Celgene Corporation
Jul 26, 2012
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Celgene Reports Second Quarter 2012 Operating and Financial Results

Total Revenue of $1.37 Billion and Net Product Sales of $1.34 Billion, Increased 16 Percent Y/Y, Respectively

Non-GAAP Diluted Earnings per Share of $1.22, Increased 37 Percent Y/Y; GAAP Earnings per Share of $0.82 Increased 39 Percent Y/Y

Raising 2012 Earnings Guidance; Revenue Guidance Reaffirmed

Key Pivotal Data for ABRAXANE®, Apremilast, Pomalidomide and REVLIMID® Expected by Year-end

SUMMIT, N.J.--(BUSINESS WIRE)--Jul. 26, 2012-- Celgene Corporation (NASDAQ: CELG) reported total revenue of $1,367 million for the second quarter of 2012, a 16 percent increase from the same period in 2011. Non-GAAP net income for the second quarter of 2012 increased 31 percent to $545 million compared to $417 million in the second quarter of 2011. For the same periods, non-GAAP diluted earnings per share increased 37 percent to $1.22 from $0.89.

Based on U.S. GAAP (Generally Accepted Accounting Principles), Celgene reported second quarter 2012 net income of $367 million or $0.82 per diluted share. For the second quarter of 2011, net income was $279 million or $0.59 per diluted share.

“The second quarter financial results were very strong and provide significant momentum for the second half of the year,” said Bob Hugin, Chairman and Chief Executive Officer of Celgene Corporation. “The recent positive apremilast phase III data is the first of multiple pivotal trial results and regulatory actions across our portfolio anticipated through early 2013. We have never been in a better position to deliver on our promise of helping to improve patients’ lives and provide value for our shareholders.”

Raising 2012 Earnings Outlook; Revenue Guidance Reaffirmed

Second Quarter 2012 Financial Highlights

Unless otherwise stated, all comparisons are for the second quarter of 2012 compared to the second quarter of 2011. The non-GAAP operating expenses presented below exclude share-based employee compensation expense, upfront collaboration payments, non-core operations acquired from Abraxis, and IPR&D impairments.

Net Product Sales Performance

Net product sales increased 16% to $1,337 million and reflect strong volume growth in the U.S., Europe and Japan. U.S. and international net product sales of $772 million and $565 million increased 15 percent and 19 percent, respectively.

Research and Development (R&D)

Non-GAAP R&D expenses were $349 million for the second quarter compared to $306 million for the second quarter of 2011. The change is primarily due to increased clinical costs associated with advancing the mid- to late-stage pipeline and the absorption of the Avila Therapeutics acquisition which closed in March 2012. On a GAAP basis, R&D expenses were $447 million for the second quarter of 2012 and $372 million for the same period in 2011.

Selling, General, and Administrative (SG&A)

Non-GAAP SG&A expenses were $296 million for the second quarter of 2012 compared to $274 million for the second quarter of 2011. The change was primarily due to increased ABRAXANE and REVLIMID marketing, in addition to pomalidomide prelaunch activities. On a GAAP basis, SG&A expenses were $323 million for the second quarter of 2012 compared to $306 million for the same period in 2011.

Cash, Cash Equivalents, and Marketable Securities

Operating cash flow was $947 million for the first six months of 2012, an increase of 29 percent compared to 2011. Under our authorized stock repurchase program, we purchased approximately 8.1 million shares during the second quarter of 2012 at a total cost of approximately $558 million. As of June 30, 2012, we had $3,161 million remaining under the existing stock repurchase program that includes the additional $2,500 million authorization that the Board of Directors approved in mid-June. During the second quarter of 2012, we made upfront payments to Epizyme and Inhibrx totaling $75 million related to the formation of strategic collaborations with both companies. We ended the second quarter with $2,562 million in cash and marketable securities.

Key Accomplishments During the First Half of 2012

Hematology

Oncology

Inflammation & Immunology

Key Milestones Expected During the Second Half of 2012

Hematology

Oncology

Inflammation & Immunology

Second Quarter 2012 Conference Call and Webcast Information

We are hosting a conference call to discuss the second quarter 2012 operating and financial performance on Thursday, July 26, 2012, at 9:00 a.m. ET. The conference call will be available by webcast at www.celgene.com. An audio replay of the call will be available from noon July 26, 2012, until midnight ET August 3, 2012. To access the replay, in the U.S. dial 800-585-8367; international dial 404-537-3406; and Participant Pass code 99589605. Our third quarter 2012 financial and operational results are expected to be reported in late October.

