On July 26, 2018 Celgene Corporation (NASDAQ:CELG) reported net product sales of $3,808 million for the second quarter of 2018, a 17 percent increase from the same period in 2017 (Press release, Celgene, JUL 26, 2018, View Source [SID1234527897]). Celgene reported second quarter 2018 total revenue of $3,814 million, a 17 percent increase compared to $3,271 million in the second quarter of 2017.
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Based on U.S. GAAP (Generally Accepted Accounting Principles), Celgene reported net income of $1,045 million and diluted earnings per share (EPS) of $1.43 for the second quarter of 2018. For the second quarter of 2017, GAAP net income was $1,101 million and diluted EPS was $1.36.
Adjusted net income for the second quarter of 2018 increased 5 percent to $1,585 million compared to $1,514 million in the second quarter of 2017. For the same period, adjusted diluted EPS increased 16 percent to $2.16 (including dilution from the Juno Therapeutics acquisition) from $1.87.
"We continued to deliver strong operating performance in the second quarter, leading us to update our 2018 financial guidance," said Mark J. Alles, Chairman and Chief Executive Officer of Celgene Corporation. "Our next innovation cycle is underway. We are meaningfully advancing our pipeline, while strengthening the organization to maximize future growth opportunities."
Second Quarter 2018 Financial Highlights
Unless otherwise stated, all comparisons are for the second quarter of 2018 compared to the second quarter of 2017. The adjusted operating expense categories presented below exclude share-based employee compensation expense, collaboration-related upfront expense and a litigation-related loss contingency accrual expense. Please see the attached Use of Non-GAAP Financial Measures and Reconciliation of GAAP to Adjusted Net Income for further information relevant to the interpretation of adjusted financial measures and reconciliations of these adjusted financial measures to the most comparable GAAP measures, respectively.
Net Product Sales Performance
REVLIMID sales for the second quarter increased 21 percent to $2,453 million. REVLIMID sales continue to grow, driven by increases in market share and extended treatment duration. U.S. sales of $1,586 million and international sales of $867 million increased 17 percent and 28 percent year-over-year, respectively. International sales were also favorably impacted by customer buying patterns and sales of product for use in clinical trials.
POMALYST/IMNOVID sales for the second quarter were $507 million, an increase of 30 percent year-over-year. U.S. sales were $341 million and international sales were $166 million, an increase of 41 percent and 11 percent year-over-year, respectively. POMALYST/IMNOVID sales growth was driven primarily by increases in market share and treatment duration.
OTEZLA sales for the second quarter were $375 million, a 5 percent increase year-over-year. Second quarter U.S. sales of $291 million and international sales of $84 million decreased 5 percent and increased 62 percent year-over-year, respectively. OTEZLA sales in the U.S. were driven primarily by increasing demand with continued access pull-through in contracted health plans that was offset by lower customer inventory levels at the end of the second quarter of 2018. The strong momentum of OTEZLA adoption continued in key international markets with significant growth acceleration in Japan.
ABRAXANE sales for the second quarter were $243 million, a 4 percent decrease year-over-year. U.S. sales were $152 million and international sales were $91 million, a decrease of 6 percent and 2 percent year-over-year, respectively.
In the second quarter, all other product sales, which include IDHIFA, THALOMID, ISTODAX, VIDAZA and an authorized generic version of VIDAZA drug product primarily sold in the U.S., were $230 million compared to $222 million in the second quarter of 2017.
Research and Development (R&D)
On a GAAP basis, R&D expenses were $1,251 million for the second quarter of 2018 compared to $835 million for the same period in 2017. Adjusted R&D expenses were $948 million for the second quarter of 2018 compared to $690 million for the second quarter of 2017. The increase was driven by the inclusion of R&D expenses associated with the acquisition of Juno and regulatory submission-related work on multiple programs. Additional R&D expenses only included on a GAAP basis increased in 2018, as outlined in the attached Reconciliation of GAAP to Adjusted Net Income.
Selling, General and Administrative (SG&A)
On a GAAP basis, SG&A expenses were $790 million for the second quarter of 2018 compared to $939 million for the same period in 2017. Adjusted SG&A expenses were $672 million for the second quarter of 2018 compared to $532 million for the second quarter of 2017. The current period included an increase in SG&A expense associated with the acquisition of Juno and marketing-related expenses. Additional SG&A expenses only included on a GAAP basis decreased in 2018, as outlined in the attached Reconciliation of GAAP to Adjusted Net Income.
