Celgene Corporation
Jul 24, 2014
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Celgene Reports Second Quarter 2014 Operating and Financial Results

- 2014 Total Revenue, Net Product Sales and Adjusted Diluted EPS Guidance Raised

- Data on GED-0301, MDS-005 and MCL-002 to be Presented H2 2014

SUMMIT, N.J.--(BUSINESS WIRE)-- Celgene Corporation (NASDAQ:CELG) reported net product sales of $1,845 million for the second quarter of 2014, an 18 percent increase from the same period in 2013. Second quarter total revenue increased 17 percent to $1,873 million compared to $1,599 million in the second quarter of 2013. Adjusted net income for the second quarter of 2014 increased 15 percent to $748 million compared to $653 million in the second quarter of 2013. For the same period, adjusted diluted earnings per share (EPS) increased 18 percent to $0.90 from $0.76, on a split-adjusted basis.

Based on U.S. GAAP (Generally Accepted Accounting Principles), Celgene reported second quarter of 2014 net income of $598 million or $0.72 per diluted share. For the second quarter of 2013, net income was $478 million or $0.56 per diluted share, on a split-adjusted basis.

"Strong second quarter operating and financial results demonstrate the significant momentum of our portfolio and support raising our 2014 guidance," said Bob Hugin, Chairman and Chief Executive Officer of Celgene Corporation. "We look forward to multiple milestones in the second half of the year, including the expansion of OTEZLA® into psoriasis and the further advancement of our pipeline."

Second Quarter 2014 Financial Highlights

Unless otherwise stated, all comparisons are for the second quarter of 2014 compared to the second quarter of 2013. The adjusted operating expense categories presented below exclude share-based employee compensation expense and upfront collaboration payments. In June 2014, Celgene effected a two-for-one split of the Company's common stock. Adjusted diluted EPS, GAAP EPS and share counts for all periods are split-adjusted. Please see the attached Reconciliation of GAAP to Adjusted Net Income for further information.

Net Product Sales Performance

Research and Development (R&D)

Adjusted R&D expenses were $397 million for the second quarter of 2014 compared to $345 million for the second quarter of 2013. The increase was primarily due to an increase in clinical trial activity. On a GAAP basis, R&D expenses were $457 million for the second quarter of 2014 and $458 million for the same period in 2013 reflecting the increased clinical trial activity which was offset by lower upfront collaboration expense.

Selling, General, and Administrative (SG&A)

Adjusted SG&A expenses were $440 million for the second quarter of 2014 compared to $384 million for the second quarter of 2013. The increase was primarily due to investments in support of the launch of OTEZLA® for psoriatic arthritis in the U.S., pre-launch activities for OTEZLA® for psoriasis in the U.S. and pre-launch activities for OTEZLA® in Europe. On a GAAP basis, SG&A expenses were $492 million for the second quarter of 2014 compared to $418 million for the same period in 2013. The increase in GAAP SG&A expenses also included an increase in share-based compensation expense.

Cash, Cash Equivalents, and Marketable Securities

In the second quarter of 2014, Celgene purchased approximately 3.2 million of its shares on a pre-split basis at a total cost of approximately $475 million. As of June 30, 2014, the Company had $3,932 million remaining under the stock repurchase program.

In May, the Company priced a series of five-, ten- and thirty-year senior unsecured notes for an aggregate principal amount of $2,500 million that resulted in $12 million in interest expense in the second quarter of 2014. In addition, the Company purchased additional equity in Acceleron Pharma Inc. at a price above market value that resulted in an expense for the premium of $10 million. The incremental interest expense and equity premium combined accounted for a $0.02 reduction in adjusted diluted EPS.

Operating cash flow was $516 million in the second quarter of 2014. Celgene ended the quarter with $6,213 million in cash, cash equivalents and marketable securities.

