conference date: April 24, 2014 @ 6:00 AM Pacific Time
for quarter ending: March 31, 2014 (first quarter, Q1 2014)
Overview: Mixed picture, but very positive for Q2.
Basic data (GAAP):
Revenue was $1.730 billion, down 1.5% sequentially from $1.756 billion, but up 19% from $1.465 billion in the year-earlier quarter.
Net income was $279.7 million, up 30% sequentially from $214.4 million, but down 27% from $384.9 million year-earlier.
EPS (earnings per share, diluted) were $0.66, up 32% sequentially from $0.50, but down 26% from $0.89 year-earlier.
Confirmed full-year guidance. [Revenue is expected near $7.5 billion, which would be 15% growth over 2013. Product sales $7.3 to $7.4 billion. Revlimid sales $4.9 to $5.0 billion. Non-GAAP operating margin around 50%; GAAP 39%. Resulting in expected non-GAAP diluted EPS of $7.00 to $7.20. GAAP EPS $5.54 to $5.92. 425 million fully diluted average shares.]
"Our longer-term growth prospects are significantly enhanced by the approval of Otezla for psoriatic arthritis and the advancement and expansion of our pipeline."
There was some negative impact from Medicare Part D buying patterns in Q1.
$4 billion was authorized for further share repurchases by the Celgene board.
Otezla (apremilast) was approved on March 21 for psoriatic arthritis and revenue will commence in Q2.
Early Q2 sales trends are very positive.
Announced a major license agreement with Nogra Pharma Limited to develop and commercialize GED-0301, an oral antisense DNA oligonucleotide with Smad7 mRNA as a target for treating Crohn's disease and related indications. A Phase II trial was completed and data will be presented at an upcoming medical meeting. Upfront payment will be $710 million, plus development milestone payments that could reach $815 million for multiple indications, and sales milestones of up to $1.05 billion if annual sales reach $4 billion.
Non-GAAP numbers: net income $705 million, up 9% sequentially from $649 million and up 19% from $592 million year-earlier. EPS was $1.67, up 10% from $1.51, but up 22% from $1.37. Excludes up-front payments on new collaborations, as well as stock-based compensation, etc.
Product gross margin was 95%. Operating margin was 46.1%.
REVLIMID revenues were $1.143 billion, up 14.1% y/y. 7% sequential increase in new patients. But revenue was hit by the seasonal rebates. Newly diagnosed multiple myeloma (MM) applications were submitted in Europe and the U.S.
VIDAZA revenues were $148.4 million, down 27.3% y/y. There was impact from generic competition in the U.S., where sales dropped to $14 million, but sales were up in Europe and Japan.
ABRAXANE revenues were $184.8 million, up 51% y/y. There was an inventory build in Q4, resulting in a pause in Q1. But y/y growth reflects ongoing pancreatic cancer launches in the U.S. and Europe. Enrollment began on a Phase III trial comparing it in combination with gemcitabine to gemcitabine alone as an adjuvant treatment with surgically resected pancreatic cancer. Also commenced was a squamous cell non-small cell lung cancer Phase III maintenance therapy study. Celgene is also evaluating combination therapy strategies.
THALOMID revenues were $58.0 million up 1% y/y.
POMALYST / Imnovid (pomalidomide) revenues were $135.6 milion, up 375.8% y/y, driven by market share gains and increased duration in the U.S. as well as the launch in Europe.
Other product sales (Istodax and authorized generic Vidaza) were $34.5 million.
Cash and securities balance ended near $5.1 billion. Operating cash flow was $557 million. Short and long-term debt was $5.3 billion. $1.66 billion was spent to repurchase shares.
AG-221 for acute Myelo-leukemia (advanced hematologic malignancies with an IDH2 mutation) had promising Phase I results. This is a collaboration with Agios Pharmaceuticals.
Phase II for Crohn's disease had positive results, with Phase III trial to be planned to begin later this year.
Over 20 compounds are now in pre-clinical or clinical development. There are 25 pivotal trials underway and 12 earlier-stage trials, plus 30 pre-clinical programs. See also Celgene product pipeline. About 70 abstracts have been submitted for presentation at ASCO.
