Analyst Conference Summary

conference date: April 25, 2013 @ 6:00 AM Pacific Time
for quarter ending: March 31, 2013 (first quarter, Q1 2013)

Forward-looking statements

Overview: Another growth quarter, with new product introductions ahead.

Basic data (GAAP):

Revenue was $1.46 billion, up 3% sequentially from $1.42 billion, and up 15% from $1.27 billion in the year-earlier quarter.

Net income was $384.9 million, up 46% sequentially from $263.1 million, but down 4% from $401.5 million year-earlier.

EPS (earnings per share, diluted) were $0.89, up 46% sequentially from $0.61, but down 1% from $0.90 year-earlier.

Guidance:

Raised full year 2013 guidance. Net product sales growth 11% y/y to $6.0 billion. Revlimid revenue range $4.1 to $4.2 billion. Non-GAAP EPS $5.55 to $5.65 (up from $5.50 to $5.60). GAAP EPS $4.32 to $4.47.

Quarter Highlights:

"The first quarter delivered remarkable achievements ... With the momentum from these milestones and opportunities in the rest of the year, we are well-positioned to achieve our goals for 2013."

Non-GAAP numbers: net income $592 million, up 3% sequentially from $572 million and up 22% from $484 million year-earlier. EPS $1.37, up 27% from $1.08 year-earlier.

Product sales were $1.43 billion, up 1% sequentially from $1.42 billion and up 15% y/y.

REVLIMID revenues were $1.003 billion, flat sequentially from $1.002 billion, but up 16% y/y. Sales were negatively impacted by Medicare Part D gap and exchange rates.

VIDAZA revenues were $204 million, down 6% sequentially from $216 million, but up 10% y/y. Guidance includes a the projected introduction of generic Vidaza in the U.S. later this year.

ABRAXANE revenues were $123 million, up 16% sequentially from $106 million and up 18% y/y. Launched in Q4 for non-small cell lung cancer (NSCLC).

THALOMID revenues were $57 million, down 22% sequentially from $73 million and down 26% y/y. Included $8 million in sales returns from transition from retail to specialty pharmacies.

POMALYST (formerly Pomalidomide) for relapsed and refractory multiple myeloma sales were $29 million, following FDA approval on February 8, 2013. EMA decision expected in Q3. But it did not meet the primary endpoint in a Phase III myelofibrosis trial.

Royalty and collaboration revenue was $35.3 million, up sequentially from $31.9 million.

Cash and securities balance ended at $3.52 billion. Operating cash flow was $367 million. $403 million was spent to repurchase shares, and has $834 million more authorized.

Revlimid application for relapsed and refractory mantle cell lymphoma (MCL) was accepted by the FDA and should get a decision in Q2. Revlimid was approved in China in combination with dexamethasone for second-line treatment of relapsed or refractory multiple myeloma. Expanding label to newly diagnosed MM (multiple myeloma) is a priority, with data looking positive and likely US and EU applications in Q4. Second primary malignancies (SPMs) are at low enough a rate that they should be trumped by overall efficacy and safety. Results could be presented at ASH in December.

Abraxane filed for FDA approval for metastatic pancreatic cancer after positive Phase III trial results, with a decision expected no later than Q1 2014. Also hoping for results in Melanoma and bladder cancers.

Apremilast for psoriatic arthritis new drug application was submitted to FDA in the quarter, with commercial launch hoped for in 2014. Will complete enroll ankylosing spondylitis phase III trial in the second half of 2013.

Over 20 compounds are now in pre-clinical or clinical development. See also Celgene product pipeline. New and updated data from over ten pivotal phase III trials is expected in 2013.

Cost of goods sold was $80.5 million. Research and development expense was $452.4 million. Selling, general and administrative expense was $369.0 million. Amortization of acquired intangibles was $65.7 million. Acquisition & restructuring charges $33.2 million. Leaving operating income of $463.8 million. Other expense was $15.4 million. Income tax provision $63.5 million.

Both R&D and SG&A expense were substantially higher than year-earlier, mainly from the POMALYST launch, leading to the y/y decline in net income despite increased revenues.

Q&A:

MM015 positive trend for over 75 patients confirmed? Confirmed overall. Less than 75 population is quite favorable.

Donut hole? Sequential change was $11 million million negative for Revlimid.

Pomalyst line of therapy so far? 100% of early patients had previously been treated with Revlimid, believes vast majority are 3rd or 4th line. Believes some are coming off Kyprolis.

First line Revlimid? What we are really doing is focusing on getting a reference country, either the U.S. or in Europe. After that we would get a cascade of other countries.

EPS vs. revenue in guidance? There were multiple drivers of EPS growth. We feel we can project operating expenses and revenue, so we could increase EPS. Basically, more visibility, not a particular line item.

The composite of the data of 4 studies for newly diagnosed MM will give us guidance on the best path to regulatory approval. Prefers to have all data in before choosing pathways.

Apremilast spondylitis trial? Target was full accrual by early 2014, but we are currently about 6 months ahead, assuming accrual continues. Then another six months before seeing the data. PALACE4 top line results should be in the next few months. We won't know the size of the treatable population until we see the data, but it could be sizable.

We are excited about the potential for epigenetic therapies; we believe we are a leader in that field.

Any new market dynamics in MM due to cost concerns? Less than 0.5% of Celgene's revenue is endangered by government cutbacks. Even though our oral therapies are cheaper we don't expect any dramatic benefit to us.

Can you still meet your $600 million Abraxane guidance, given Q1? Yes, we see the primary driver as the lung cancer launch, of which Q2 will be the first full quarter. International expansion will also be a driver. In Japan we had gastric cancer and lung cancer approvals which will provide royalties from our partner there.

Fixed dose Revlimid arm? The study has 1600 patients, 3 arms. We strongly expect the 2 Revlimid arms to be superimposable after 18 months.

Revlimid in France? We are at or ahead of where we were pre SPM (second primary malignancy worries).

Pomalyst trends? Accelerating in April.

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