Celgene Corporation
Jul 23, 2015
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Celgene Reports Second Quarter 2015 Operating and Financial Results

SUMMIT, N.J.--(BUSINESS WIRE)-- Celgene Corporation (NASDAQ:CELG) reported net product sales of $2,254 million for the second quarter of 2015, a 22 percent increase from the same period in 2014. The negative net impact of currency on net product sales was 2 percent. Second quarter total revenue increased 22 percent to $2,278 million compared to $1,873 million in the second quarter of 2014. Adjusted net income for the second quarter of 2015 increased 36 percent to $1,019 million compared to $748 million in the second quarter of 2014. Adjusted diluted earnings per share (EPS) in the second quarter of 2015 was $1.23 which includes a $0.06 gain related to the sale of an equity investment upon completion of their acquisition by another company. For the same period in 2014, adjusted diluted EPS was $0.90.

Based on U.S. GAAP (Generally Accepted Accounting Principles), Celgene reported second quarter of 2015 net income of $356 million or $0.43 per diluted share. For the second quarter of 2014, net income was $598 million or $0.72 per diluted share.

"The Celgene team delivered exceptional results across the portfolio in the second quarter," said Bob Hugin, Chairman and Chief Executive Officer of Celgene Corporation. "We continue to invest strategically in the long-term future of Celgene and expect our recently announced transactions with AstraZeneca, Juno and Receptos to accelerate our earnings growth beginning in 2019."

Second Quarter 2015 Financial Highlights

Unless otherwise stated, all comparisons are for the second quarter of 2015 compared to the second quarter of 2014. The adjusted operating expense categories presented below exclude share-based employee compensation expense and upfront collaboration payments. 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 $477 million for the second quarter of 2015 compared to $397 million for the second quarter of 2014. The increase was primarily due to an increase in clinical trial activity across the portfolio. On a GAAP basis, R&D expenses were $1,110 million for the second quarter of 2015 and $457 million for the same period in 2014 primarily reflecting an increase in upfront collaboration expenses.

Selling, General, and Administrative (SG&A)

Adjusted SG&A expenses were $541 million for the second quarter of 2015 compared to $440 million for the second quarter of 2014. The increase was primarily due to investments in support of the global launches of OTEZLA® in psoriasis and psoriatic arthritis and REVLIMID® in newly diagnosed multiple myeloma. On a GAAP basis, SG&A expenses were $617 million for the second quarter of 2015 compared to $492 million for the same period in 2014. 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 2015, Celgene purchased approximately 7.9 million of its shares at a total cost of approximately $902 million. In June, the share repurchase authorization was increased by an additional $4.0 billion. As of June 30, 2015, the Company had approximately $5.1 billion remaining authorization under the stock repurchase program, including the additional $4.0 billion.

Operating cash flow was $284 million in the second quarter of 2015 which included $570 million of upfront payments relating to research and development collaborations. Celgene ended the quarter with approximately $7.5 billion in cash, cash equivalents and marketable securities.

2015 Adjusted EPS Guidance Raised

Key Accomplishments in First Half of 2015

Hematology

Oncology

Inflammation & Immunology

Research and Early Development

Key Milestones Expected During the Second Half of 2015

Hematology & Oncology

Inflammation & Immunology

Second Quarter 2015 Conference Call and Webcast Information

Celgene will host a conference call to discuss the second quarter of 2015 operational and financial performance on Thursday, July 23, 2015, 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 23, 2015, until midnight ET July 30, 2015. To access the replay in the U.S., dial (855) 859-2056; outside the U.S. dial (404) 537-3406. The participant passcode is 82289992.

About Celgene

Celgene Corporation, headquartered in Summit, New Jersey, is an integrated global biopharmaceutical company engaged primarily in the discovery, development and commercialization of innovative therapies for the treatment of cancer and inflammatory diseases through gene and protein regulation. For more information, please visit www.celgene.com. Follow Celgene on Social Media: @Celgene, Pinterest, LinkedIn and YouTube.

About REVLIMID®

In the U.S., REVLIMID® (lenalidomide) in combination with dexamethasone is indicated for the treatment of patients with multiple myeloma. 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 a proteasome inhibitor and have demonstrated disease progression on or within 60 days of completion of the last therapy.

