Analyst Conference Summary



conference date: January 28, 2016 @ 6:00 AM Pacific Time
for quarter ending: December 31, 2015 (fourth quarter, Q4 2015)

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Forward-looking statements

Overview: Strong revenue and product growth continues.

Basic data (GAAP):

Revenue was $2.56 billion, up 10% sequentially from $2.33 billion, and up 22% from $2.09 billion in the year-earlier quarter.

Net income was $561.0 million, up sequentially from negative $34.1 million, and down from $614.9 million year-earlier.

EPS (earnings per share, diluted) were $0.69, up sequentially from negative $0.04, and down from $0.74 year-earlier.


Full year 2016 product sales should be between $10.5 and $11.0 billion, up 17% y/y. Adjusted operating margin of 53.5% and GAAP operating margin near 42%. Adjusted diluted EPS of $5.50 to $5.70. GAAP EPS $4.26 to $4.64. Share count 825 million.

Volume growth, not price increases, will represent most revenue growth in 2016.

For Q1 2016 expects adjusted diluted EPS of $1.27 to $1.30 and GAAP diluted EPS of $0.98 and $1.05. This includes the usual donut-hole lag, the Abraxane sell through, and several milestone payments.

Quarter Highlights:

Management changes in January leverage the experience and leadership of the Celgene team. 2015 was a great year for Celgene. Significant strategic investments were made while strong commercial results were delivered. Sees high growth for another decade. Q4 revenue growth was led by Pomalyst and Otezla, but Revlimid was up 18% y/y. There was a negative impact from foreign exchange rates.

Plans to initiate 50 new clinical trials in 2016. Data from at least 18 Phase 3 trials is expected in 2016 through mid-2018.

Non-GAAP numbers: net income $0.96 billion, down % sequentially from $1.01 billion but up % from $840 million year-earlier. Diluted EPS was $1.18, down sequentially from $1.23, and up 17% from $ year-earlier. Excludes up-front collaboration payments and other charges, but includes a $70 million milestone payment to OncoMed. % operating margin.

"Human Longevity, Inc. (HLI), a genomics and cell therapy-based diagnostic and therapeutic company based in San Diego, agreed to purchase Celgene Cellular Therapeutics' (CCT) biobanking business known as LifebankUSA and CCT's biomaterials portfolio of assets including Biovance. In addition, in this transaction HLI will also acquire the full rights to PSC-100, a placental stem cell program which CCT partnered with HLI in August 2014"

Total product sales were $2.54 billion, up % sequentially from $2.31 billion, and up 23.6% from $2.05 billion year-earlier. $1.55 billion of sales were in the U.S., $993 million were outside the U.S.

Revenue in millions
Q4 2015
Q3 2015
Q4 2014
change y/y

Other revenue was $24.1 million.

Data continuous to build to encourage continuous treatment with Revlimid.

Abraxane revenue was boosted by a end-of year inventory purchase. Now in early stages of launch for lung cancer in Europe.

Cash and securities balance ended near $6.6 billion, down sequentially from $7.51 billion. Debt was $14.3 billion. Full year 2015 operating cash flow was $2.5 billion. $3.3 billion was spent to repurchase shares in the full year 2015. In Q4 used $0.4 billion to repurchase shares. $3.9 billion remains in share repurchase program.

A supplementary NDA was filed with the FDA for the expanded indication of Revlimid for the treatment of non-del 5q lower risk myelodysplastic syndromes (MDS). The Prescription Drug User Fee Act (PDUFS) decision date for the submission is April 16, 2016.

A Phase 3 registration study of GED-0301 for Crohn's disease is starting with enrollment completion expected by year end. There will be a second Phase 3 trial as well, starting in early 2016.

At ASH in December data was presented from Revlimid, luspatercept, AG-221, AG-120, and ACY-1215. Data from Abraxane studies was presented at the Breast Cancer Symposium in December. In January Abraxane + Gemcitabine feasibility for extension into second-line following first-line was reported at ASCO.

