Analyst Conference Summary

conference date: July 24, 2014 @ 6:00 AM Pacific Time
for quarter ending: June 30, 2014 (second quarter, Q2 2014)

Forward-looking statements

Overview: Continued strong revenue and earnings growth. Raised 2014 guidance.

Basic data (GAAP):

Revenue was $1.87 billion, up 8% sequentially from $1.730 billion, and up 17% from $1.60 billion in the year-earlier quarter.

Net income was $597.8 million, up 114% sequentially from $279.7 million, but up 25% from $478.1 million year-earlier.

EPS (earnings per share, diluted) were $0.72, up 118% sequentially from $0.33, and up 29% from $0.56 year-earlier. (adjusted for 2 for 1 split in June 2014)

Guidance:

For full year 2014: Revenue about $7.6 billion (prior guidance was $7.5 billion), including Revlimid sales near $4.95 billion and Abraxane sales between $850 and $900 million.

GAAP net income between $2.058 billion and $2.130 billion. GAAP EPS $2.46 to $2.55.

Non-GAAP net income between $3.006 billion and $3.048 billion. Non-GAAP EPS $3.60 to $3.65.

Quarter Highlights:

Celgene's products "demonstrate significant momentum." CEO Bob Hugin said "We look forward to multiple milestones in the second half of the year, including the expansion of Otezla into psoriasis and the further advancement of our pipeline." In the first quarter of sales for psoriatic arthritis, Otezla demand grew steadily, with free two-week sample packs being distributed to patients.

Q2 "was a transformational quarter." in I&I (immunology and inflamation).

Expect at least two new compounds will have INDs filed by year end.

Price increases added 3% to the revenue growth rate, but global prices are expected to be flat for 2014 on a global basis.

Non-GAAP numbers: net income $750 million, up 6% sequentially from $705 million and up 15% from $653 million year-earlier. Diluted EPS was $0.90, up 8% from $0.83, and up 18% from $0.76 year-earlier. Excludes up-front payments on new collaborations, as well as stock-based compensation, etc.

Product gross margin was 95.0%. Operating margin was 50.3%.

REVLIMID revenues were $1.214 billion, sequentially from $1.143 billion and up 14% from $1.051 billion year-earlier. Application was made for label expansion to newly diagnosed multiple myeloma (NDMM) in the U.S. and Europe. FDA PDUFA date is February 22, 2015. Also completed enrollment of a Phase III trial for maintenance in diffuse large B-cell lymphoma. Revlimid reached the progression free survival endpoint in a pivotal Phase II trial for relapsed and/or refractory mantle cell lymphoma.

VIDAZA revenues were $152.0 million, up sequentially from $148.4 million, but down 28% from $211.3 million year-earlier.

ABRAXANE revenues were $215.3 million, up sequentially from $184.8 million, and up 39% from $154.8 million year-earlier. A Phase III trial for adjuvant resected pancreatic cancer began enrollment. Also began enrollment in Phase III trial for maintenance for squamous cell non-small cell lung cancer (NSCLC).

THALOMID revenues were $54.3 million, down sequentially from $58.0 million and down 18% from $66.2 million year-earlier.

POMALYST / Imnovid (pomalidomide) revenues were $160.9 million, up 19% sequentially from $135.6 milion, and up 143% from $66.2 million year-earlier.

Otezla (apremilast) revenues were $4.6 million. It had been approved on March 21 for psoriatic arthritis and revenue commenced in Q2. Phase III ankylosing spondylitis data was announced. 80% of patients can start Otezla without having to fail a biologic. There are already over 4000 patients on Otezla.

Istodax revenue was $17.1 million, up 27% from $13.5 million year-earlier.

Other product sales were $2.3 million.

Cash and securities balance ended near $6.2 billion. Operating cash flow was $516 million. Short and long-term debt was $6.9 billion. $475 million was spent to repurchase shares. In May Celgene sold senior unsecured notes of varying durations for an aggregate $2.5 billion.

Phase I AG-221 trial for advanced hematologic malignancies with the IDH2 mutation data was presented; described as "exciting". Celgene exercised an option to license AG-221.

The initiation of GED-0301 for Crohn's disease Phase III trial will be important. Data will be present in Vienna on October 21.

Over 20 compounds are now in pre-clinical or clinical development. There are over 30 pivotal and earlier-stage trials underway, plus over 30 pre-clinical programs. See also Celgene product pipeline. A large number (13) of key milestones are expected to be reached in the second half of 2014.

Celgene is initiating a broad Phase I/II clinical program with T-cell checkpoint inhibitors.

Gross margins improved / Non-GAP operating margin 50.5%

Cost of goods sold was $98.9 million. Research and development expense was $456.9 million. Selling, general and administrative expense was $491.8 million. Amortization of acquired intangibles was $65.3 million. Acquisition & restructuring charges $0.9 million. Leaving operating income of $758.9 million. Other expense was $52.1 million. Income tax provision $109.0 million.

Q&A:

What will be the key drivers of growth towards the end of the decade? Revlimid beyond multiple myeloma would all be beyond 2017. The Krohn's asset would also come into the mix after 2017. There are many more assets that would come into the pipeline. We will inform investors at the appropriate inflection points. There should be more visibility over the next couple of quarters as to the incredible opportunities for 2020.

AG-221 payments for rights? AG-221 nothing on the opt-in, but the development costs will start to shift to us. GED-301 upfront was $710 million, done with purchase accounting you can find in the 10-Q.

Revlimid duration trends? Increasing number of physicians are treating until progression, which has increased duration. Data at ASH next year would support duration further.

PD-1 is seeing a lot of interest from other companies for possible collaborations. CD-38 could address multiple subsets of multiple myeloma (MM).

2015 view of Revlimid? Things are moving along as expected in Europe. Launch in U.S. could start towards the end of Q1. Europe launch would be followed by the reimbursement process. The contribution to growth would really kick in more in 2016. We are confident the single-agent profile in lymphoma will get a boost. Remember that interim analysis is subject to further events.

Appetite for late stage acquisitions? We are talking about segmentation of MDS in our assets.We think ACE 11 or 536 could address a significant population of MDS patients. it is an active and interesting time in the industry. The 301 acquisition was see as a late-stage asset acquisition. Our business model has tremendous leverage, so adding late stage assets does give leverage to the model. We have a great pipeline, but if something opportunistic came along, we could go for it.

We believe GED-0301 for Crohn's data, when you see it, including dose response and durability, you will understand exactly why we bought it. We are eager to get that data out.

We don't expect to issue dividends in the near future, but we are keeping dividends in mind, particularly after we diversify our revenue more from Revlimid.

Our CLL strategy with next generation molecules will address maintenance, which we believe is an area that needs addressing. There are many CLL segments different therapies can address.

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