About VIDAZA®

In the U.S., VIDAZA® (azacitidine for injection) is indicated for treatment of patients with the following French-American-British (FAB) myelodysplastic syndrome subtypes: refractory anemia (RA) or refractory anemia with ringed sideroblasts (RARS) (if accompanied by neutropenia or thrombocytopenia or requiring transfusions), refractory anemia with excess blasts (RAEB), refractory anemia with excess blasts in transformation (RAEB-T), and chronic myelomonocytic leukemia (CMMoL).

About OTEZLA®

In the U.S., OTEZLA® (apremilast) is indicated for the treatment of adult patients with active psoriatic arthritis. OTEZLA® is indicated in the U.S. for the treatment of patients with moderate to severe plaque psoriasis who are candidates for phototherapy or systemic therapy.

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 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. See the attached Reconciliations of GAAP to Adjusted Net Income for explanations of the amounts excluded and included to arrive at the adjusted measures for the three-and six-month periods ended June 30, 2015 and 2014, and for the projected amounts for the year ending December 31, 2015.

 
Celgene Corporation and Subsidiaries
Condensed Consolidated Statements of Income
(Unaudited)
(In millions, except per share data)
 
 
          Three-Month Periods Ended         Six-Month Periods Ended
June 30, June 30,
 

2015

      2014   2015   2014
 
Net product sales $ 2,254.1 $ 1,844.6 $ 4,309.3 $ 3,552.1
Other revenue   23.7     28.1     49.3   50.6
Total revenue   2,277.8     1,872.7     4,358.6   3,602.7
 
Cost of goods sold (excluding amortization of
acquired intangible assets) 100.8 98.9 204.8 185.0
Research and development 1,110.0 456.9 1,616.0 1,170.6
Selling, general and administrative 616.8 491.8 1,146.0 985.9
Amortization of acquired intangible assets 63.7 65.3 127.3 131.0
Acquisition related (gains) charges, net   (29.3 )   0.9     (10.3)   9.5
Total costs and expenses   1,862.0     1,113.8     3,083.8   2,482.0
 
Operating income 415.8 758.9 1,274.8 1,120.7
 
Interest and investment income, net 8.8 7.3 17.8 13.7
Interest (expense) (48.3 ) (41.6 ) (97.5) (70.9)
Other income (expense), net   94.5     (17.8 )   102.8   (24.4)
 
Income before income taxes 470.8 706.8 1,297.9 1,039.1
 
Income tax provision   114.6     109.0     222.8   161.6
 
Net income $ 356.2   $ 597.8   $ 1,075.1 $ 877.5
 
 
Net income per common share:
Basic $ 0.45 $ 0.75 $ 1.35 $ 1.09
Diluted $ 0.43 $ 0.72 $ 1.30 $ 1.05
 
Weighted average shares:
Basic 793.0 799.6 796.0 805.5
Diluted 825.3 831.0 829.7 838.0
 
 
June 30, December 31,
  2015     2014  
Balance sheet items:
Cash, cash equivalents & marketable securities $ 7,492.2 $ 7,546.7
Total assets 17,745.7 17,340.1
Short-term borrowings and current portion of long-term debt 1,362.9 605.9
Long-term debt 6,256.1 6,265.7
Total stockholders' equity 6,321.9 6,524.8
 

 
Celgene Corporation and Subsidiaries
Reconciliation of GAAP to Adjusted Net Income
(In millions, except per share data)
                 
Three-Month Periods Ended Six-Month Periods Ended
June 30, June 30,
2015 2014 2015 2014
 
Net income - GAAP $ 356.2 $ 597.8 $ 1,075.1 $ 877.5
 
Before tax adjustments:
Cost of goods sold (excluding amortization
of acquired intangible assets):
Share-based compensation expense (1) 8.1 5.9 14.8 12.0
 
Research and development:
Share-based compensation expense (1) 63.6 45.8 119.8 92.8
Upfront collaboration expense (2) 569.5 14.0 588.5 323.0
 