About REVLIMID

In the U.S., REVLIMID (lenalidomide) in combination with dexamethasone is indicated for the treatment of multiple myeloma (MM) patients who have received at least one prior therapy. REVLIMID is indicated for patients with transfusion-dependent anemia due to Low- or Intermediate-1-risk myelodysplastic syndromes (MDS) associated with a deletion 5q cytogenetic abnormality with or without additional cytogenetic abnormalities.

About ABRAXANE

In the U.S., ABRAXANE for Injectable Suspension (paclitaxel protein-bound particles for injectable suspension) is indicated for the treatment of breast cancer after failure of combination chemotherapy for metastatic disease or relapse within six month of adjuvant chemotherapy. Prior therapy should have included an anthracycline unless clinically contraindicated.

About Celgene

Celgene Corporation, headquartered in Summit, New Jersey, is an integrated global biopharmaceutical company engaged primarily in the discovery, development and commercialization of novel therapies for the treatment of cancer and inflammatory diseases through gene and protein regulation. For more information, please visit the company's Web site at www.celgene.com.

Forward-Looking Statements

This press release contains forward-looking statements, which are generally statements that are not historical facts. Forward-looking statements can be identified by the words "expects," "anticipates," "believes," "intends," "estimates," "plans," "will," “outlook” and similar expressions. Forward-looking statements are based on management’s current plans, estimates, assumptions and projections, and speak only as of the date they are made. We undertake no obligation to update any forward-looking statement in light of new information or future events, except as otherwise required by law. Forward-looking statements involve inherent risks and uncertainties, most of which are difficult to predict and are generally beyond our control. Actual results or outcomes may differ materially from those implied by the forward-looking statements as a result of the impact of a number of factors, many of which are discussed in more detail in our Annual Report on Form 10-K and our other reports filed with the Securities and Exchange Commission.

In addition to financial information prepared in accordance with U.S. GAAP, this press release also contains non-GAAP financial measures that we believe provide investors and management with supplemental information relating to operating performance and trends that facilitate comparisons between periods and with respect to projected information. These non-GAAP measures should be considered in addition to, but not as a substitute for, the information prepared in accordance with U.S. GAAP. We typically exclude certain GAAP items that management does not believe affect our basic operations and that do not meet the GAAP definition of unusual or non-recurring items. Other companies may define these measures in different ways. See the attached Reconciliations of GAAP to non-GAAP Net Income for explanations of the amounts excluded and included to arrive at non-GAAP net income and non-GAAP earnings per share amounts for the three- and six-month periods ended June 30, 2012 and 2011, and for the projected amounts for the year ending December 31, 2012.

 
Celgene Corporation and Subsidiaries
Condensed Consolidated Statements of Income
(Unaudited)
(In thousands, except per share data)
                                   
                                   
          Three-Month Periods Ended June 30,       Six-Month Periods Ended June 30,
            2012           2011           2012           2011  
                                   
Net product sales       $ 1,336,590         $ 1,154,328         $ 2,582,089         $ 2,237,937  
Other revenue         30,174           28,827           57,963           70,499  
Total revenue         1,366,764           1,183,155           2,640,052           2,308,436  
                                   
Cost of goods sold (excluding amortization of                                
acquired intangible assets)         71,852           126,443           144,372           253,711  
Research and development         447,098           371,520           809,142           806,998  
Selling, general and administrative         323,027           305,643           648,805           607,904  
Amortization of acquired intangible assets         44,148           70,087           85,908           139,137  
Acquisition related (gains) charges and restructuring, net         39,285           (9,477)           28,215           (106,221)  
Total costs and expenses         925,410           864,216           1,716,442           1,701,529  
                                   
Operating income         441,354           318,939           923,610           606,907  
                                   
Other income (expense), net         (670)           (528)           (8,924)           (1,688)  
                                   
Income before income taxes         440,684           318,411           914,686           605,219  
                                   
Income tax provision         73,311           39,203           145,776           70,925  
                                   