2014 Guidance

Business Update

Celgene announced that Robert Hershberg, M.D., Ph.D. is joining the Company to lead Celgene's research and early development efforts in immuno-oncology and a newly formed Celgene Immuno-Oncology Center of Excellence to be based in Seattle, Washington. His arrival anchors strategic positioning of the Company's current and expanding immuno-oncology pipeline assets, including approved IMiD® products, emerging preclinical assets targeting innate immunity, T-cell checkpoints and collaborative CAR-T projects. Dr. Hershberg brings a depth of translational and clinical development experience from former positions at Corixa, Dendreon, and as founder and current CEO, President and Director of VentiRx. Dr. Hershberg completed his undergraduate degree in molecular biology and M.D. at UCLA, and his Ph.D. in Biology at the Salk Institute.

Key Accomplishments in First Half of 2014

Hematology

Oncology

Inflammation & Immunology

Key Milestones Expected During the Second Half of 2014

Hematology & Oncology

Inflammation & Immunology

Second Quarter 2014 Conference Call and Webcast Information

Celgene will host a conference call to discuss the second quarter of 2014 operating and financial performance on Thursday, July 24, 2014, 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 24, 2014, until midnight ET July 31, 2014. To access the replay in the U.S., dial (855) 859-2056. Outside the U.S. dial (404) 537-3406. The participant passcode is 23334020. The Company's third quarter of 2014 financial and operational results are expected to be reported on October 23.

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. REVLIMID® is approved in the U.S. for the treatment of patients with mantle cell lymphoma (MCL) whose disease has relapsed or progressed after two prior therapies, one of which included bortezomib. Limitations of Use: REVLIMID® is not indicated and is not recommended for the treatment of chronic lymphocytic leukemia (CLL) outside of controlled clinical trials.

About ABRAXANE®

In the U.S., ABRAXANE® for Injectable Suspension (paclitaxel protein-bound particles for injectable suspension) (albumin-bound) is indicated for the treatment of breast cancer after failure of combination chemotherapy for metastatic disease or relapse within six months of adjuvant chemotherapy. Prior therapy should have included an anthracycline unless clinically contraindicated. ABRAXANE® is indicated for the first-line treatment of locally advanced or metastatic non-small cell lung cancer, in combination with carboplatin, in patients who are not candidates for curative surgery or radiation therapy. ABRAXANE® is also indicated for the first-line treatment of metastatic adenocarcinoma of the pancreas in combination with gemcitabine.

About POMALYST®

In the U.S., POMALYST® (pomalidomide) is indicated for patients with multiple myeloma who have received at least two prior therapies including lenalidomide and bortezomib and have demonstrated disease progression on or within 60 days of completion of the last therapy. Approval is based on response rate. Clinical benefit such as improvement in survival or symptoms has not been verified.

About OTEZLA®

In the U.S., OTEZLA® (apremilast) is indicated for the treatment of adult patients with active psoriatic arthritis.

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 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 adjusted 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 adjusted measures are non-GAAP and 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 Adjusted Net Income for explanations of the amounts excluded and included to arrive at Adjusted Net Income and Adjusted Earnings Per Share amounts for the three-and six-month periods ended June 30, 2014 and 2013, and for the projected amounts for the year ending December 31, 2014.

               

Celgene Corporation and Subsidiaries
Condensed Consolidated Statements of Income
(Unaudited)
(In millions, except per share amounts)

 

 

Three-Month Periods Ended
June 30,

Six-Month Periods Ended
June 30,

2014 2013 2014 2013
 

Net product sales

$ 1,844.6 $ 1,564.1 $ 3,552.1 $ 2,993.4

Other revenue

  28.1     34.9     50.6     70.2  
Total revenue   1,872.7     1,599.0     3,602.7     3,063.6  
 

Cost of goods sold (excluding amortization of

acquired intangible assets) 98.9 80.9 185.0 161.4

Research and development

456.9 458.1 1,170.6 910.5

Selling, general and administrative

491.8 418.1 985.9 787.1

Amortization of acquired intangible assets

65.3 65.7 131.0 131.4

Acquisition related charges, net

  0.9     12.5     9.5     45.7  
Total costs and expenses   1,113.8     1,035.3     2,482.0     2,036.1  
 

