Analyst Conference Summary



conference date: July 23, 2015 @ 6:00 AM Pacific Time
for quarter ending: June 30, 2015 (second quarter, Q2 2015)

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Forward-looking statements

Overview: Strong revenue growth and raised 2015 EPS guidance.

Basic data (GAAP):

Revenue was $2.28 billion, up 10% sequentially from $2.08 billion, and up 22% from $1.87 billion in the year-earlier quarter.

Net income was $356.2 million, down 50% sequentially from $718.9 million, and down 40% from $597.8 million year-earlier.

EPS (earnings per share, diluted) were $0.43, down 50% sequentially from $0.86, and down 40% from $0.72 year-earlier.


Full year non-GAAP guidance was raised. Total product sales are expected between $9.0 and $9.5 billion, with Revlimid sales of $5.6 to $5.7 billion. Adjusted EPS $4.75 to $4.85. GAAP diluted EPS range $2.17 to $2.46, which is lower than the prior guidance due to acquisition costs.

2020 guidance target increased to $13 non-GAAP EPS and over $21 billion in revenue.

Quarter Highlights:

Revlimid led the revenue growth with 19% y/y. Filed 4 new INDs in the first half. Achieved 6 approvals for major products in key markets. Receptos acquisition should close in the third quarter. Pomalyst and Otezla are growing revenue at rapid rates. Growth was based on volume, not price increases.

The pace of R&D spend is expected to increase.

Non-GAAP numbers: net income $1.02 billion, up 14% sequentially from $891 million and up 36% from $748 million year-earlier. Diluted EPS was $1.23, up 15% from $1.07, and up 37% from $0.90 year-earlier. A $0.06 gain on investment was included in non-GAAP EPS. Excludes up-front collaboration payments and other charges. 51.3% operating margin.

Total product sales were $2.25 billion, up 10% sequentially from $2.05 billion, and up 22% from $ billion year-earlier. $ billion of sales were in the U.S., $ million were outside the U.S.

Revenue in millions
Q2 2015
Q1 2015
Q2 2014
change y/y

Other revenue was $23.7 million.

For Revlimid there were roughly balancing price increases in the U.S. and decreases in Europe. Geographic and reimbursement expansion continues. Data continues to reinforce efficacy and label expansion. Pomalyst had its label updated and obtained Japanese approval, which should drive further sales.

Otezla has now tied enbrel with the second-largest share of psoriasis patients.

Cash and securities balance ended near $7.49 billion, up sequentially from $7.3 billion. Operating cash flow was $284 million. Debt was $ billion. $902 million was spent to repurchase shares.

The Juno Therapeutics collaboration represents part of the next generation of growth drivers.

GED-0301 has a registration-enabling Crohn's endoscopy trial should complete enrollment in the second half. An ulcerative colitis Phase II study to begin in the second half of 2015.

In the second half CC-122 will advance to Phase I/II trials in DLBCL; luspatercept will begin a Phase 3 trial in beta-thalassemia; and a pivotal program will be initiated in AG-221 in AML.

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.

Cost of goods sold was $ million. Research and development expense was $ million. Selling, general and administrative expense was $ million. Amortization of acquired intangibles was $ million. Acquisition charges $ million. Leaving operating income of $ million. Other expense was $ million. Income tax provision $ million.


First line myeloma launch in Germany? We got approval in February and are seeing rapid uptake in share. We hope it goes in the same direction as in the U.S., but each nation is different.

Intellectual property Revlimid? Our strategy is independent of our defense of IP.

Abraxane growth drivers? In pancreatic cancer we have been gaining share. Lung and breast are quite competitive, we are holding our own. Pancreatic and lung launches in Europe should help, still waiting for some national approvals.

Guidance despite dilution from Receptos deal? We had great momentum in the first half. With Receptos acquisition we add the R&D burn to guidance, plus the debt we take on. Momentum is so strong we can absorb the new expenses and still raise EPS guidance.

Revlimid in U.S.? We are extremely pleased with Revlimid's performance. We are gaining share in newly diagnosed myeloma, particularly in the non-stem cell transplant population. We are seeing duration expand, it is now 16.5 months or so. More gains are still to come.

Otezla patients, how hard to go straight without a biologic first? About 50% of scripts go through without extra paperwork. Another 20% need just a medical necessity letter. We work to continue to expand access.

SG&A going forward? We have been spending on building out the I&I franchise and etc. SG&A will continue to grow, but not as fast as revenue.

Revlimid lymphoma trials? 5 are enrolling. First data should be late in 2016.

How much of R&D in quarter was for external milestones? We had a low level of milestones in Q2. Receptos trials will be pushed forward, we will continue to invest in R&D, but our operating margin will increase long term towards the high 50s by 2020.

Net debt after acquisition? We will end with $5 billion in debt, which will generate some interest expense.

GED-0301 phase 3 efficacy study? Will start this quarter, it is a big international study.

Juno deal motivation? The long term strategic alignment for T-cell therapies, their whole infrastructure, is aligned with our view of the long-term potential. We are going to build a team that is going to do great things.

PML risk with Receptos molecule? Gilenya had a small handful of cases, mostly pre-treated with Tysabri. We don't think there is a problem with the Receptos molecule.

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Copyright 2015 William P. Meyers