Selling, general and administrative:
Share-based compensation expense (1) 76.0 51.7 141.9 103.0
Settlement of contingent obligation (3) - - - 25.0
 
Amortization of acquired intangible assets (4) 63.7 65.3 127.3 131.0
 
Acquisition related (gains) charges, net:
Change in fair value of contingent consideration (5) (29.3) 0.9 (10.3) 9.5
 
Net income tax adjustments (6) (89.0) (33.5) (147.3) (121.0)
Net income - Adjusted $ 1,018.8 $ 747.9 $ 1,909.8 $ 1,452.8
 
Net income per common share - Adjusted
Basic $ 1.28 $ 0.94 $ 2.40 $ 1.80
Diluted $ 1.23 $ 0.90 $ 2.30 $ 1.73
 
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 $147.7 for the three-month period ended June 30, 2015 and $103.4 for the three-month period
ended June 30, 2014. Exclude share-based compensation expense totaling $276.5 for the six-month period ended June 30, 2015 and $207.8 for the
six-month period ended June 30, 2014.
(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, adjustments related to the gain on the
sale of an equity investment and nonrecurring items connected with the launch of new products.

 
Celgene Corporation and Subsidiaries
Reconciliation of Full-Year 2015 Projected GAAP to Adjusted Net Income
(In millions, except per share data)
 
 
          Range
Low         High
 
Projected net income - GAAP (1 ) $ 1,798.9 $ 2,042.5
 
Before tax adjustments:
Cost of goods sold (excluding amortization of acquired
intangible assets):
Share-based compensation expense 30.9 29.7
 
Research and development:
Share-based compensation expense 257.7 247.5
Upfront collaboration expense 1,158.8 1,067.5
 
Selling, general and administrative:
Share-based compensation expense 302.0 290.2
 
Amortization of acquired intangible assets 254.6 254.6
 
Acquisition related (gains) charges, net:
Change in fair value of contingent consideration 62.6 51.2
Acquisition related charges 336.3 304.3
 
Net income tax adjustments (259.3) (262.0)
   
Projected net income - Adjusted $ 3,942.5 $ 4,025.5
 
Projected net income per diluted common share - GAAP $ 2.17 $ 2.46
 
Projected net income per diluted common share - Adjusted $ 4.75 $ 4.85
 
Projected weighted average diluted shares 830.0 830.0
 

(1)

Our projected 2015 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 or be announced after the date of this press release.

 
Celgene Corporation and Subsidiaries
Net Product Sales
(In millions)
 
 
          Three-Month Periods
Ended June 30,     % Change
  2015       2014

Reported

    Operational(1)     Currency(2)
 
REVLIMID®
U.S. $ 872.6 $ 716.2 21.8% 21.8% 0.0%
International   571.4   497.5 14.9% 20.5% (5.6)%
Worldwide 1,444.0 1,213.7 19.0% 21.3% (2.3)%
 
ABRAXANE®
U.S. 169.8 159.9 6.2% 6.2% 0.0%
International   74.4   55.4 34.3% 34.2% 0.1%
Worldwide 244.2 215.3 13.4% 13.4% 0.0%
 
POMALYST®/IMNOVID®
U.S. 143.6 104.2 37.8% 37.8% 0.0%
International   90.9   56.7 60.3% 60.5% (0.2)%
Worldwide 234.5 160.9 45.7% 45.8% (0.1)%
 
VIDAZA®
U.S. 5.6 9.7 (42.3)% (42.3)% 0.0%
International   146.5   142.3 3.0% 8.2% (5.2)%
Worldwide 152.1 152.0 0.1% 4.9% (4.8)%
 
azacitidine for injection
U.S. 22.3 24.4 -8.6% -8.6% 0.0%
International   -   - N/A N/A N/A
Worldwide 22.3 24.4 -8.6% -8.6% 0.0%
 
OTEZLA®(3)
U.S. 84.7 4.6 N/A N/A N/A
International   5.0   - N/A N/A N/A
Worldwide 89.7 4.6 N/A N/A N/A
 
THALOMID®
U.S. 33.8 36.5 (7.4)% (7.4)% 0.0%
International   14.1   17.8 (20.8)% (12.4)% (8.4)%
Worldwide 47.9 54.3 (11.8)% (9.1)% (2.7)%
 
