Celgene Corporation
Jul 28, 2011
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Celgene Reports Record Second Quarter 2011 Operating and Financial Results

- Non-GAAPTotal Revenue of $1.18 Billion Increased 38 Percent Y/Y
- Non-GAAP Diluted Earnings Per Share of $0.89 Increased 29 Percent Y/Y
- REVLIMID® Global Net Product Sales of $795 Million Increased 35 Percent Y/Y
- Increasing2011 Revenue and Non-GAAP EPS Financial Outlook

SUMMIT, N.J., Jul 28, 2011 (BUSINESS WIRE) --

Celgene Corporation (NASDAQ: CELG):

2011 Second Quarter Financial Results Year-Over-Year

2011 Financial Outlook Update

Recent Developments and Highlights

2H 2011 Selected Objectives

Hematology

Oncology

Inflammation and Immunology

 

Celgene Corporation (NASDAQ: CELG) announced non-GAAP (Generally Accepted Accounting Principles) net income of $417 million, or non-GAAP diluted earnings per share of $0.89, for the quarter ended June 30, 2011. Non-GAAP net income for the second quarter of 2010 was $323 million, or non-GAAP diluted earnings per share of $0.69. Based on U.S. GAAP, Celgene reported net income attributable to Celgene of $279 million, or GAAP diluted earnings per share of $0.59, for the quarter ended June 30, 2011. GAAP net income for the second quarter of 2010 was $155 million, or GAAP diluted earnings per share of $0.33.

Celgene posted non-GAAP net income of $811 million, or non-GAAP diluted earnings per share of $1.72, for the first six months of 2011 as compared to non-GAAP net income of $618 million or non-GAAP diluted earnings per share of $1.32 in 2010. On a GAAP basis, Celgene reported net income attributable to Celgene of $535 million, or diluted earnings per share of $1.14 for the first six months of 2011, compared to GAAP net income of $390 million, or diluted earnings per share of $0.83 in 2010.

"The quarterly results were outstanding, and reflect the therapeutic value of our novel therapies for patients worldwide," said Bob Hugin, Chief Executive Officer of Celgene Corporation. "We are focused on operational excellence to leverage our global potential and drive both near and long-term industry-leading growth and profitability."

Product Sales Performance

Non-GAAP total revenue was a record $1.18 billion for the quarter ended June 30, 2011, an increase of 38 percent over 2010. GAAP total revenue was $1.18 billion for the quarter ended June 30, 2011. The increase in total revenue was driven by global market share gains, geographic expansion and increased duration of therapy of REVLIMID and VIDAZA.Net sales of REVLIMID were $795 million, an increase of 35 percent over the same period in 2010. VIDAZA net sales were $162 million, an increase of 23 percent from 2010. Global THALOMID® (inclusive of Thalidomide Celgene® and Thalidomide Pharmion®) net sales were $88 million, a decrease of 10 percent from 2010. Global ABRAXANE net sales were $95 million.

For the first six months of 2011, non-GAAP total revenue was a record $2.28 billion, an increase of 39 percent over the same period in 2010. GAAP total revenue was $2.31 billion for the first six months of 2011. REVLIMID net sales for the first six months of 2011 reached $1.53 billion, an increase of 37 percent over $1.12 billion for the same period in 2010. VIDAZA net sales for the first six months of 2011 reached $325 million, an increase of 29 percent over the same period in 2010. THALOMID net sales for the first six months of 2011 were $174 million. Global ABRAXANE net sales for the first six months of 2011 were $169 million.

Research and Development

For the second quarter of 2011, non-GAAP R&D expenses, which exclude share-based employee compensation expense, non-core R&D operations acquired from Abraxis and an upfront payment for an R&D collaboration agreement, were $306 million compared to $202 million for the second quarter of 2010. The increase was primarily due to support of ongoing clinical progress in multiple proprietary development programs in hematology, oncology, inflammation and immunology as well as multiple initiatives in our discovery program, peak enrollment in multiple late stage, large clinical trials and a $7 million milestone payment in the second quarter of 2011. On a GAAP basis, R&D expenses were $372 million for the second quarter of 2011 and $343 million for the same period in 2010.

Selling, General, and Administrative

Non-GAAP selling, general and administrative expenses, which exclude share-based employee compensation expense, and expenses from non-core selling, general, and administrative activities acquired from Abraxis, were $274 million for the second quarter of 2011 compared to $197 million for the second quarter of 2010. The increase was primarily due to higher marketing and sales related expenses resulting from multiple international medical meetings; ongoing product launch activities, including REVLIMID in Japan, VIDAZA in Europe, ISTODAX in the United States, and launch of ABRAXANE in the United States and Europe; as well as Abraxis ongoing operations and integration costs. On a GAAP basis, selling, general and administrative expenses were $306 million for the second quarter of 2011 and $219 million for the same period in 2010.

Interest and Other Income, Net

Non-GAAP interest and other income, net, was a net expense of $5 million for the second quarter of 2011, compared with a net benefit of $5 million for the second quarter of 2010, primarily due to interest expense associated with the $1.25 billion in senior notes issued in October 2010.