Operating income

758.9 563.7 1,120.7 1,027.5
 

Other income (expense), net

  (52.1 )   (5.9 )   (81.6 )   (21.3 )
 

Income before income taxes

706.8 557.8 1,039.1 1,006.2
 

Income tax provision

  109.0     79.7     161.6     143.2  
 

Net income

$ 597.8   $ 478.1   $ 877.5   $ 863.0  
 
 

Net income per common share:(1)

Basic $ 0.75 $ 0.58 $ 1.09 $ 1.04
Diluted $ 0.72 $ 0.56 $ 1.05 $ 1.00
 

Weighted average shares:(1)

Basic 799.6 828.2 805.5 832.0
Diluted 831.0 858.5 838.0 861.9
 
 

 

 

June 30,
2014

December 31,
2013

Balance sheet items:

Cash, cash equivalents & marketable securities $ 6,213.0 $ 5,687.0
Total assets 15,601.9 13,378.2
Short-term borrowings 192.3 544.8
Long-term debt 6,743.3 4,196.5
Total stockholders' equity 4,851.3 5,589.9
 
(1)    

Following stockholder approval, the Company amended its certificate of incorporation on June 18, 2014, to increase the number of authorized shares of common stock from 575.0 million to 1.150 billion and effect a two-for-one stock split of its outstanding common stock. Accordingly, all share and per share amounts presented herein reflect the impact of the stock split.

 
                 

Celgene Corporation and Subsidiaries
Reconciliation of GAAP to Adjusted Net Income
(In millions, except per share amounts)

 
 

 

 

Three-Month Periods Ended
June 30,

Six-Month Periods Ended
June 30,

2014 2013 2014 2013
 

Net income - GAAP

$ 597.8 $ 478.1 $ 877.5 $ 863.0
 
Before tax adjustments:
Cost of goods sold (excluding amortization
of acquired intangible assets):
Share-based compensation expense (1 ) 5.9 3.7 12.0 6.5
 
Research and development:
Share-based compensation expense (1 ) 45.8 31.8 92.8 58.8
Upfront collaboration expense (2 ) 14.0 81.8 323.0 177.5
 
Selling, general and administrative:
Share-based compensation expense (1 ) 51.7 34.3 103.0 70.1
Settlement of contingent obligation (3 ) - - 25.0 -
 
Amortization of acquired intangible assets (4 ) 65.3 65.7 131.0 131.4
 
Acquisition related charges, net:
Change in fair value of contingent consideration (5 ) 0.9 12.5 9.5 45.7
 
Net income tax adjustments (6 )   (33.5 )   (55.0 )   (121.0 )   (108.4 )

Net income - Adjusted

$ 747.9   $ 652.9   $ 1,452.8   $ 1,244.6  
 

Net income per common share - Adjusted

Basic $ 0.94 $ 0.79 $ 1.80 $ 1.50
Diluted $ 0.90 $ 0.76 $ 1.73 $ 1.44
 

In addition to financial information prepared in accordance with U.S. GAAP, this press release also contains adjusted 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 adjusted financial measures are non-GAAP and 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.

 

   

Explanation of adjustments:

(1)

Exclude share-based compensation expense totaling $103.4 for the three-month period ended June 30, 2014 and $69.8 for the three-month period ended June 30, 2013. Exclude share-based compensation expense totaling $207.8 for the six-month period ended June 30, 2014 and $135.4 for the six-month period ended June 30, 2013.

(2) Exclude upfront payment expense for research and development collaboration arrangements.
(3) Exclude settlement of a contingent obligation to make matching contributions to a non-profit organization.
(4)

Exclude amortization of intangible assets acquired in the acquisitions of Pharmion Corp., Gloucester Pharmaceuticals, Inc. (Gloucester), Abraxis BioScience Inc. (Abraxis) and Celgene Avilomics Research, Inc. (Avila).

