Celgene Corporation
Jul 29, 2010
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Celgene Reports Record Second Quarter 2010 Operating and Financial Results

Record Second Quarter Results Driven By Market Share Gains Across Major Markets

REVLIMID® Second Quarter Global Net Product Sales Increased 48% Y/Y

VIDAZA® Second Quarter Global Net Product Sales Increased 43% Y/Y

Non-GAAP Second Quarter Diluted Earnings Per Share Increased 50% Y/Y

SUMMIT, N.J., Jul 29, 2010 (BUSINESS WIRE) --

Celgene Corporation (NASDAQ: CELG):

2010 Second Quarter Financial Results Year-Over-Year

2010 Financial Outlook Update (excluding effects of the proposed acquisition of Abraxis BioScience, unless noted)

Recent Developments and Highlights

2010 Selected Corporate Objectives

Celgene Corporation (NASDAQ: CELG) announced non-GAAP (Generally Accepted Accounting Principles) net income of $323.3 million, or non-GAAP diluted earnings per share of $0.69 for the quarter ended June 30, 2010. Non-GAAP net income for the second quarter of 2009 was $216.0 million or non-GAAP diluted earnings per share of $0.46. Based on U.S. GAAP, Celgene reported net income of $155.4 million, or diluted earnings per share of $0.33 for the quarter ended June 30, 2010. GAAP net income for the second quarter of 2009 was $142.8 million, or diluted earnings per share of $0.31.

Celgene posted non-GAAP net income of $617.8 million or non-GAAP diluted earnings per share of $1.32 during the first six months of 2010 as compared to non-GAAP net income of $421.2 million and non-GAAP diluted earnings per share of $0.90 in 2009. On a GAAP basis, Celgene reported net income of $389.8 million, or diluted earnings per share of $0.83 for the first six months of 2010, compared to GAAP net income of $305.7 million, or diluted earnings per share of $0.65 in 2009.

"These outstanding results reflect the effectiveness of our operating strategies and the exceptional execution of our global team," said Robert J. Hugin, Chief Executive Officer of Celgene Corporation. "Our portfolio of products and promising hematology and immune-inflammatory pipeline position us to make an increasingly meaningful impact on the lives of patients suffering from serious unmet medical conditions. By combining operational excellence with innovative science, we are strategically positioned to produce sustained long-term growth."

Product Sales Performance

Non-GAAP total revenue was a record $850.4 million for the quarter ended June 30, 2010, an increase of 36 percent from 2009. GAAP total revenue was $852.7 million for the quarter ended June 30, 2010. The increase in total revenue was driven by global market share gains and increased duration of therapy of REVLIMID. Net sales of REVLIMID were $587.1 million, an increase of 48 percent over the same period in 2009. Global THALOMID® (inclusive of Thalidomide Celgene® and Thalidomide Pharmion®) and VIDAZA® net sales were $97.8 million and $131.8 million, respectively. Revenue from Focalin® and the Ritalin® family of drugs totaled $27.0 million for the second quarter of 2010 compared to $24.2 million over the same period in 2009.

For the first six months of 2010, non-GAAP total revenue was a record $ 1.639 billion, an increase of 34 percent year-over-year. GAAP total revenue was $1.644 billion for the six months ended June 30, 2010. REVLIMID net sales for the first six months of 2010 reached $1.118 billion, an increase of 47 percent over $759.8 million for the same period in 2009. THALOMID net sales for the first six months of 2010 were $201.8 million. Vidaza net sales for the first six months of 2010 reached $252.1 million, an increase of 51 percent over the same period in 2009.

Research and Development

For the second quarter of 2010, non-GAAP R&D expenses, which exclude upfront collaboration payments and share-based employee compensation expense, were $201.6 million compared to $169.0 million for the second quarter of 2009. These R&D expenditures continue to support ongoing clinical progress in multiple proprietary development programs for REVLIMID, pomalidomide and other IMiDs® compounds; VIDAZA; ISTODAX®; amrubicin; apremilast and our oral anti-inflammatory compounds; our kinase inhibitor programs; our activin inhibitor program with ACE-011; and cellular therapy programs. On a GAAP basis, R&D expenses were $342.8 million for the second quarter of 2010 and $218.5 million in the same period in 2009.

Selling, General, and Administrative

Non-GAAP selling, general and administrative expenses, which exclude share-based employee compensation expense, were $197.1 million for the second quarter of 2010 compared to $156.9 million for the second quarter of 2009. The increase was primarily due to an increase in donations to non-profit foundations, in addition to marketing and sales expenses related to the continued expansion of our international commercial activities. On a GAAP basis, selling, general and administrative expenses were $219.3 million for the second quarter of 2010 and $176.3 million in the same period in 2009.