Cash, Cash Equivalents, and Marketable Securities

Cash, cash equivalents, and marketable securities totaled $2.79 billion as of June 30, 2011. Celgene repurchased 4.1 million shares during the second quarter for approximately $239 million.

Conference Call and Webcast Information

Celgene will host a conference call to discuss the results and achievements of its second quarter 2011 and its operating and financial performance on July 28, 2011, at 9 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 28, 2011, until midnight ET August 4, 2011. To access the replay, in the U.S. dial 800-642-1687; outside the U.S. dial 706-645-9291; and enter reservation number 79273910. The company's third quarter financial and operational results are expected to be reported in late October.

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-month and six-month periods ended June 30, 2011 and 2010 and for the projected amounts for the year ending December 31, 2011.

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,
            2011       2010       2011       2010  
                       
Net product sales       $ 1,154,328     $ 823,097     $ 2,237,937     $ 1,582,508  
Collaborative agreements and other revenue         3,399       2,544       12,702       4,924  
Royalty revenue         25,428       27,051       57,797       56,514  
  Total revenue         1,183,155       852,692       2,308,436       1,643,946  
                       
Cost of goods sold (excluding amortization of                    
  acquired intangible assets)         126,443       67,993       253,711       129,908  
Research and development         371,520       342,761       806,998       547,418  
Selling, general and administrative         305,643       219,262       607,904       427,241  
Amortization of acquired intangible assets         70,087       47,068       139,137       88,661  
Acquisition related (gains) charges and restructuring, net         (9,477)       7,836       (106,221)       12,698  
  Total costs and expenses         864,216       684,920       1,701,529       1,205,926  
                       
Operating income         318,939       167,772       606,907       438,020  
                       
Equity in (gains) losses of affiliated companies         (1,251)       103       (695)       (638)  
Interest and other income (expense), net         (1,779)       4,610       (2,383       21,979  
                       
Income before income taxes         318,411       172,279       605,219       460,637  
                       
Income tax provision         39,203       16,927       70,925       70,843  
                       
Net income         279,208       155,352       534,294       389,794  
                       
Non-controlling interest         190       -       694       -  
                       
Net income attributable to Celgene       $ 279,398     $ 155,352     $ 534,988     $ 389,794  
                       
                       
Net income per common share attributable to Celgene:                    
  Basic       $ 0.60     $ 0.34     $ 1.15     $ 0.85  
  Diluted       $ 0.59     $ 0.33     $ 1.14     $ 0.83  
                       
Weighted average shares - basic         462,625       460,309       464,300       460,112  
                       
Weighted average shares - diluted         469,962       467,425       470,958       467,557  
                       
                       
          June 30,
2011
  December 31,
2010
       
Balance sheet items:                    
  Cash, cash equivalents & marketable securities       $ 2,789,111     $ 2,601,301          
  Total assets         10,051,611       10,177,162          
  Long-term debt         1,259,646       1,247,584          
  Total equity         5,994,687       5,995,472          
                       
                       
                       
                       
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,
            2011       2010       2011       2010  
                       
Net income attributable to Celgene - GAAP       $ 279,398     $ 155,352     $ 534,988     $ 389,794  
                       
  Before tax adjustments:                    
  Net product sales:                    
  Sales of products to be divested:                    
  Pharmion   (1)     (1,131)       (2,301)       (2,203)       (4,675)  
  Abraxis   (1)     (5,434)       -       (21,265)       -  
                       
  Collaborative agreements and other revenue:                    
  Abraxis non-core revenues   (2)     (809)       -       (1,714)       -  
                       
  Cost of goods sold (excluding amortization                    
  of acquired intangible assets):                    
  Share-based compensation expense   (3)     2,420       1,602       4,427       3,121  
  Abraxis inventory step-up   (4)     41,666       -       83,333       -  
  Cost of products to be divested:                    
  Pharmion   (2)     1,128       4,397       2,129       8,683  
  Abraxis   (2)     3,602       -       13,151       -  
                       
  Research and development:                    
  Share-based compensation expense   (3)     22,880       20,023       55,472       39,153  
  Abraxis non-core activities   (2)     1,879       -       8,728       -  
  IPR&D impairment   (5)     -       -       118,000       -  
  Upfront collaboration payments   (6)     40,982       121,176       40,982       121,176  
                       
  Selling, general and administrative:                    
  Share-based compensation expense   (3)     25,613       22,185       48,707       42,116  
  Abraxis non-core activities   (2)     5,857       -       15,065       -  
                       
  Amortization of acquired intangible assets:                    
  Pharmion   (7)     39,938       39,991       79,875       79,928  
  Gloucester   (7)     7,917       7,077       14,467       8,733  
  Abraxis   (7)     22,232       -       44,795       -  
                       
  Acquisition related (gains) charges and restructuring, net:                    
  Gloucester contingent liability accretion   (8)     6,108       5,892       12,161       10,754  
  Abraxis acquisition costs   (8)     (375)       1,944       (326)       1,944  
  Abraxis restructuring costs   (8)     2,533       -       5,275       -  
  Change in fair value of contingent value                    
  rights issued as part of Abraxis acquisition   (8)     (17,743)       -       (123,331)       -  
                       