2016 and 2017 possible data readouts:

REMARC trial with REVLIMID in DLBCL maintenance
CONTINUUM trial with REVLIMID in CLL maintenance
ETNA trial with ABRAXANE in neoadjuvant breast cancer
PSA-006 trial with OTEZLA in biologic naïve psoriatic arthritis

RELEVANCE® trial with REVLIMID in first-line follicular lymphoma
AUGMENT® trial with REVLIMID in relapsed and/or refractory follicular lymphoma
IMpower 130 Roche trial with ABRAXANE and atezolizumab in non-squamous NSCLC
IMpower 131 Roche trial with ABRAXANE and atezolizumab in squamous NSCLC
apact trial with ABRAXANE in adjuvant pancreatic cancer
abound.sqm with ABRAXANE in squamous NSCLC maintenance
RELIEFTM trial with OTEZLA in Behçet's disease
SUNBEAM trial with ozanimod in multiple sclerosis
RADIANCE trial with ozanimod in multiple sclerosis

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 $105.4 million. Research and development expense was $776.8 billion. Selling, general and administrative expense was $609.1 million. Amortization of acquired intangibles was $88.1 million. Acquisition charges $83.7 million. Leaving operating income of $900.2 million. Other & interest expense was $154 million. Income tax provision $184.5 million.

There was a significant R&D ramp in Q4 that will continue into 2016.

Interest expense in 2016 is expected between $480 to $500 million. The increase is a result of debt used to finance acquisitions.


2017 guidance still intact? On a constant currency basis we are on track. Maybe the mix is a little different. That guidance was issued in January 2013, and we have seen currency impact, but currency remains volatile. We are investing heavily to reach the 2020 guidance, which we still see as reaching despite any foreign exchange impact.

Pomalyst beat, any change in Q4? Just the ongoing impact of penetration in Europe and launch in Japan in June.

CD40 therapies in multiple myeloma? Treatment landscape is starting to settle out. It is a little bit early to call trends in later lines of therapy.

Remark trial, do you need OS data? We are looking for PSF and a trend in OS. There are no maintenance therapies right now for DLBCL.

Duration trends in Revlimid and impact of triplet treatments? The data supports longer treatment. We are seeing increasing duration trends for both Revlimid and Pomalyst, though Europe is lagging the U.S. The trends in Europe are very good. It takes a while when a newly diagnosed patient gets on drug and then stays on for it to affect the overall numbers.

We have been pleased with our newly diagnosed multiple myeloma reimbursement discussions in Europe. There are nations that have not approved reimbursement yet, there is FX headwind, there are pricing negotiations. Do we think the full potential is included in guidance? No. We want to see strong growth for a long time to come.

If the Euro and other currencies strengthened, that would help Celgene, including with 2017 and 2020 guidance.

Abraxane drivers? Number of cycles has been about as expected. The launches of the checkpoint inhibitors created competition, but has been trending to stabilizing. We still don't have reimbursement in all the top-five countries in Europe, so there is still room for expansion there. IO (immuno-oncology) combination regimens could make Abraxane a backbone of therapy. We are looking to see Phase 3 IO data in 2017.

Business development activity plans in 2016? 2015 was a big year. We are not backing down at all, but what we do depends on the opportunities we see. Science is really opening up in some areas. We have the financial strength to work with everybody.

We believe we can continue to take reasonable price increases in the U.S. when connected to the value proposition. In Europe we had some price decreases as we expanded into the newly diagnosed multiple myeloma space. But the global impact of price is "altogether relatively modest."

Juno collaboration CD-19 option? There is a whole package of information Juno will provide for us to evaluate before we make any opt-in decision.

Sees share price as low, has plenty in the stock repurchase plan, sees that as a great opportunity. No particular problem with cash balances overseas.

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Copyright 2016 William P. Meyers