Analyst Conference Summary

conference date: July 28, 2011 @ 6:00 AM Pacific Time
for quarter ending: June 30, 2011 (second quarter, Q2 2011)

Forward-looking statements

Overview: Strong quarter. Looking forward to strong growth.

Basic data (GAAP):

Revenue was $1.18 billion, up 4% sequentially from $1.13 billion, and up 38% from $852.7 million in the year-earlier quarter.

Net income was $279.2 million, up 9% sequentially from $255.6 million and up 80% from $155.4 million year-earlier.

EPS (earnings per share) were $0.59, up 9% sequentially from $0.54 and up 79% from $0.33 year-earlier.

Comparisons:

Q1 2011 Celgene summary
Q2 2010 Celgene summary

Guidance:

2011 guidance revised upward. Non-GAAP reenue range of $4.6 to $4.7 billion, led by REVLIMID product sales range of $3.15 to $3.25 billion. Non-GAAP EPS range $3.45 to $3.55.

Quarter Highlights:

Record results. Operating profit margin is expanding despite major investments in clinical trials. Numerous milestones are ahead in 2011 and 2012.

Non-GAAP numbers: Net income $417 million, EPS $0.89, up 29% y/y. Operating margin 44.1%.

REVLIMID revenues were $795 million, up 35% y/y. International sales were up 43%. Expansion to Russia, China and Brazil is still ahead. Positive results in multiple indications further progress to future filings.

VIDAZA revenues were $162 million, up 23% y/y. Newly launched in Japan and Australia.

ABRAXANE revenues were $95 million (over zero year-earlier).

THALOMID revenues were $88 million, down 10% y/y.

Royalty and collaboration revenue was $28.8 million.

Revenue growth was driven by market share gains, geographic expansion and increased durations of therapy. Phase III CALGB study for Revlimid for continous therapy for multiple myeloma showed overall survival benefit.

ISTODAX for Peripheral T-Cell Lymphoma (PTCL) approved for second-line treatment. Revlimid Phase II data for metastatic castrate-resistant prostate cancer showed 86% of patients achieved a 50% reduction in PSA. Revlimid Phase II with Rituximab for Indolent B-Cell Lymphoma had 91% overall response rate and 65% complete response rate.

In later 2011 will submit Revlimid for newly diagnosed multiple myeloma for FDA approval, and to European Medicines Agency for del 5q myelodysplastic syndromes. ISTODAX for PTCL will be launched in U.S. A Phase II/III study of revlimid + vidaza for AML (accute myeloid leukemia) will be launched. Apremilast for Ankylosing Spondylitis Phase II data will be released. Abraxane for non-small cell lung cancer will have FDA submission in second half of 2011. There are currently 25 Phase III and Pivotal trials underway. 20 compounds are in clinical and pre-clinical development.

See also Celgene product pipeline

Cash and equivalents balance ended at $2.79 billion. $461 million cash from operations. $239 million was spent on share repurchases in the quarter.

Cost of goods sold was $126.4 million. R&D expense was $371.5 million. SG&A $305.6 million. Amortization of acquired assets $70.1 million. There was an acquisition related gain of $9.5 million. Leaving operating income of $318.9 million. $1.3 million gain in equity, $1.8 million interest and other expense. Income tax provision $39.2 million.

Q&A:

Revlimid for newly diagnosed myeloma 120 day questions? There are no questions that were unexpected. We will give complete, comprehensive answers.

Operating leverage at some point from R&D? SG&A will trend down over time. For R&D even though we have a number of Phase III trials nearing end, we will invest appropriately. Our long term plan is for R&D to remain about 25% of revenue.

Revenue and EPS guidance? We are assuming generic competition for Vidaza in the second half, and a larger base revenue to grow over, so yes some revenue velocity slowdown, but some expenses from first half will not be repeated in second half.

Pomalidomide filing factors? The updated data will be presented at ASH this year. That data needs to be completely analyzed for any accelerated filing. The baseline strategy is still to do the Phase III trials.

Revlimid does not yet have reimbursement approval in Brazil or China, so we are focused on those markets. In 18 to 24 months we could see an impact on revenue.

No generic Taxotere pressure on Abraxane? We are focused on our expansion into oncology execution. Generic Taxotere is a headwind. In Q2 we got a bit of a benefit from shortages in generic breast cancer therapy. We are building market share in the approved indication and developing other indications like melanoma, pancratic and lung cancer.

Oral Vidaza? There is tremendous interest in oral Vidaza. We have made progress on the formulation.

Revlimid sales in Japan? No specifics, we are on track in Japan with 22% market share over all lines.

Use of cash? Cash buy backs in first half are indicative of second half unless we find an acquisition that would be good for us. We don't need huge amounts of cash, but will manage it quarter by quarter.

How soon could there be an Abraxane lung cancer approval? Non-small cell lung will be submitted as quickly as possible. Then the standard ten month review.

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