Interest and Other Income, Net

For the quarter ended June 30, 2010, interest and other income, net, decreased to $4.6 million compared to $28.7 million in the same period in 2009. The decrease was primarily due to a reduction in interest and investment income as well as a loss on net hedging and foreign currency revaluation in the quarter ended June 30, 2010, compared to a gain in the same period in 2009.

Cash, Cash Equivalents, and Marketable Securities

Celgene reported $3.145 billion in cash, cash equivalents, and marketable securities as of June 30, 2010.

Non-GAAP Financial Information

See the attached Reconciliation of GAAP to Non-GAAP Net Income for an explanation 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, 2010 and 2009. See the attached Reconciliation of Full-Year 2010 Projected GAAP to Non-GAAP Net Income for an explanation of the amounts excluded and included to arrive at projected non-GAAP net income and non-GAAP earnings per share amounts for the year ending December 31, 2010. Non-GAAP financial measures provide investors and management with supplemental measures of operating performance and trends that facilitate comparisons between periods before and after certain items that would not otherwise be apparent on a GAAP basis. Certain unusual or non-recurring items that management does not believe affect the company's basic operations do not meet the GAAP definition of unusual or non-recurring items. Non-GAAP net income and non-GAAP earnings per share are not, and should not be viewed as a substitute for similar GAAP items. We define non-GAAP diluted earnings per share amounts as non-GAAP net income divided by the weighted average number of diluted shares outstanding. Our definition of non-GAAP net income and non-GAAP diluted earnings per share may differ from similarly named measures used by others.

Conference Call and Webcast Information

Celgene will host a conference call to discuss the results and achievements of its second quarter 2010 and its operating and financial performance on July 29, 2010, at 9 a.m. ET. The conference call will be available by webcast at http://www.celgene.com. An audio replay of the call will be available from noon July 29, 2010, until midnight ET August 5, 2010. To access the replay, in the U.S. dial 800-642-1687; outside the U.S. dial 706-645-9291; and enter reservation number 83920237. The Company's third quarter 2010 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.

This release contains certain forward-looking statements which involve known and unknown risks, delays, uncertainties and other factors not under the Company's control. The Company's actual results, performance, or achievements could be materially different from those projected by these forward-looking statements.The factors that could cause actual results, performance, or achievements to differ from the forward-looking statements are discussed in the Company's filings with the Securities and Exchange Commission, such as the Company's Form 10-K, 10-Q and 8-K reports.Given these risks and uncertainties, you are cautioned not to place undue reliance on the forward-looking statements.

 
Celgene Corporation and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share data)
                       
                       
                       
        Three Months Ended     Six Months Ended
        June 30,     June 30,
        2010   2009     2010   2009
                       
Net product sales      

$

823,097

 

  $ 598,154       $ 1,582,508    

$

1,174,386

 

Collaborative agreements and other revenue         2,544       2,354         4,924       4,598  
Royalty revenue         27,051       28,158         56,514       54,735  
Total revenue         852,692       628,666         1,643,946       1,233,719  
                       

Cost of goods sold (excluding amortization of acquired intangible assets)

        67,993       50,902         129,908       115,201  
Research and development         342,761       218,500         547,418       399,747  
Selling, general and administrative         219,262       176,311         427,241       349,752  
Amortization of acquired intangible assets         47,068       22,667         88,661       46,292  
Acquisition related charges         7,836       -         12,698       -  
Total costs and expenses         684,920       468,380         1,205,926       910,992  
                       
Operating income         167,772       160,286         438,020       322,727  
                       
Equity in (gains) losses of affiliated companies         103       (157)         (638)       615  
Interest and other income, net         4,610       28,721         21,979       78,320  
                       
Income before income taxes         172,279       189,164         460,637       400,432  
                       
Income tax provision         16,927       46,329         70,843       94,715  
                       
Net income       $ 155,352     $ 142,835       $ 389,794     $ 305,717  
                       
Net income per common share:                      
Basic       $ 0.34     $ 0.31       $ 0.85     $ 0.67  
Diluted       $ 0.33     $ 0.31       $ 0.83     $ 0.65  
                       
Weighted average shares - basic         460,309       459,586         460,112       459,584  
                       
Weighted average shares - diluted         467,425       467,082         467,557       467,759  
                       
                       
        June 30,   December 31,          
        2010   2009          
Balance sheet items:                      
Cash, cash equivalents & marketable securities       $ 3,144,617     $ 2,996,752            
Total assets         6,178,238       5,389,311            
Stockholders' equity         4,927,810       4,394,606            
                               
 
Celgene Corporation and Subsidiaries
Reconciliation of GAAP to Non-GAAP Net Income
(In thousands, except per share data)
                       
