one tradeable Contingent Value Right (CVR), which will entitle the holder to receive a cash payment of $9.00 upon the achievement of FDA approval of all three products (ozanimod, liso-cel and bb2121) within specified time periods. The transaction is subject to approval by BMS and Celgene stockholders and the completion of customary closing conditions and regulatory approvals. BMS and Celgene expect to close the transaction in the third quarter of 2019.

Label expansion should drive revenue growth for key therapies.

Non-GAAP numbers: net income $1.71 billion, up 4% sequentially from $1.65 billion and up 8% from $1.59 billion year-earlier. Diluted EPS was $2.39, up 4% sequentially from $2.29, and up 20% from $2.00 year-earlier.

Total product sales were $4.04 billion, up 4% sequentially from $3.89 billion, and up 16% from $3.48 billion year-earlier. $2.71 billion of sales were in the U.S., $1.33 billion were outside the U.S.

Other, non-product revenue was $1 million.

Cash and securities balance ended near $6.04 billion, up sequentially from $4.4 billion. Debt was $20.3 billion. Operating cash flow was $ billion. million shares $ per share average were repurchased.

In December 2018 Celgene made many data presentations at ASH.

Otezla reported positive Phase 3 data for scalp psoriasis.

Ozanimod filings are on track for Q1 2019. New Phase 3 study were initiated in Q3 2018 for Crohn's. Phase 3 ulcerative colitis study should complete in mid-2019.

Revlimid Phase 3 data for relapsed/refractory follicular lymphoma and marginal zone lymphoma met its primary PFS endpoint. Regulatory submissions are planned for 2019.

Pembrolizumab + Abraxane approved by FDA on October 30, 2018 for first line metastatic squamous NSCLC. Upcoming PDUFA dates for IO combinations: - Atezolizumab + Abraxane in 1L metastatic TNBC (March 12, 2019). Atezolizumab + Abraxane in 1L metastatic nonsquamous NSCLC (Sept 2, 2019)

Liso-cel (formerly Juno's JCAR017) phase II pivotal trial evaluating liso-cel in patients with relapsed and/or refractory CLL is initiating. BLA submission expected in H2:19; U.S. approval expected in mid-2020

JCARH125 for BCMA trial data was presented at ASH.

BB2121, in partnership with Bluebird Bio, KarMMa pivotal trial in RRMM completed enrollment in Q4 2018. Believes on track for approval in 2020. bb21217 data presented at ASH 2018

Tislelizumab for previously untreated hepatocellular carcinoma (HCC) started a Phase 3 trial in Q1, in partnership with BeiGene. Also a Phase 2 for previously treated HCC.

Fedratinib for myelofibrosis is a JAK2 kinase inhibitor that has already completed Phase 3 in treatment-naive patients NDA was submitted.

Reported positive Ph II 52-week data for RPC4046 in eosinophilic esophagitis (EoE).

CC-486 for AML (acute myeloid leukemia)

CC-220 for lupus is in Phase 2.

CC-122 for NHL . Also BGB-A317 in NSCLC.

In September an IND was submitted for CC-92480, a CELMoD for multiple myeloma.

Luspatercept, with partner Acceleron Pharma (XLRN), Phase 3 trial data was positive for MDS (myelodysplastic syndromes) and transfusion dependent beta-thalassemia. Another Phase 3 trial, for ESA naive, very low to intermediate risk MDS patients, started in Q3 2018. U.S. and EU regulatory submissions for RS+ MDS and transfusion-dependent beta-thalassemia on-track for H1:19

Otezla (apremilast) continued several trials aimed at label expansion. In October the Phase 3 trial for moderate to severe plaque psoriasis of the scalp reported positive results.

See also Celgene product pipeline. There are a large number of trials under way not mentioned in this summary. Many of these programs are "potentially transformative." There are 12 Phase 3 studies that should read out by the end of 2018.

Cost of goods sold was $169 million. Research and development expense was $1.14 billion. Selling, general and administrative expense was $850 million. Amortization of acquired intangibles was $127 million. Acquisition gains $54 million. Total costs and expenses $2.23 billion. Leaving operating income of $1.81 billion. Interest expense was $190 million. Other expense $515 million. Income tax provision $44 million.

Q&A:

Questions about the merger should be addressed to BMS.

Luspatercept long time frame? The BLA will include both indications. No additional analyses are pending.

Oral azacitidine? Waiting for trial results.

Ozanimod FDA feedback, timing? We have further characterized the active metabolite. We have had no further delays, right now it is full steam ahead.

Repeated benefits of merger.

Dr. Reddy's lawsuit? Fact discovery has not closed yet. Expert phase should close some time this quarter. Moving to attempted mediation. IPRs in February or March. Those are just on method of treatment patents.

Liso-cel manufacturing preparations? Everything is on track.

Revlimid generics timeline? Most use in U.S. is frontline, also in Europe. We already settled with Natco. We are confident in our patent space. We think it is unlikely there is a risk prior to 2022. Under the right circumstances we would engage in settlements with other companies.

Ex-U.S. contribution to 2019 growth? Price increases in the U.S. will be offset by price declines in the rest of world.

Luspatercept pricing thoughts? Price should match the value proposition.

CVR timing, safety margin? There are many variables, we are comfortable with the timing and probability we achieved for the CVR.

Consolidation of industry? Other companies have been talking about their strategic outlook. The key is innovation.

Otezla sales are going well in multiple indications and should grow in 2019.

For Ozanimod we also have an additional year of safety data, which is good.

MRD (minimal residual disease) negativity for multiple myeloma? FDA is interested in this, to have it included in clinical trials. It could become a recognized endpoint, particularly in frontline trials.

JCAR 125 plans? Early data was released at ASH. Enrollment continues.

Other deals before Bristol merger closes? The deals are related to mitigating side effects of CAR-T. We remain open to business, we will consult with BMS.

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