Cash, Cash Equivalents, Marketable Debt Securities and Publicly-Traded Equity Securities
Operating cash flow was $1.2 billion in the second quarter of 2018, compared to $1.6 billion for the second quarter of 2017. In May 2018, we entered into an accelerated share repurchase (ASR) agreement to repurchase an aggregate of $2 billion of our common stock. During the second quarter of 2018, we purchased 32.8 million of our shares for $3.3 billion, including the $2 billion paid for the ASR for which we have received a partial delivery of approximately 18 million shares. We anticipate the remaining shares from the ASR will be received in the third quarter of 2018. As of June 30, 2018, Celgene had approximately $2.8 billion remaining under its stock repurchase program. Celgene ended the quarter with approximately $3.4 billion in cash, cash equivalents, marketable debt securities and publicly-traded equity securities.
Portfolio Updates
In July, Celgene announced that the phase III AUGMENT trial evaluating REVLIMID in combination with rituximab (R2) in patients with relapsed and/or refractory follicular lymphoma and marginal zone lymphoma met the primary endpoint of progression-free survival (PFS). Data from the AUGMENT trial will be submitted to a future medical meeting. Global regulatory submissions are planned for the first quarter of 2019.
In June and July, Celgene and Acceleron Pharma announced that luspatercept achieved all primary and key secondary endpoints in the phase III MEDALIST and BELIEVE trials in patients with low-to-intermediate risk myelodysplastic syndromes (MDS) and transfusion-dependent beta-thalassemia, respectively. Data from the MEDALIST and BELIEVE trials will be submitted to a future medical meeting in 2018. Regulatory applications for luspatercept in the United States and Europe are planned for the first half of 2019.
At the 2018 American Society of Clinical Oncology (ASCO) (Free ASCO Whitepaper) Annual Meeting in June, data were presented on Celgene’s pipeline assets and marketed products including:
Updated durability and safety data from the TRANSCEND NHL-001 trial evaluating liso-cel (JCAR017) in patients with relapsed and/or refractory aggressive non-Hodgkin lymphoma (NHL).
In collaboration with partner bluebird bio, updated data from the CRB-401 phase I trial evaluating bb2121 in patients with relapsed and/or refractory multiple myeloma (RRMM).
Results from the phase III OPTIMISMM trial evaluating POMALYST in combination with bortezomib and dexamethasone (PVd) in patients with second-line multiple myeloma.
Results from the phase III RELEVANCE trial evaluating REVLIMID in combination with rituximab in patients with previously untreated follicular lymphoma (FL).
Results from the Merck sponsored phase III KEYNOTE-407 trial evaluating KEYTRUDA (pembrolizumab) in combination with ABRAXANE as first-line treatment for metastatic squamous non-small cell lung cancer (NSCLC).
PFS and safety analysis from the Genentech-sponsored phase III IMpower131 trial evaluating TECENTRIQ (atezolizumab) plus chemotherapy (carboplatin and ABRAXANE) as first-line treatment in patients with advanced squamous NSCLC.
In May, Roche announced that the phase III IMpower130 trial evaluating TECENTRIQ plus chemotherapy (carboplatin and ABRAXANE) in patients with metastatic non-squamous NSCLC met its co-primary endpoints of overall survival and PFS. Additionally, in July, Roche announced that the phase III IMpassion130 trial with ABRAXANE in combination with TECENTRIQ in patients with metastatic or locally advanced triple negative breast cancer met its co-primary endpoint of PFS. Data from these trials will be presented at a future medical meeting.
The phase I TRANSCEND CLL-004 trial evaluating liso-cel in patients with relapsed and/or refractory chronic lymphocytic leukemia (CLL) continues to enroll. The phase III TRANSFORM (BCM-003) trial evaluating liso-cel as second-line therapy in patients with diffuse large B-cell lymphoma (DLBCL) who are eligible for transplantation is initiating. In addition, the phase II trial (PILOT) evaluating liso-cel as second-line therapy in patients with DLBCL who are not eligible for transplantation was initiated in May.
Organizational Updates
In May, Celgene announced the hiring of David V. Elkins as Executive Vice President (EVP) and Chief Financial Officer (CFO) and the appointment of Peter N. Kellogg to EVP, Chief Corporate Strategy Officer until his retirement planned for mid-2019. Mr. Elkins joined Celgene as EVP on July 1, 2018 and will succeed Peter Kellogg as CFO effective August 1, 2018.
In June, Celgene announced the appointment of Jonathan Biller as EVP and General Counsel effective July 3, 2018, following the departure of Gerald F. Masoudi.
Second Quarter 2018 Conference Call and Webcast Information
Celgene will host a conference call to discuss the second quarter of 2018 operational and financial performance on Thursday, July 26, 2018, at 9 a.m. ET. The conference call will be available by webcast at View Source An audio replay of the call will be available from noon July 26, 2018, until midnight ET August 2, 2018. To access the replay in the U.S., dial (855) 859-2056; outside the U.S. dial (404) 537-3406. The participant passcode is 2194616.