Analyst Conference Summary

conference date: April 28, 2011 @ 6:00 AM Pacific Time
for quarter ending: March 31, 2011 (first quarter, Q1 2011)

Forward-looking statements

Overview: Still growing strong, raised 2011 guidance slightly.

Basic data (GAAP):

Revenue was $1.13 billion, up 4% sequentially from $1.07 billion, and up 43% from $791 million in the year-earlier quarter.

Net income was $255.6 million, up 20% sequentially from $213.2 million, and up 9% from $234.4 million year-earlier.

EPS (earnings per share) were $0.54, up 20% sequentially from $0.45, and up 8% from $0.50 year-earlier.

Comparisons:

Q4 2010 Celgene summary
Q1 2010 Celgene summary

Guidance:

Full 2011 total revenue increased by $50 million to range of $4.45 to $4.55 billion. Revlimid up 26% y/y to $3.05 to $3.15 billion. Non-GAAP diluted EPS also increased to range of $3.35 to $3.40.

Impact of U.S. health care regulation changes for full 2011 is $80 to $90 million, with a disproportionate hit already in Q1.

Quarter Highlights:

CEO Bob Hugin called Q1 results "outstanding." Their business model is set for long-term high growth. International expansion continues, and increased R&D expense will pay off in the future. Medicare donut hole had a negative effect on the quarter.

REVLIMID revenues were $738 million, up 39% y/y. Patent protection was enhanced. Duration of treatment is a growth driver. Now has 48% of overall U.S. myeloma market. Europe was particularly strong. Just starting sales in Japan.

VIDAZA revenues were $163 million, up 36% y/y. In May will lose exclusivity in the U.S.; potential impact of generic competition is built into current guidance. Expanding rapidly outside the U.S.

THALOMID revenues were $85 million, down 18% from $104 million year-earlier.

ABRAXANE revenues were $74 million, first full quarter of revenue after acquired from Abraxis. In combo with Gemcitabine recommended by NCCN for pancreatic cancer. 32% response rate shown in Phase II study for metastatic platinum-refractory urothelial (bladder) cancer. Country by country launches for breast cancer in Europe planned for 2011.

Collaboration and other revenue was $9.3 million. Royalty revenue was $32.4 million.

Non-GAAP numbers: revenue $1.11 billion, up 40% y/y. Operating income $486 million. Net income $393 million, up 34% y/y. EPS $0.83, up 32% y/y. 93.2% gross margin.

Pomalidomide international Phase III trial initiated for relapsed or refractory multiple myeloma.

Istodax granted FDA priority review for PTCL (peripheral t-cell lymphoma), also recommended by NCCN. Marketing application submitted in Europe to EMA.

Apremilast is in multiple Phase III trials for psoriasis and psoriatic arthritis.

See also Celgene product pipeline

Cash and equivalents balance ended at $2.43 billion. $275 million cash flow from operations. $450 million spent on share repurchases. $1.5 billion share repurchase program announced during quarter.

Cost of goods sold was $127.3 million. R&D expense was $435.5 million (up from $204.7 million year-earlier). Selling, general and administrative expense was $302.3 million. Amortization was $69.1 million. Acquisition related gain was $96.7 million. Leaving GAAP operating income of $288.0 million. Other losses were $1.2 million. Income tax $31.7 million. Non-controlling interest was $0.5 million.

Q&A:

Revlimid volume growth? We will be able to drive growth on a volume basis, particularly outside the U.S.

Safety, secondary cancers? We see nothing negative that would change our development strategy. It is a very rigorous and transparent process. We are confident the outcome will be positive for Revlimid.

Margins trending down lately? There is noise from the acquisition. Later this year there will be restructuring costs and integration costs. Cost synergies from the acquisition won't start until later in 2011.

Acquisition strategy? All acquisitions have a strategic and financial plan. We are very pleased with the Pharmion and Abraxis acquisitions. Right now we are pleased with our position and have no need for further acquisitions, but would still consider them.

Pomalidomide? We think the data is strong, more is coming out, we will talk about it when it is ready.

Revlimid outside U.S. and Europe? Still room for gains in Europe. We are seeing a small impact from Turkey. We may disclose Japan revenues later in the year.

Are you still seeing increases in Revlimid durations in the U.S.? Yes, it is an important market driver in the U.S. and all around the world.

Given Q1, why not higher guidance for full year? Vidaza issue (see above). Guidance is from our prudent planning.

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