                       
        Three Months Ended     Six Months Ended
        June 30,     June 30,
        2010   2009     2010   2009
                       
Net income - GAAP       $ 155,352     $ 142,835       $ 389,794     $ 305,717  
                       
Before tax adjustments:                      
Net product sales:                      
Pharmion products to be divested   (1)     (2,301)       (2,515)         (4,675)       (6,466)  
                       

Cost of goods sold (excluding amortization of acquired intangible assets):

                     
Share-based compensation expense   (2)     1,602       1,001         3,121       1,973  
Pharmion inventory step-up   (3)     -       -         -       354  
Pharmion products to be divested   (1)     4,397       2,000         8,683       4,268  
                       
Research and development:                      
Share-based compensation expense   (2)     20,023       14,965         39,153       29,663  
Upfront collaboration payments   (4)     121,176       34,500         121,176       34,500  
                       
Selling, general and administrative:                      
Share-based compensation expense   (2)     22,185       19,363         42,116       36,217  
                       
Amortization of acquired intangible assets:                      
Pharmion   (5)     39,991       22,667         79,928       46,292  
Gloucester   (5)     7,077       -         8,733       -  
                       
Acquisition related charges                      
Gloucester contingent liability accretion   (6)     5,892       -         10,754       -  
Abraxis acquisition costs   (6)     1,944       -         1,944       -  
                       
Equity in losses of affiliated companies - EntreMed   (7)     56       321         442       659  
                       
Net income tax adjustments   (8)     (54,130)       (19,112)         (83,344)       (32,004)  

Net income - non-GAAP

      $ 323,264     $ 216,025       $ 617,825     $ 421,173  
                       

Net income per common share - non-GAAP:

                     
Basic       $ 0.70     $ 0.47       $ 1.34     $ 0.92  
Diluted       $ 0.69     $ 0.46       $ 1.32     $ 0.90  
Explanation of adjustments:
(1) Exclude sales and costs related to former non-core Pharmion Corp., or Pharmion, products to be divested.
(2)

Exclude share-based compensation expense for the second quarter totaling $43,810 in 2010 and $35,329 in 2009. The after tax net impact reduced GAAP net income for the second quarter by $33,850, or $0.07 per diluted share in 2010 and $27,315, or $0.06 per diluted share in 2009. Exclude share-based compensation expense for the six-month period totaling $84,390 in 2010 and $67,853 in 2009. The after tax net impact reduced GAAP net income for the six-month period by $65,223, or $0.14 per diluted share in 2010 and $52,462, or $0.11 per diluted share in 2009.

(3) Exclude acquisition-related Pharmion inventory step-up adjustment to fair value expensed during the period.
(4)

Exclude upfront payments for research and development collaboration arrangements with Agios Pharmaceuticals, Inc. for both the three-month and six-month periods in 2010 and GlobeImmune, Inc. and Array BioPharma Inc. of $30,000 and $4,500, respectively for both the three-month and six-month periods in 2009.

(5) Exclude amortization of acquired intangible assets from the acquisitions of Pharmion and Gloucester Pharmaceuticals, Inc., or Gloucester.
(6) Exclude acquisition related charges for Gloucester and the proposed acquisition of Abraxis BioScience, Inc.
(7) Exclude the Company's share of equity losses in EntreMed, Inc.
(8) Net income tax adjustments reflects the estimated tax effect of the above adjustments.
   
 
Celgene Corporation and Subsidiaries
Reconciliation of Full-Year 2010 Projected GAAP to Non-GAAP Net Income
(In thousands, except per share data)
               
               
        Range
        Low     High
               
Projected net income - GAAP       $ 805,000       $ 859,000  
               
Before tax adjustments:              
               
Share-based compensation expense         180,000         175,000  
               
Amortization of acquired intangible assets:              
Pharmion         160,000         160,000  
Gloucester         22,000         22,000  
Abraxis         30,000         20,000  
               
Upfront collaboration payments         121,000         121,000  
               
Acquisition related charges              
Gloucester         23,000         23,000  
Abraxis         50,000         30,000  
               
Pharmion products to be divested         4,000         4,000  
               
Net income tax adjustments         (147,000)         (142,000)  
Projected net income - non-GAAP       $ 1,248,000       $ 1,272,000  
               
Projected net income per diluted common share - GAAP       $ 1.71       $ 1.82  
               
Projected net income per diluted common share - non-GAAP       $ 2.65       $ 2.70  
               
Projected weighted average diluted shares         471,000         471,000  

SOURCE: Celgene Corporation

Celgene Corporation
David Gryska, 908-673-9059
Sr. Vice President and Chief Financial Officer
or
Tim Smith, 908-673-9951
Director, Investor Relations