(5) Exclude changes in the fair value of contingent consideration related to the acquisitions of Gloucester, Abraxis, Avila and Nogra Pharma Limited.
(6)

Net income tax adjustments reflect the estimated tax effect of the above adjustments and the impact of certain other non-operating tax adjustments, including the effects of acquisition related matters, adjustments to the amount of unrecognized tax benefits, and nonrecurring items connected with the launch of new products.

 

               

Celgene Corporation and Subsidiaries
Net Product Sales
(In millions)

   
Three-Month Periods
Ended June 30, % Change  
2014 2013

Reported

Operational(1) Currency(2)
 

REVLIMID®

U.S. $ 716.2 $ 624.6 14.7 % 14.7 % 0.0 %
International   497.5   426.9 16.5 % 14.2 % 2.3 %
Worldwide 1,213.7 1,051.5 15.4 % 14.5 % 0.9 %
 

ABRAXANE®

U.S. 159.9 119.8 33.5 % 33.5 % 0.0 %
International   55.4   35.0 58.3 % 58.0 % 0.3 %
Worldwide 215.3 154.8 39.1 % 39.0 % 0.1 %
 

VIDAZA®

U.S. 9.7 84.4 (88.5 )% (88.5 )% 0.0 %
International   142.3   126.9 12.1 % 10.4 % 1.7 %
Worldwide 152.0 211.3 (28.1 )% (29.1 )% 1.0 %
 

POMALYST®/IMNOVID®(3)

U.S. 104.2 57.7 80.6 % 80.6 % 0.0 %
International   56.7   8.5 567.1 % 572.1 % (5.0 )%
Worldwide 160.9 66.2 143.1 % 143.7 % (0.6 )%
 

THALOMID®

U.S. 36.5 46.1 (20.8 )% (20.8 )% 0.0 %
International   17.8   20.1 (11.4 )% (13.0 )% 1.6 %
Worldwide 54.3 66.2 (18.0 )% (18.5 )% 0.5 %
 

azacitidine for injection

U.S. 24.4 - N/A N/A N/A
International   -   - N/A N/A N/A
Worldwide 24.4 - N/A N/A N/A
 

ISTODAX®

U.S. 16.3 12.1 34.7 % 34.7 % 0.0 %
International   0.8   1.4 (42.9 )% (46.3 )% 3.4 %
Worldwide 17.1 13.5 26.7 % 26.3 % 0.4 %
 

OTEZLA®(4)

U.S. 4.6 - N/A N/A N/A
International   -   - N/A N/A N/A
Worldwide 4.6 - N/A N/A N/A
 

All Other

U.S. 1.4 - N/A N/A N/A
International   0.9   0.6 N/A N/A N/A
Worldwide 2.3 0.6 N/A N/A N/A
 

Total Net Product Sales

U.S. 1,073.2 944.7 13.6 % 13.6 % 0.0 %
International   771.4   619.4 24.5 % 22.6 % 1.9 %
Worldwide $ 1,844.6 $ 1,564.1 17.9 % 17.1 % 0.8 %
 
(1)     - Operational includes impact from both volume and price
(2) - Currency includes the impact from both foreign exchange rates and hedging activities
(3) - POMALYST® was approved in the U.S. on February 8, 2013; IMNOVID® was approved in the EU on August 5, 2013
(4) - OTEZLA® was approved in the U.S. on March 21, 2014
 
                   

Celgene Corporation and Subsidiaries
Net Product Sales
(In millions)

 
Six-Month Periods
Ended June 30, % Change
2014 2013 Reported Operational(1) Currency(2)
 

REVLIMID®

U.S. $ 1,358.0 $ 1,192.9 13.8 % 13.8 % 0.0 %
International   999.5   861.4 16.0 % 14.7 % 1.3 %
Worldwide 2,357.5 2,054.3 14.8 % 14.2 % 0.6 %
 

