Celgene Corporation
Jul 28, 2016
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Celgene Reports Second Quarter 2016 Operating and Financial Results

- Net Product Sales $2.74B in Q2:16: Increased 22% Y/Y

- REVLIMID® Net Product Sales $1.7B in Q2:16; Increased 18% Y/Y

- 2016 Guidance Updated: REVLIMID® and Total Net Product Sales; EPS

SUMMIT, N.J.--(BUSINESS WIRE)-- Celgene Corporation (NASDAQ:CELG) reported net product sales of $2,745 million for the second quarter of 2016, a 22 percent increase from the same period in 2015. Net product sales growth includes a 1 percent negative impact from currency exchange effects. Second quarter total revenue increased 21 percent to $2,754 million compared to $2,278 million in the second quarter of 2015.

Net income for the second quarter of 2016 based on U.S. GAAP (Generally Accepted Accounting Principles), was $598 million or $0.75 per diluted share compared to $356 million or $0.43 per diluted share in the second quarter of 2015. Adjusted net income for the second quarter of 2016 was $1,152 million or $1.44 per diluted share compared to $1,019 million or $1.23 per diluted share for the second quarter of 2015.

"Our first-half 2016 operating results were outstanding and we are pleased with the progress made advancing many key corporate objectives," said Mark J. Alles, Chief Executive Officer of Celgene Corporation. "This strong momentum increases our confidence in our near- and longer-term outlook as we continue to invest in innovative research and the development of transformational therapies for patients worldwide."

Second Quarter 2016 Financial Highlights

Unless otherwise stated, all comparisons are for the second quarter of 2016 compared to the second quarter of 2015. The adjusted operating expense categories presented below exclude share-based employee compensation expense, upfront collaboration expense and a litigation-related loss contingency accrual expense. Please see the attached Reconciliation of GAAP to Adjusted Net Income for further information.

Net Product Sales Performance

Research and Development (R&D)

On a GAAP basis, R&D expenses were $949 million for the second quarter of 2016 compared to $1,110 million for the same period in 2015. The change was primarily driven by a decrease in upfront collaboration expenses compared to the previous year, partially offset by early research and clinical trial activity related to the acquisitions of Receptos, Inc. and Quanticel Pharmaceuticals, Inc. that closed in the second half of 2015. Adjusted R&D expenses were $601 million for the second quarter of 2016 compared to $477 million for the second quarter of 2015. Adjusted R&D does not include upfront collaboration expenses but does reflect the increase in early research and clinical trial activity.

Selling, General, and Administrative (SG&A)

On a GAAP basis, SG&A expenses were $732 million for the second quarter of 2016 compared to $617 million for the same period in 2015. The increase was primarily due to a loss contingency accrual expense of $100 million related to a contractual dispute. Adjusted SG&A expenses were $547 million for the second quarter of 2016 compared to $541 million for the second quarter of 2015.

Cash, Cash Equivalents, and Marketable Securities

Operating cash flow was $936 million in the second quarter of 2016. Celgene ended the quarter with approximately $6.4 billion in cash, cash equivalents and marketable securities.

In the second quarter of 2016, Celgene purchased approximately 3.4 million of its shares at a total cost of approximately $343 million. In June 2016, the share repurchase authorization was increased by an additional authorization of $3 billion. As of June 30, 2016, the Company had approximately $5.1 billion remaining under the stock repurchase program.

2016 Guidance Updated

 

Previous 2016
Guidance

Updated 2016
Guidance

Net Product Sales
Total $10.75B-$11.0B Approximately $11.0B
REVLIMID® Approximately $6.7B Approximately $6.8B
GAAP diluted EPS $4.26 to $4.56 $3.82 to $4.05
Adjusted diluted EPS $5.60 to $5.70 $5.70 to $5.75
GAAP operating margin Approximately 42% Approximately 37%
Adjusted operating margin Approximately 53.5% Approximately 54.0%
Weighted average diluted shares 811M 806M

Net product sales guidance for POMALYST®/IMNOVID®, ABRAXANE® and OTEZLA® remain unchanged.

