Analyst Conference Summary

conference date: January 27, 2011 @ 6:00 AM Pacific Time
for quarter ending: December 31, 2010 (fourth quarter)

Forward-looking statements

Overview: Cost increases due to acquisition and expansion trumped record revenue, but non-GAAP EPS increased 18%.

Basic data (GAAP):

Revenue was $1.07 billion, up 18% sequentially from $910 million and up 41% from $761 million in the year-earlier quarter.

Net income was $213.2 million, down 24% sequentially from $281.2 million and also down 16% from $254.2 million year-earlier.

EPS (earnings per share) were $0.45, down 25% sequentially from $0.60 and down 17% from $0.54 year-earlier.

Comparisons:

Q3 2010 Celgene summary
Q4 2009 Celgene summary

Guidance:

2011 Revlimid sales of $3.0 to $3.1 Billion. Total revenue $4.4 to $4.5 billion, up 24% over 2010. Non-GAAP EPS $3.30 to $3.35. Non-GAAP R&D expense $1.2 billion; SG&A $0.95 billion. 93% gross margin. Tax rate to decrease to 18.5%.

Quarter Highlights:

Record revenue was driven by market share gains, increased duration of therapies, and geographic expansion. Increased costs from acquisition and from global expansion cut into profits.

Non-GAAP numbers: $1.05 billion in revenue, up 38% y/y. Net income $347.6 million, up 20% y/y from $290.3 million. EPS $0.73, up 18% y/y. The difference between GAAP and non-GAAP were attributable to share-based compensation expense, amortization of acquired assets, and acquisition related charges for the Pharmion, Gloucester, and Abraxis acquisitions. R&D expense increased 28%; SG&A 24% y/y.

Both expenses and revenue were impacted by the acquisition of Abraxis BioScience on October 15, 2010. So nearly a full-quarter of revenue was added.

REVLIMID revenues $707.5 million, up 42% y/y. $402 million was in U.S. $306 million international. Japan launch is on track. Turkey launch is underway. Russian reimbursement should happen in 2011. Now has 45% of overall myeloma market in U.S.

VIDAZA revenues $140.4 million, up 20% y/y. Will lose exclusivity in U.S. later this year, but gaining market share in Europe.

THALOMID revenues $91.3 million, down 15% y/y.

ABRAXANE revenues $71 million, newly acquired from Abraxis.

Focalin and Ritalin sales were $27.2 million, slightly down from year-earlier.

92.9% non-GAAP gross margin.

The program for 2011 is ambitious. In Hematology REVLIMID for newly diagnosed Multiple Myeloma to file with FDA, and for del 5q Myelodysplastic Syndromes to file with EMA (European Medicines Agency). ISTODAX for peripheral t-cell lymphoma should have its U.S. commercial launch. Two Phase III trials will be initiated (Pomalidomide for multiple myeloma and REVLIMID for follicular lymphoma).

In Oncology ABRAXANE should complete enrollment in two Phase III trials, for pancreatic cancer and for melanoma. REVLIMID should complete enrollment in Phase III for androgen independent prostate cancer.

In Inflammation/Immunology Apremilast Phase II and Phase III trials will continue.

Cash and equivalents ended at $2.6 billion, versus $1.25 billion long-term debt. Cash was used for acquisitions.

Cost of goods sold was $114.3 million. Research and development expense was $327.5 million. Selling, General and Administrative expense was $295.1 million. Amortization of acquired intangibles was $69.0 million. Acquisition and restructuring costs were $28.5 million. Leaving operating income of $232.8 million. Other expense was 4 million. Income tax provision $13.1 million.

2010 healthcare reform impact was $36 million. In 2011 revenue impact $80 to $90 million, which is included in guidance.

Secondary malignancy issue in Revlimid reported at ASH appears to have been due to a reporting bias across treatment arms, as Revlimid arm patients lived so much longer. Progression Free Survival with Revlimid compared to standard therapy is "unprecedented."

Believes pomalidomide for relapsed/refractory multiple myeloma is very promising and should be made available to patients as soon as possible.

Abraxis integration is going well. Multiple trials of Abraxane are underway in major solid tumor types.

Q&A:

Duration for Revlimid? Across all markets, duration has continued to extend. Finished the year strong in all markets, and January so far has been strong.

Abraxane billion in sales in 2015 projection? We are learning a lot after closing the deal in October. Refocusing the brand in metastatic breast cancer, with more optimism about revenues from Europe. NSCLC (lung cancer), when approved, would give a level of revenue that makes the Abraxis deal financially favorable. Any other cancer types would add to projections.

International revenue growth and pricing for Revlimid? 2010 was encouraging. Good market share gains in Europe combined with expansion to new markets should be drivers in 2011. Pricing is nothing new; Celgene is proactive on value propositions.

Abraxane inflection point timing? Second half of 2011 for breast cancer growth increase is likely.

Merger and acquisitions negative affect on stock price? Our job is to maximize operating excellence and grow for the long term. We are no longer looking for a large deal, but could do tactical deals. We are attentive to shareholder value.

Donut hole portion of healthcare impact? Most of the 2010 to 2011 difference is driven by the Medicaid donut hole. But this is a first time event, so it could deviate from out model.

Japan is on track to have a meaningful contribution to our revenues in 2011.

RVD is gaining traction as an induction regimen due to its safety and apparent effectiveness.

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