ABRAXANE®

U.S. 301.4 213.5 41.2 % 41.2 % 0.0 %
International   98.7   64.0 54.2 % 53.3 % 0.9 %
Worldwide 400.1 277.5 44.2 % 44.0 % 0.2 %
 

VIDAZA®

U.S. 24.3 171.1 (85.8 )% (85.8 )% 0.0 %
International   276.1   244.3 13.0 % 11.9 % 1.1 %
Worldwide 300.4 415.4 (27.7 )% (28.4 )% 0.7 %
 

POMALYST®/IMNOVID®(3)

U.S. 192.9 79.5 142.6 % 142.6 % 0.0 %
International   103.6   15.2 581.6 % 588.1 % (6.5 )%
Worldwide 296.5 94.7 213.1 % 214.2 % (1.1 )%
 

THALOMID®

U.S. 76.5 81.5 (6.1 )% (6.1 )% 0.0 %
International   35.8   42.1 (15.0 )% (15.7 )% 0.7 %
Worldwide 112.3 123.6 (9.1 )% (9.4 )% 0.3 %
 

azacitidine for injection

U.S. 42.8 - N/A N/A N/A
International   -   - N/A N/A N/A
Worldwide 42.8 - N/A N/A N/A
 

ISTODAX®

U.S. 31.2 24.2 28.9 % 28.9 % 0.0 %
International   2.0   2.2 (9.1 )% (12.0 )% 2.9 %
Worldwide 33.2 26.4 25.8 % 25.6 % 0.2 %
 

OTEZLA®(4)

U.S. 4.6 - N/A N/A N/A
International   -   - N/A N/A N/A
Worldwide 4.6 - N/A N/A N/A
 

All Other

U.S. 3.2 - N/A N/A N/A
International   1.5   1.5 N/A N/A N/A
Worldwide 4.7 1.5 N/A N/A N/A
 

Total Net Product Sales

U.S. 2,034.9 1,762.7 15.4 % 15.4 % 0.0 %
International   1,517.2   1,230.7 23.3 % 22.1 % 1.2 %
Worldwide $ 3,552.1 $ 2,993.4 18.7 % 18.2 % 0.5 %
(1)     - Operational includes impact from both volume and price
(2) - Currency includes the impact from both foreign exchange rates and hedging activities
(3) - POMALYST® was approved in the U.S. on February 8, 2013; IMNOVID® was approved in the EU on August 5, 2013
(4) - OTEZLA® was approved in the U.S. on March 21, 2014
 
         

Celgene Corporation and Subsidiaries
Reconciliation of Full-Year 2014 Projected GAAP to Adjusted Net Income
(In millions, except per share amounts)

 
 
 
Range

 

Low High
 

Projected net income - GAAP

(1 ) $ 2,058.0 $ 2,130.1
 
Before tax adjustments:
Cost of goods sold (excluding amortization of acquired
intangible assets):
Share-based compensation expense 27.0 26.7
 
Research and Development:
Share-based compensation expense 207.8 205.7
Upfront collaboration expense 323.0 323.0
 
Selling, general and administrative:
Share-based compensation expense 232.9 230.6
Settlement of contingent obligation 25.0 25.0
 
Amortization of acquired intangible assets 258.3 258.3
 
Acquisition related charges, net:

Change in fair value of contingent consideration

67.4 66.0
 
Net income tax adjustments (193.4 ) (217.6 )
   

Projected net income - Adjusted

$ 3,006.0   $ 3,047.8  
 

Projected net income per diluted common share - GAAP

$ 2.46 $ 2.55
 

Projected net income per diluted common share - Adjusted

$ 3.60 $ 3.65
 

Projected weighted average diluted shares

835.0 835.0
 
(1)     Our projected 2014 earnings do not include the effect of any business combinations, collaboration agreements, asset acquisitions, intangible asset impairments, or changes in the fair value of our CVRs issued as part of the acquisition of Abraxis that may occur after the day prior to the date of this press release.
 

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

Source: Celgene Corporation

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