Product and Pipeline Updates

Hematology/Oncology

Inflammation & Immunology

Business Update

Second Quarter 2016 Conference Call and Webcast Information

Celgene will host a conference call to discuss the second quarter of 2016 operational and financial performance on Thursday, July 28, 2016, 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, 2016, until midnight ET August 4, 2016. To access the replay in the U.S., dial (855) 859-2056; outside the U.S. dial (404) 537-3406. The participant passcode is 43057627.

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 next-generation solutions in protein homeostasis, immuno-oncology, epigenetics, immunology and neuro-inflammation. For more information, please visit www.celgene.com. Follow Celgene on Social Media: @Celgene, Pinterest, LinkedIn, FaceBook 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 metastatic 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 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, 2016 and 2015, and for the projected amounts for the year ending December 31, 2016.

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,
2016 2015 2016 2015
 
Net product sales $ 2,744.5 $ 2,254.1 $ 5,239.2 $ 4,309.3
Other revenue 9.8 23.7 26.7 49.3
Total revenue 2,754.3 2,277.8 5,265.9 4,358.6
 
Cost of goods sold (excluding amortization of
acquired intangible assets) 110.9 100.8 216.8 204.8
Research and development 948.7 1,110.0 1,681.9 1,616.0
Selling, general and administrative 732.1 616.8 1,275.1 1,146.0
Amortization of acquired intangible assets 174.8 63.7 266.6 127.3
Acquisition related charges and restructuring, net (35.9) (29.3) 0.3 (10.3)
Total costs and expenses 1,930.6 1,862.0 3,440.7 3,083.8
 
Operating income 823.7 415.8 1,825.2 1,274.8
 
Interest and investment income, net 7.2 8.8 14.0 17.8
Interest (expense) (123.3) (48.3) (245.2) (97.5)
Other income (expense), net (12.5) 94.5 22.7 102.8
 
Income before income taxes 695.1 470.8 1,616.7 1,297.9
 
Income tax provision 96.9 114.6 217.8 222.8
 
Net income $ 598.2 $ 356.2 $ 1,398.9 $ 1,075.1
 
 
Net income per common share:
Basic $ 0.77 $ 0.45 $ 1.80 $ 1.35
Diluted $ 0.75 $ 0.43 $ 1.74 $ 1.30
 
Weighted average shares:
Basic 775.6 793.0 778.1 796.0
Diluted 801.5 825.3 804.7 829.7
 
 
June 30, December 31,
2016 2015
Balance sheet items:
Cash, cash equivalents & marketable securities $ 6,403.7 $ 6,551.9
Total assets* 26,562.0 26,964.4
Long-term debt* 14,312.1 14,161.4

 

Total stockholders' equity 5,548.8 5,919.0
 
* Total assets and long-term debt as of December 31, 2015 have been adjusted to reflect the retroactive adoption of ASU 2015-03 in the first quarter of 2016. ASU 2015-03 requires the presentation of debt issuance costs as a reduction of long-term debt.
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,
2016 2015 2016 2015
 
Net income - GAAP $ 598.2 $ 356.2 $ 1,398.9 $ 1,075.1
 
Before tax adjustments:
Cost of goods sold (excluding amortization
of acquired intangible assets):
Share-based compensation expense (1) 8.6 8.1 17.6 14.8
 
Research and development:
Share-based compensation expense (1) 63.9 63.6 126.1 119.8
Upfront collaboration expense (2) 284.0 569.5 364.0 588.5
 
Selling, general and administrative:
Share-based compensation expense (1) 85.0 76.0 160.3 141.9
Litigation-related loss contingency accrual expense (3) 100.0 - 100.0 -
 
Amortization of acquired intangible assets (4) 174.8 63.7 266.6 127.3
 
Acquisition related (gains) charges and restructuring, net:
Change in fair value of contingent consideration (5) (43.7) (29.3) (10.7) (10.3)
Restructuring charges (6) 7.8 - 11.0 -
 
Net income tax adjustments (7) (126.7) (89.0) (217.6) (147.3)
Net income - Adjusted $ 1,151.9 $ 1,018.8 $ 2,216.2 $ 1,909.8
 
Net income per common share - Adjusted
Basic $ 1.49 $ 1.28 $ 2.85 $ 2.40
Diluted $ 1.44 $ 1.23 $ 2.75 $ 2.30
 
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 $157.5 for the three-month period ended June 30, 2016 and $147.7 for the three-month period
ended June 30, 2015. Exclude share-based compensation expense totaling $304.0 for the six-month period ended June 30, 2016 and $276.5 for the
six-month period ended June 30, 2015.
 
