Analyst Conference Summary



conference date: January 26, 2012 @ 6:00 AM Pacific Time
for quarter ending: December 31, 2011 (fourth quarter, Q4 2011)

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Forward-looking statements

Overview: Continued strong revenue and profit growth. Announced acquisition of Avila Therapeutics.

Basic data (GAAP):

Revenue was $1.28 billion, up 5% sequentially from $1.22 billion and up 20% from $1.07 billion in the year-earlier quarter.

Net income was $410.2 million, up 10% sequentially from $373.0 million and up 96% from $209.6 million year-earlier.

EPS (earnings per share) were $0.91, up % sequentially from $0.81 and up 107% from $0.44 from year-earlier.


Q3 2011 Celgene summary
Q4 2010 Celgene summary


For 2012 total revenue expected up 15% y/y to range of $5.4 to $5.6 billion. Revlimid sales up 19% y/y. Non-GAAP EPS range $4.70 to $4.80. This includes the Avila acquisition. R&D will be about 25% of revenue.

Quarter Highlights:

Avila Therapeutics to be acquired this quarter for $350 million cash and up to $575 million in milestone payments. Protein silencing technology platform includes Phase I candidate AVL-292 for hematologic cancers.

"Superior performance does not happen by accident." 2012 catalysts for growth are the result of years of development. 2012 will be a pivotal year for Celgene.

Non-GAAP numbers: EPS $1.05, net income $473 million, up 38% from $343 million year-earlier.

REVLIMID revenues were $855 million, up 20% y/y. Marketing application for newly diagnosed multiple myeloma in Europe decision could come in first half of 2012. Application for U.S. and other markets in 2012, too. European marketing application for 4q transfusion dependent low-risk myelodsyplastic syndromes planned for this quarter.

VIDAZA revenues were $189 million, up 34% y/y driven by recent launches in the U.K. and Japan.

ABRAXANE revenues were $104 million, down sequentially by 1.9% after generic paclitaxel shortage resolved and due to quality issues with contract manufacturers. Supplemental new drug application (sNDA) was submitted to FDA for first-line advanced non-small cell lung cancer in December. Two Phase III trials nearly fully enrolled, one for melanoma and one with gemcitabine for pancreatic cancer.

THALOMID revenues were $82 million, down 12% y/y.

Royalty and collaboration revenue was $3.0 million. Royalty revenue was $38.2 million.

Cash and equivalents balance ended at $2.65 billion. $647 million was spent on share repurchases.

Pomalidomide for relapsed and refractory multiple myeloma makreting application will be submitted this quarter to FDA and in Q2 to EMA (Europe) based on Phase II MM-002 results, while Phase III trial MM-003 continues. Phase III myelofibrosis trial to fully accrue in Q1 2012.

Apremilast completed Phase III enrollment in five trials, two for psoriasis and three for psoriatic arthritis. Phase III trial for ankylosing spondylitis scheduled to start this quarter.

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

Cost of goods sold was $77.5 million. R&D expense $436.4 million. Selling, general and administrative $315.1 million. Amortization of acquired intangible assets $75.0 million. Acquisition related gains $24.9 million. Total expenses $879.2 million, leaving operating income of $404.7 million. Other income $0.6 million. Income tax benefit $8.5 million.


U.S. dynamics for Revlimid? Market share has been consistent in 2011. Improvement in revenue has been due to expanding myeloma market base and increased duration of treatment. We expect these U.S. trends to continue in 2012.

Myeloma market penetration? We have a lot of global opportunity in myeloma. In U.S. duration of therapy has been key, but getting a label for newly diagnosed myeloma induction and maintenance would drive further expansion. This would also apply globally.

France? It was affected by the secondary malignancy issue more than any other national market. The positive data from ASH should mean France is an opportunity in 2012 and after.

Brazil, China and Russia? These are high potential, high priority markets. China will be later this year for sure. Russia is a reimbursement issue and is built into forecast. Looking for full approval and reimbursement in Brazil, probably 2013 events.

Avila strategy? Strengthens hematology franchise and 292 is important. The platform has shown good productivity with 3 candidates generated. The synergies look strong and the finances are good.

More acquisitions? We continue to look for best-in-class capabilities that fit our portfolio, but they could be modest in size.

Revlimid in Japan? 2011 was the first full year of operations and the second half accelerated over the first half.

Share repurchases? Will manage capital structure dynamically. We have strong cash flow generation that allows for business development while optimizing capital structure through stock buy backs.

Pomalidomide? We would not be moving forward based on Phase II data if we did not think we had a reasonable chance of success.

Price concessions with longer duration of therapy? The value proposition is very high, so reimbursement has been good. Conversations are on nation-by-nation and payer-by-payer basis. So there is no simple answer on prices with label expansion.

IMWG consensus paper? We are aligned with the myeloma thought leaders as reflected in the paper. There are substantial debates in myeloma about the long progression free survival periods and strategies today.

Flat sequential Abraxane U.S. sales? We know we benefitted from a lack of paclitaxel in Q3. Avastin multiple combination study for breast cancer data suggests we are back to single agents like Abraxane.

MM020 interim analysis is event driven and so we would expect one some time in 2012, more likely in second half. We expect Revlimid to be established as the backbone for treatment of newly diagnosed myeloma, but we have to see the data.

Upper end for margins? No end in sight yet for operating margin improvement.

Japan? Japanese market has significant differences from the U.S. It is even more safety conscious. We have done a lot of research on the Japanese market, have adapted to it, and have a lot of confidence for 2012 and thereafter.

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Copyright 2012 William P. Meyers