Gross margins improved / Non-GAP operating margin 50.5%
Cost of goods sold was $86.1 million. Research and development expense was $713.7 million. Selling, general and administrative expense was $494.1 million. Amortization of acquired intangibles was $65.7 million. Acquisition & restructuring charges $8.6 million. Leaving operating income of $361.8 million. Other expense was $29.5 million. Income tax provision $52.6 million.
The high GAAP R&D expenses was driven by up-front payments on new collaborations during the quarter.
There was a great deal of progress in Celgene's early stage candidates during the quarter as well.
Revlimid filing in Europe, breadth of? Base case is transplant-ineligble patients, but at start of process and will pursue the broadest possible label.
Natco situation, Markman thoughts? Can't say much about litigation, but built extensive intellectual property for Revlimid.
Otezla, payers requiring stepping through it before P&F? Our mid to long term goal is to get ahead of P&F, but short term we want to get started in a non-disadvantaged position. We are sampling titration packs at this point.
Swing in Abraxane, Q4 to Q1? It ws in the $15 million range. Q1 patient demand curve was sideways, but returning to growth in March, so back on track.
Comfort in oral anti-gen value? Anti-sense technology with delivery to site led to robust response in Phase II data.
Timing of contribution of revenues? Out to 2017 we have given very good visibility, including revenues not included in the model. That did not include the new Revlimid submissions. The new annoucements would likely not kick in until after 2017.
Crohn's disease is a target we have been very interested in, where remission rates are currently very low.
We believe there is appropriate IP to protect the new acquisitions beyond the 2027 time frame.
NICE guidance for Revlimid in U.K.? We believe the new Revlimid application in Europe will take the standard review time. We are optimistic that we can still expand utilization of Revlimid in the second line in the U.K. despite the NICE Thalidomide/Velcade/Revlimid reimbursement announcement about lack of cost effectiveness. This was not a new discussion. We received a similar preliminary negative NICE opinion before we got the very positive final opinion on Revlimid in its current label.
SG&A and R&D, getting to guidance? The SG&A is frontloaded this year because of the Otezla and other launch related expenses, while revenues will accelerate. For R&D it looks light at the beginning of the year compared to late last year because of milestone payments in Q4. The ramping up and down of trials is taken into account on the guidance.
Pomalyst vs. Kyprolis, both down sequentially? The 3rd + line market does seem to have consolidated. But we are seeing duration increasing nicely, while the patient base is growing for Pomalyst.
Revlimid new trials? We have long believed Revlimid plus Rituxan could be a chemo-free approach to all histologic subsets. The Remark study is building on the maintenance paradigm to try to extend the benefit of a Rituxan based therapy. We are excited about this large study with a placebo control arm.
Revlimid method of use pattents in Europe, risk this year? We are very confident where we are with those patents, but there will be challenges from time to time. So far grounds have not been found to be sufficient to invalidate the patents.
301 Phase III costs? We are projecting $250 to $300 million in expense, but over a five year period, so not that much per year, so absorbable within the financial model. We would like to initiate the Phase III this year. Because it is oral and effective and has a differentiated side effect profile, we see it possibly being used in the pre-biologic space.
Appetite for business development? We don't have a target going forward. We understand our financial restraints. It depends on the opportunities and our internal research capabilities. We are looking for transformational impacts on patients. Obviously late-stage assets are going to be more expensive than early-stage assets. When you see the data you will understand why we were so interested in this acquisition.
Abraxane is being used in pancreatic cancer performance status patients in categories 0 and 1. We can expand to patients who are not as well off. We will have periods where growth won't be dramatic, but with clinical programs, we expect continued expansion.
301, high sum paid for acquisition, is speed of response a key driver? Response rate and speed of remission were both key drivers. It is very different than what you see in the marketplace today. It could be a transformational asset.
Royalty rate in 301? We will try to develop the drug as quickly as we can. Whether 2018 or later, we will have more clarity when the Phase III trial begins. Royalties are tiered and customary for this particular market.
Revlimid PDUFA date for newly diagnosed MM will be announced as soon as we have it.
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