Net income         367,373           279,208           768,910           534,294  
                                   
Non-controlling interest         -           190           -           694  
                                   
Net income attributable to Celgene       $ 367,373         $ 279,398         $ 768,910         $ 534,988  
                                   
                                   
Net income per share attributable to Celgene:                                
Basic         $ 0.84         $ 0.60         $ 1.76         $ 1.15  
Diluted       $ 0.82         $ 0.59         $ 1.72         $ 1.14  
                                   
Weighted average shares:                                
Basic           436,703           462,625           437,526           464,300  
Diluted         445,379           469,962           447,092           470,958  
                                 
        June 30,       December 31,      
          2012         2011      
Balance sheet items:                      
Cash, cash equivalents & marketable securities       $ 2,561,544       $ 2,648,154      
Total assets         10,381,207         10,005,910      
Short-term borrowings         390,434         526,684      
Long-term debt         1,272,112         1,275,585      
Total stockholders' equity         5,958,028         5,512,727      
                       
Celgene Corporation and Subsidiaries
Reconciliation of GAAP to Non-GAAP Net Income
(In thousands, except per share data)
                                     
                                     
            Three-Month Periods Ended June 30,       Six-Month Periods Ended June 30,
              2012           2011           2012           2011  
                                     
Net income attributable to Celgene - GAAP         $ 367,373         $ 279,398         $ 768,910         $ 534,988  
                                     
Before tax adjustments:                                  
Total revenues:                                  
  Sales of products exited or to be exited     (1)       -           (6,565)           -           (23,468)  
  Abraxis non-core other revenues     (2)       -           (809)           -           (1,714)  
                                     
Cost of goods sold (excluding amortization                                  
of acquired intangible assets):                                  
  Share-based compensation expense     (3)       2,983           2,420           5,859           4,427  
  Abraxis inventory step-up     (4)       -           41,666           -           83,333  
  Products exited or to be exited     (2)       (572)           4,730           (1,981)           15,280  
                                     
Research and development:                                  
  Share-based compensation expense     (3)       23,556           22,880           48,584           55,472  
  Abraxis non-core activities     (2)       -           1,879           -           8,728  
  IPR&D impairments     (5)       -           -           22,151           118,000  
  Upfront collaboration payments     (6)       75,000           40,982           75,000           40,982  
                                     
Selling, general and administrative:                                  
  Share-based compensation expense     (3)       27,075           25,613           53,891           48,707  
  Abraxis non-core activities     (2)       -           5,857           -           15,065  
                                     
Amortization of acquired intangible assets     (7)       44,148           70,087           85,908           139,137  
                                     
Acquisition related (gains) charges and restructuring, net:                                  
  Change in fair value of contingent consideration     (8       38,071           (11,635)           25,638           (111,170)  
  Acquisition and restructuring costs     (8       1,214           2,158           2,577           4,949  
                                     
Other income (expense), net                                  
  EntreMed, Inc. equity method loss     (9)       -           234           -           489  
  Abraxis non-core activities     (2)       -           93           -           2,036  
  Gain on divestment of non-core activities     (10)       -           (2,931)           -           (2,931)  
                                     
Non-controlling interest -Abraxis     (2)       -           (190)           -           (694)  
                                     
Net income tax adjustments     (11)       (34,296)           (58,660)           (57,556)           (121,020)  
                                     
Net income attributable to Celgene - non-GAAP         $ 544,552         $ 417,207         $ 1,028,981         $ 810,596  
                                     
                                     
Net income per share attributable to Celgene -non-GAAP:                                  
Basic           $ 1.25         $ 0.90         $ 2.35         $ 1.75  
Diluted         $ 1.22         $ 0.89         $ 2.30         $ 1.72  
                                   
In addition to financial information prepared in accordance with U.S. GAAP, this press release also contains non-GAAP financial measures that we believe provide investors and management with supplemental information relating to operating performance and trends that facilitate comparisons between periods and with respect to projected information. These non-GAAP measures should be considered in addition to, but not as a substitute for, the information prepared in accordance with U.S. GAAP. We typically exclude certain GAAP items that management does not believe affect our basic operations and that do not meet the GAAP definition of unusual or non-recurring items. Other companies may define these measures in different ways. See the attached Reconciliations of GAAP to non-GAAP Net Income for explanations of the amounts excluded and included to arrive at non-GAAP net income and non-GAAP earnings per share amounts for the three- and six-month periods ended June 30, 2012 and 2011, and for the projected amounts for the year ending December 31, 2012.
 