(2) Exclude upfront payment expense for research and development collaboration arrangements.
 
(3) Exclude loss contingency accrual expense related to a contractual dispute.
 
(4) Exclude amortization of intangible assets acquired in the acquisitions of Pharmion Corp., Gloucester Pharmaceuticals, Inc. (Gloucester), Abraxis
BioScience Inc. (Abraxis), Celgene Avilomics Research, Inc. (Avila), and Quanticel Pharmaceuticals, Inc. (Quanticel). The excluded amortization
expense for the three- and six-month periods ended June 30, 2016 includes $83.1 million related to the impairment of an intangible asset
acquired in the Avila acquisition.
 
(5) Exclude changes in the fair value of contingent consideration related to the acquisitions of Gloucester, Abraxis, Avila, Nogra Pharma Limited and
Quanticel.
 
(6) Exclude restructuring charges related to our relocation of certain operations into our two Summit, NJ locations as well as costs associated
with certain headcount reductions.
 
(7) 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 adjustments related to the gain on
the sale of certain assets.
Celgene Corporation and Subsidiaries
Reconciliation of Full-Year 2016 Projected GAAP to Adjusted Net Income
(In millions, except per share data)
   
 
 
Range
Low High
 
Projected net income - GAAP (1) $ 3,074.9 $ 3,266.5
 
 
Before tax adjustments:
Cost of goods sold (excluding amortization of acquired intangible assets):
Share-based compensation expense 37.0 35.2
 
Research and development:
Share-based compensation expense 263.4 250.9
Upfront collaboration expense 601.0 601.0
 
Selling, general and administrative:
Share-based compensation expense 334.8 318.9
Litigation-related loss contingency accrual expense 100.0 100.0
 
Amortization of acquired intangible assets 458.2 418.6
 
Acquisition related (gains) charges and restructuring, net:
Change in fair value of contingent consideration 43.7 39.5
Restructuring charges 30.0 15.0
 
Net income tax adjustments (348.8) (411.1)
   
Projected net income - Adjusted $ 4,594.2 $ 4,634.5
 
Projected net income per diluted common share - GAAP $ 3.82 $ 4.05
 
Projected net income per diluted common share - Adjusted $ 5.70 $ 5.75
 
Projected weighted average diluted shares 806.0 806.0
 
(1) Our projected 2016 earnings do not include the effect of any business combinations, collaboration agreements, asset acquisitions, intangible asset impairments, additional litigation-related loss contingency accruals 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 and Subsidiaries
Net Product Sales
(In millions)
       
 
Three-Month Periods
Ended June 30, % Change
2016 2015 Reported Operational(1) Currency(2)
 
REVLIMID®
U.S. $ 1,079.6 $ 872.6 23.7% 23.7% 0.0%
International 621.2 571.4 8.7% 10.9% (2.2)%
Worldwide 1,700.8 1,444.0 17.8% 18.7% (0.9)%
 
ABRAXANE®
U.S. 174.7 169.8 2.9% 2.9% 0.0%
International 74.4 74.4 0.0% 2.4% (2.4)%
Worldwide 249.1 244.2 2.0% 2.7% (0.7)%
 
POMALYST®/IMNOVID®
U.S. 184.9 143.6 28.8% 28.8% 0.0%
International 132.8 90.9 46.1% 43.2% 2.9%
Worldwide 317.7 234.5 35.5% 34.4% 1.1%
 