ISTODAX®
U.S. 17.0 16.3 4.3% 4.3% 0.0%
International   0.9   0.8 12.5% 12.0% 0.5%
Worldwide 17.9 17.1 4.7% 4.7% 0.0%
 
All Other
U.S. 0.9 1.4 N/A N/A N/A
International   0.6   0.9 N/A N/A N/A
Worldwide 1.5 2.3 N/A N/A N/A
 
Total Net Product Sales
U.S. 1,350.3 1,073.2 25.8% 25.8% 0.0%
International   903.8   771.4 17.2% 21.9% (4.7)%
Worldwide $ 2,254.1 $ 1,844.6 22.2% 24.2% (2.0)%
 
(1) - Operational includes impact from both volume and price
(2) - Currency includes the impact from both foreign exchange rates and hedging activities
(3) - OTEZLA® was approved in the U.S. for Psoriatic Arthritis in March 2014 and approved in the U.S. for Psoriasis in
September 2014. OTEZLA® was approved for Psoriatic Arthritis and Plaque Psoriasis in the EU in January 2015.

 
Celgene Corporation and Subsidiaries
Net Product Sales
(In millions)
 
 
          Six-Month Periods
Ended June 30,     % Change
2015     2014 Reported     Operational(1)     Currency(2)
 
REVLIMID®
U.S. $ 1,683.4 $ 1,358.0 24.0% 24.0% 0.0%
International 1,103.5 999.5 10.4% 15.4% (5.0)%
Worldwide 2,786.9 2,357.5 18.2% 20.3% (2.1)%
 
ABRAXANE®
U.S. 328.9 301.4 9.1% 9.1% 0.0%
International 138.7 98.7 40.5% 39.7% 0.8%
Worldwide 467.6 400.1 16.9% 16.7% 0.2%
 
POMALYST®/IMNOVID®
U.S. 272.0 192.9 41.0% 41.0% 0.0%
International 161.0 103.6 55.4% 54.3% 1.1%
Worldwide 433.0 296.5 46.0% 45.6% 0.4%
 
VIDAZA®
U.S. 11.5 24.3 (52.7)% (52.7)% 0.0%
International 284.2 276.1 2.9% 7.6% (4.7)%
Worldwide 295.7 300.4 (1.6)% 2.7% (4.3)%
 
azacitidine for injection
U.S. 42.9 42.8 0.2% 0.2% 0.0%
International - - N/A N/A N/A
Worldwide 42.9 42.8 0.2% 0.2% 0.0%
 
OTEZLA®(3)
U.S. 144.1 4.6 N/A N/A N/A
International 5.9 - N/A N/A N/A
Worldwide 150.0 4.6 N/A N/A N/A
 
THALOMID®
U.S. 66.2 76.5 (13.5)% (13.5)% 0.0%
International 28.6 35.8 (20.1)% (12.6)% (7.5)%
Worldwide 94.8 112.3 (15.6)% (13.2)% (2.4)%
 
ISTODAX®
U.S. 32.2 31.2 3.2% 3.2% 0.0%
International 2.2 2.0 10.0% 13.0% (3.0)%
Worldwide 34.4 33.2 3.6% 3.8% (0.2)%
 
All Other
U.S. 2.7 3.2 N/A N/A N/A
International 1.3 1.5 N/A N/A N/A
Worldwide 4.0 4.7 N/A N/A N/A
 
Total Net Product Sales
U.S. 2,583.9 2,034.9 27.0% 27.0% 0.0%
International 1,725.4 1,517.2 13.7% 17.8% (4.1)%
Worldwide $ 4,309.3 $ 3,552.1 21.3% 23.1% (1.8)%
 
(1) - Operational includes impact from both volume and price
(2) - Currency includes the impact from both foreign exchange rates and hedging activities
(3) - OTEZLA® was approved in the U.S. for Psoriatic Arthritis in March 2014 and approved in the U.S. for Psoriasis in
September 2014. OTEZLA® was approved for Psoriatic Arthritis and Plaque Psoriasis in the EU in January 2015.

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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