Analyst Conference Summary



conference date: January 26, 2017 @ 6:00 AM Pacific Time
for quarter ending: December 31, 2016 (fourth quarter, Q4)

I own this stock
Forward-looking statements

Overview: Continued strong y/y revenue growth. Buying Delinia.

Basic data (GAAP):

Revenue was $2.98 billion, flat sequentially from $2.98 billion, and up 16% from $2.56 billion in the year-earlier quarter.

Net income was $428.9 million, up 150% sequentially from $171.4 million, but down 24% from $561.0 million year-earlier.

EPS (earnings per share, diluted) were $0.53, up 152% sequentially from $0.21, but down 23% from $0.69 year-earlier.


Total 2017 revenue is expected up 18% to $13.0 to $13.4 billion. GAAP diluted EPS $5.85 to $6.21. Non-GAAP diluted EPS $7.10 to $7.25. Operating margin about 45.5% GAAP, 56.5% non-GAAP. Weighted average diluted shares 815 million.

Quarter Highlights:

Celgene CEO Mark J. Alles said “We expect our business momentum and significant near-term catalysts to drive high-growth through 2017 and beyond.” Demand growth remained strong across geographies.

In the next 2 years Celgene expect 19 Phase 3 data readouts, and 9 new molecules advancing to pivotal trials. In the next 5 years 14 new molecules could potentially be approved. Has enhanced capabilities with transactions with EngMab, Evotec, Anokion, and now Delinia.

The FDA granted Priority Review for Revlimid as a maintenance treatment, post-autologous stem-cell transplant, in Multiple Myeloma. The PDUFA (decision) date is February 24, 2017. A European decision is also expected in the first half of 2017.

Celgene expects to begin a pivotal program with Juno for JCAR017 for lymphomas in 2017. Celgene owns the rights outside of North America and China.

Celgene is developing bb2121 for relapses/refractory multiple myeloma with Bluebird Bio.

Non-GAAP numbers: net income $1.29 billion, up 5% sequentially from $1.23 billion and up 34% from $0.96 billion year-earlier. Diluted EPS was $1.61, up 2% sequentially from $1.58, and up 36% from $1.18 year-earlier. Non-GAAP numbers exclude share-based compensation of $155 million, collaboration upfront expense of $128 million, R&D asset acquisition expense of $270 million, litigation accrual expense of $69 million, $105 million in amortization, $272 million change in equity investment adjustment, with a tax benefit of $150 million from the above.

Total product sales were $2.98 billion, up slightly sequentially from $2.97 billion, and up 17% from $2.54 billion year-earlier. $1.90 billion of sales were in the U.S., $1.08 billion were outside the U.S.

Revenue in millions
Q4 2016
Q3 2016
Q4 2015
change y/y

Other, non-product revenue was $3.7 million.

Otezla is still waiting for reimbursement decisions in most EU nations. On track to achieve blockbuster status. Japan granted full marketing authorization for plaque and psoriatic arthritis. Made deals for my widespread distribution of Otezla in 2017 in the U.S., but at lower margins.

Cash and securities balance ended near $7.97 billion, up sequentially from $6.87 billion. Debt was $14.3 billion. Operating cash flow was $3.98 billion. $2.16 billion was spent to repurchase shares. $4.73 billion remains in share repurchase program.

For the full year 2016 revenue was $11.2 million, GAAP net income $2.0 billion, GAAP EPS $2.49. Non-GAAP net income was $4.77 billion, with adjusted EPS of $5.94.

"Celgene expected to submit a new drug application (NDA) to the FDA for enasidenib (AG-221) in relapsed and/or refractory acute myeloid leukemia (AML) with isocitrate dehydrogenase-2 (IDH2) mutation by year-end, but did not. The NDA will be based on data from an ongoing phase I/II trial in patients with relapsed and/or refractory AML and other advanced hematologic malignancies with an IDH2 mutation." AG-221 is licensed from Agios.

GED-0301 (mongersen) Phase 1b data for Crohn's was presented in October. Phase 2 data for ulcerative colitis is expected in 2017. Ozanimod for ulcerative arthritis is enrolling a Phase 3 trial, with data from the Phase 2 trial expected later this year.

See Slide 36 for Key Catalysts in 2017.

See also Celgene product pipeline. There are a large number of trials under way not mentioned in this summary. Many of these programs are "potentially transformative."

Cost of goods sold was $116 million. Research and development expense was $1,135 million. Selling, general and administrative expense was $685 million. Amortization of acquired intangibles was $105 million. Acquisition charges $13 million. Leaving operating income of $930 million. Other & interest expense was $440 million. Income tax provision $70 million.

Interest expense from Receptos acquisition had a major impact.


Growing earnings from 2020 to 2030 prior statement? Despite expiration of Revlimid exclusivity? "We've got a ton of optionality in this portfolio." Giving us a strong chance of growing every year in the period. Many compounds we are developing have not even been put into our models yet.

Growth factors are intact. The sequential flatness was due to a large Russian tender in q3.

Potential dividend? We are always thinking about capital allocation. We have a lot of Phase 3 outcomes coming up in the next 2 years. If that turns out well, then we can think freely about new approaches to capital allocation. Our investor base wants us to build the pipeline, with allocation of cash a secondary consideration.

Trump administration? We have not had direct interaction with the administration. We work through our trade associations, which are advancing how we create jobs and the value of our medicines. We hope the administration will protect and preserve the competitive marketplace.

Ozanimod expectations? We should get full Phase 3 data in the first half of this year. We may launch on our own or partner. We have expectations for a differentiated safety profile. We could be in the market with two indications and be ramping significant revenue before 2020.

Tax rate reform? We are tracking that closely, but we don't know how it will play out. It could level the playing field with foreign competitors. The best thing would be getting access to our worldwide cash flows, if that happens.

Competition from Otezla from all the new psoriasis drugs coming to market? There are a lot of therapy types now. But only 20% of patients with moderate to severe disease are receiving any treatment in the U.S., so there is plenty of room to grow.

Is neurology becoming a major area of focus for Celgene? High unmet medical need and disruptive opportunities are what we built the business on. Ozanimod provides an opportunity in neurology.

OpenIcon Analyst Conference Summaries Main Page

Celgene Investor Relations page

My Celgene main page


More Analyst Conference Pages:


Disclaimer: Our analyst summaries may include both our condensations of statements made by company representatives and our own analysis. They are not covered by any warranty. We cannot guarantee anything said by company representatives is true. We try not to make errors, but it is possible. Before making or terminating an investment you should always verify any factual basis of your decision. Note that summaries, of necessity, eliminate fine-grains.

Copyright 2017 William P. Meyers