  Equity in (gains) losses of affiliated companies:                    
  EntreMed, Inc.   (9)     234       56       489       442  
  Abraxis non-core activities   (2)     87       -       1,932       -  
                       
  Interest and other income (expense), net:                    
  Abraxis non-core activities   (2)     6       -       104       -  
  Gain on divestment of non-core activities   (10)     (2,931)       -       (2,931)       -  
                       
  Non-controlling interest:                    
  Abraxis non-core activities   (2)     (190)       -       (694)       -  
                       
  Net income tax adjustments   (11)     (58,660)       (54,130)       (121,020)       (83,344)  
Net income - non-GAAP       $ 417,207     $ 323,264     $ 810,596     $ 617,825  
                       
Net income per common share - non-GAAP:                    
  Basic       $ 0.90     $ 0.70     $ 1.75     $ 1.34  
  Diluted       $ 0.89     $ 0.69     $ 1.72     $ 1.32  
 
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, and Abraxis BioScience Inc., or Abraxis, products to be divested.
(2)

Exclude the estimated impact of activities arising from the acquisitions of Abraxis that are not related to core nab technology and of Pharmion that are planned to be divested, including other miscellaneous revenues, the cost of goods sold for products to be divested as well as operating expenses and other costs related to such activities.

(3)

Exclude share-based compensation expense totaling $50,913 for the three-month period ended June 30, 2011 and $43,810 for the three-month period ended June 30, 2010. The after tax net impact reduced GAAP net income for the three-month period ended June 30, 2011 by $38,496, or $0.08 per diluted share and for the three-month period ended June 30, 2010 by $33,850, or $0.07 per diluted share. Exclude share-based compensation expense totaling $108,606 for the six-month period ended June 30, 2011 and $84,390 for the six-month period ended June 30, 2010.
The after tax net impact reduced GAAP net income for the six-month period ended June 30, 2011 by $80,736, or $0.17 per diluted share and for the six-month period ended June 30, 2010 by $65,223, or $0.14 per diluted share.

(4) Exclude acquisition-related inventory step-up adjustments to fair value which were expensed for Abraxis in 2011.
(5)

IPR&D impairment 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 with the Institute for Advanced Health for both the three-month
and six-month periods in 2011 and with Agios Pharmaceuticals, Inc. for both the three-month and six-month periods in 2010.
(7) Exclude amortization of acquired intangible assets from the acquisitions of Pharmion, Gloucester Pharmaceuticals, Inc., or Gloucester and Abraxis.
(8) Exclude acquisition related (gains) charges and restructuring for Gloucester and Abraxis.
(9) Exclude the Company's share of EntreMed, Inc. equity losses.
(10) Exclude gain recognized on divestment of non-core activities obtained in the acquisition of Abraxis.
(11) Net income tax adjustments reflects the estimated tax effect of the above adjustments.
 
Celgene Corporation and Subsidiaries
Reconciliation of Full-Year 2011 Projected GAAP to Non-GAAP Net Income
(In thousands, except per share data)
           
      Range
      Low   High
           
Projected net income - GAAP   $ 1,189,000     $ 1,251,000  
           
  Before tax adjustments:        
  Total Revenue:        
  Revenue from products to be divested     (28,000)       (25,000)  
           
  Cost of goods sold (excluding amortization        
  of acquired intangible assets):        
  Share-based compensation expense     10,000       9,000  
  Abraxis inventory step-up     90,000       90,000  
  Cost of products to be divested     18,000       17,000  
           
  Research and development:        
  Share-based compensation expense     98,000       89,000  
  Abraxis non-core activities     9,000       9,000  
  IPR&D impairment     118,000       118,000  
  Upfront collaboration payments     41,000       41,000  
           
  Selling, general and administrative:        
  Share-based compensation expense     110,000       100,000  
  Abraxis non-core activities     15,000       15,000  
           
  Amortization of acquired intangible assets     288,000       288,000  
           
  Acquisition related (gains) charges and restructuring, net:        
  Gloucester contingent liability accretion     16,000       16,000  
  Abraxis restructuring costs     6,000       6,000  
  Change in fair value of contingent value        
  rights issued as part of Abraxis acquisition     (123,000)       (123,000)  
           
  Other non-operating items     (2,000)       (2,000)  
           
  Net income tax adjustments     (233,000)       (230,000)  
           
Projected net income - non-GAAP   $ 1,622,000     $ 1,669,000  
           
Projected net income per diluted common share - GAAP   $ 2.53     $ 2.66  
           
Projected net income per diluted common share - non-GAAP   $ 3.45     $ 3.55  
           
Projected weighted average diluted shares     470,000       470,000  

SOURCE: Celgene Corporation

Celgene Corporation
Jacqualyn A. Fouse, 908-673-9956
Sr. Vice President and Chief Financial Officer
or
Celgene Corporation
Brian Gill, 908-673-9530
Vice President, Corporate Communications