OTEZLA®(3)
U.S. 216.8 84.7 N/A N/A N/A
International 25.1 5.0 N/A N/A N/A
Worldwide 241.9 89.7 N/A N/A N/A
 
VIDAZA®
U.S. 3.6 5.6 (35.7)% (35.7)% 0.0%
International 150.5 146.5 2.7% 5.6% (2.9)%
Worldwide 154.1 152.1 1.3% 4.1% (2.8)%
 
azacitidine for injection
U.S. 21.7 22.3 (2.7)% (2.7)% 0.0%
International - - N/A N/A N/A
Worldwide 21.7 22.3 (2.7)% (2.7)% 0.0%
 
THALOMID®
U.S. 23.3 33.8 (31.1)% (31.1)% 0.0%
International 14.4 14.1 2.1% 5.4% (3.3)%
Worldwide 37.7 47.9 (21.3)% (20.3)% (1.0)%
 
ISTODAX®
U.S. 18.9 17.0 11.2% 11.2% 0.0%
International 1.8 0.9 100.0% 107.1% (7.1)%
Worldwide 20.7 17.9 15.6% 16.0% (0.4)%
 
All Other
U.S. - 0.9 N/A N/A N/A
International 0.8 0.6 N/A N/A N/A
Worldwide 0.8 1.5 N/A N/A N/A
 
Total Net Product Sales
U.S. 1,723.5 1,350.3 27.6% 27.6% 0.0%
International 1,021.0 903.8 13.0% 14.6% (1.6)%
Worldwide $ 2,744.5 $ 2,254.1 21.8% 22.5% (0.7)%
 
(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
2016 2015 Reported Operational(1) Currency(2)
 
REVLIMID®
U.S. $ 2,076.1 $ 1,683.4 23.3% 23.3% 0.0%
International 1,198.3 1,103.5 8.6% 11.8% (3.2)%
Worldwide 3,274.4 2,786.9 17.5% 18.8% (1.3)%
 
ABRAXANE®
U.S. 318.5 328.9 (3.2)% (3.2)% 0.0%
International 155.5 138.7 12.1% 14.5% (2.4)%
Worldwide 474.0 467.6 1.4% 2.1% (0.7)%
 
POMALYST®/IMNOVID®
U.S. 355.6 272.0 30.7% 30.7% 0.0%
International 236.1 161.0 46.6% 45.2% 1.4%
Worldwide 591.7 433.0 36.7% 36.2% 0.5%
 
OTEZLA®(3)
U.S. 391.6 144.1 N/A N/A N/A
International 45.9 5.9 N/A N/A N/A
Worldwide 437.5 150.0 N/A N/A N/A
 
VIDAZA®
U.S. 7.1 11.5 (38.3)% (38.3)% 0.0%
International 293.7 284.2 3.3% 7.3% (4.0)%
Worldwide 300.8 295.7 1.7% 5.6% (3.9)%
 
azacitidine for injection
U.S. 40.2 42.9 (6.3)% (6.3)% 0.0%
International - - N/A N/A N/A
Worldwide 40.2 42.9 (6.3)% (6.3)% 0.0%
 
THALOMID®
U.S. 50.8 66.2 (23.3)% (23.3)% 0.0%
International 27.9 28.6 (2.4)% 2.0% (4.4)%
Worldwide 78.7 94.8 (17.0)% (15.7)% (1.3)%
 
ISTODAX®
U.S. 35.6 32.2 10.6% 10.6% 0.0%
International 3.6 2.2 63.6% 72.5% (8.9)%
Worldwide 39.2 34.4 14.0% 14.6% (0.6)%
 
All Other
U.S. 1.2 2.7 N/A N/A N/A
International 1.5 1.3 N/A N/A N/A
Worldwide 2.7 4.0 N/A N/A N/A
 
Total Net Product Sales
U.S. 3,276.7 2,583.9 26.8% 26.8% 0.0%
International 1,962.5 1,725.4 13.7% 16.4% (2.7)%
Worldwide $ 5,239.2 $ 4,309.3 21.6% 22.7% (1.1)%
(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.

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

Source: Celgene Corporation

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