Celgene Corporation and Subsidiaries
Reconciliation of GAAP to Non-GAAP Net Income
     
Explanation of adjustments:
(1)   Exclude sales related to non-core former Pharmion Corp., or Pharmion, products to be exited and Abraxis BioScience Inc., or Abraxis, products that
    have been exited.
(2)   Exclude the estimated impact of activities arising from the acquisition of Abraxis that are not related to core nab technology and
    were divested in 2011, including other miscellaneous revenues, cost of goods sold (excluding amortization of acquired intangible assets), operating
    expenses and other costs related to such activities. Exclude the net (benefit) cost of activities arising from the acquisition of Pharmion that
    are planned to be exited.
(3)   Exclude share-based compensation expense totaling $53,614 for the three-month period ended June 30, 2012 and $50,913 for the three-month
    period ended June 30, 2011. Exclude share-based compensation expense totaling $108,334 for the six-month period ended June 30, 2012 and
    $108,606 for the six-month period ended June 30, 2011.
(4)   Exclude acquisition-related inventory step-up adjustments to fair value which were expensed for Abraxis in 2011.
(5)   Exclude in-process research and development, or IPR&D, impairment for the six-month period ended June 30, 2012 related to the timing of obtaining
    approval for ISTODAX for the treatment of peripheral T-cell lymphoma, or PTCL, in the European Union. Exclude IPR&D impairment for the
    six-month period ended June 30, 2011 related to a reduction in the probability of obtaining progression free survival labeling for the treatment of
    non-small cell lung cancer for ABRAXANE in the United States.
(6)   Exclude upfront payments for research and development collaboration arrangements.
(7)   Exclude amortization of intangible assets acquired from the acquisitions of Pharmion, Gloucester Pharmaceuticals, Inc., or Gloucester, Abraxis
    and Celgene Avilomics Research, Inc. (formerly known as Avila Therapeutics), or Avila.
(8)   Exclude acquisition related charges and restructuring related to Gloucester, Abraxis and Avila.
(9)   Exclude the Company's share of EntreMed, Inc. equity losses in 2011.
(10)   Exclude the 2011 gain recognized on divestment of non-core activities obtained in the acquisition of Abraxis.
(11)   Net income tax adjustments reflect the estimated tax effect of the above adjustments and the impact of certain other non-operating tax adjustments,
    including one-time effects of changes in tax law, acquisition related matters, an adjustment to the amount of unrecognized tax benefits and deferred
    taxes on unremitted foreign earnings.
     
Celgene Corporation and Subsidiaries      
Reconciliation of Full-Year 2012 Projected GAAP to Non-GAAP Net Income      
(In thousands, except per share data)      
                       
                       
        Range      
        Low       High      
                       
Projected net income - GAAP       $ 1,641,000       $ 1,692,000      
                       
Before tax adjustments:                      
Cost of goods sold (excluding amortization                      
of acquired intangible assets):                      
Share-based compensation expense       11,000       10,000      
                       
Research and development:                      
Share-based compensation expense       121,000       109,000      
IPR&D impairment       57,000       52,000      
Upfront collaboration payments       75,000       75,000      
                       
Selling, general and administrative:                      
Share-based compensation expense       118,000       107,000      
                       
Amortization of acquired intangible assets       178,000       178,000      
                       
Acquisition related (gains) charges and restructuring, net:                      
Change in fair value of contingent consideration       41,000       36,000      
Acquisition and restructuring costs       4,000       3,000      
                       
Net income tax adjustments       (110,000)       (104,000)      
                       
Projected net income - non-GAAP       $ 2,136,000       $ 2,158,000      
                       
Projected net income per diluted common share - GAAP       $ 3.69       $ 3.80      
                       
Projected net income per diluted common share - non-GAAP       $ 4.80       $ 4.85      
                       
Projected weighted average diluted shares       445,000       445,000      

 

Source: Celgene Corporation

Celgene Corporation
Investors:
Patrick E. Flanigan III, (908) 673-9969
Vice President
Investor Relations
or
Media:
Brian P. Gill, (908) 673-9530
Vice President
Corporate Communications