On January 31, 2019 Celgene Corporation (NASDAQ: CELG) reported operating results for the fourth quarter and full year of 2018 (Press release, Celgene, JAN 31, 2018, View Source [SID1234532985]). For the fourth quarter of 2018, net product sales were $4,036 million, an increase of 16 percent year-over-year. Fourth quarter total revenue increased 16 percent year-over-year to $4,037 million.
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Net product sales for the full year of 2018 were $15,265 million, an increase of 18 percent year-over-year. Total revenue for the full year of 2018 was $15,281 million, an increase of 18 percent year-over-year.
Based on U.S. GAAP (Generally Accepted Accounting Principles), Celgene reported net income of $1,073 million and diluted earnings per share (EPS) of $1.50 for the fourth quarter of 2018. For the fourth quarter of 2017, GAAP net loss was $81 million and diluted EPS was ($0.10). Full year GAAP net income for 2018 was $4,046 million and diluted EPS was $5.51. Full year GAAP net income for 2017 was $2,940 million and diluted EPS was $3.64.
Adjusted net income for the fourth quarter of 2018 increased 7 percent to $1,709 million compared to $1,592 million in the fourth quarter of 2017. For the same period, adjusted diluted EPS increased 20 percent to $2.39 from $2.00.
Adjusted net income for the full year of 2018 increased 8 percent to $6,511 million. Adjusted diluted EPS increased 19 percent to $8.87 from $7.44 for the full year of 2017.
"2018 was another year of excellent operating results and significant progress advancing our innovative early-, mid- and late-stage pipeline," said Mark J. Alles, Chairman and Chief Executive Officer of Celgene Corporation. "With five near-term product launches and many promising assets advancing, we are very optimistic about our potential for long-term growth as part of the new Bristol-Myers Squibb."
Fourth Quarter and Full Year 2018 Financial Highlights
Unless otherwise stated, all comparisons are for the fourth quarter and full year of 2018 compared to the fourth quarter and full year of 2017. The adjusted operating expense categories presented below exclude share-based employee compensation expense, collaboration-related upfront expense, research and development asset acquisition expense, IPR&D asset impairment charges, clinical trial and development activity wind-down costs 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 fourth quarter increased 16 percent to $2,549 million. Fourth quarter U.S. sales of $1,729 million and international sales of $820 million increased 17 percent and 15 percent, respectively. REVLIMID sales growth was driven by increases in treatment duration and market share. Full year REVLIMID sales were $9,685 million, an increase of 18 percent year-over-year.
POMALYST/IMNOVID sales for the fourth quarter were $567 million, an increase of 28 percent year-over-year. Fourth quarter U.S. sales of $393 million and international sales of $174 million increased 39 percent and 9 percent, respectively. POMALYST/IMNOVID sales growth was driven primarily by increases in treatment duration and market share. Full year POMALYST/IMNOVID sales were $2,040 million, an increase of 26% year-over-year.
OTEZLA sales in the fourth quarter were $448 million, a 21 percent increase year-over-year. Fourth quarter U.S. sales of $360 million and international sales of $88 million increased 19 percent and 29 percent, respectively. OTEZLA sales growth in the U.S. was driven by increases in demand. OTEZLA international sales were driven by launch uptake in key ex-U.S. markets, including Japan. Full year OTEZLA sales were $1,608 million, an increase of 26 percent year-over-year.
ABRAXANE sales for the fourth quarter were $269 million, an increase of 7 percent year-over-year. Fourth quarter U.S. sales of $178 million and international sales of $91 million increased 15 percent and decreased 5 percent, respectively. ABRAXANE sales growth was driven primarily by demand. Full year ABRAXANE sales were $1,062 million, an increase of 7 percent year-over-year.
In the fourth 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 $203 million compared to $227 million in the fourth quarter of 2017. Full year sales for these products were $870 million compared to $901 million for the full year 2017.
Research and Development (R&D)
On a GAAP basis, R&D expenses were $1,138 million for the fourth quarter of 2018 versus $2,738 million for the same period in 2017. Full year 2018 R&D expenses were $5,673 million compared to $5,915 million for 2017.
Adjusted R&D expenses were $919 million for the fourth quarter of 2018 compared to $766 million for the same period in 2017. For the full year 2018, adjusted R&D expenses were $3,509 million compared to $2,749 million for the full year 2017. Both the fourth quarter and full year 2018 increases in R&D expenses were primarily driven by the inclusion of R&D expenses associated with the acquisition of Juno Therapeutics (Juno) and regulatory submission-related work on multiple programs. Additional R&D expenses (only included on a GAAP basis) decreased 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 $850 million for the fourth quarter of 2018 compared to $774 million for the same period in 2017. Full year SG&A expenses were $3,250 million for 2018 compared to $2,941 million for 2017.
Adjusted SG&A expenses were $762 million for the fourth quarter of 2018 compared to $687 million for the same period in 2017. For full year 2018, adjusted SG&A expenses were $2,747 million versus $2,279 million in 2017. Both the fourth quarter and full year 2018 increases in SG&A expenses were primarily driven by the inclusion of SG&A expense associated with the acquisition of Juno and marketing-related expenses. Additional SG&A expenses (only included on a GAAP basis) increased 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 $5.2 billion for both 2018 and 2017. Celgene ended the fourth quarter of 2018 with approximately $6.0 billion in cash, cash equivalents, marketable debt securities and publicly-traded equity securities.
**Not meaningful as the 2019 measures exclude the impact of any strategic transactions, impairments, loss contingencies, changes in the fair value of equity investments, costs associated with the Bristol-Myers Squibb Company (Bristol-Myers Squibb) and Celgene transaction and non-operating tax adjustments that have not yet occurred.
Portfolio Updates
At the 60th American Society of Hematology (ASH) (Free ASH Whitepaper) Annual Meeting in December, data were presented on Celgene’s marketed and pipeline hematology assets. Select data presentations included:
In collaboration with partner Acceleron Pharma, data from the phase III MEDALIST and BELIEVE trials with luspatercept in patients with low-to-intermediate risk myelodysplastic syndromes (MDS) and transfusion-dependent beta-thalassemia, respectively;
Data from the phase I TRANSCEND CLL-004 trial evaluating liso-cel in patients with relapsed and/or refractory chronic lymphocytic leukemia (CLL); and,
Data from the phase III AUGMENT trial evaluating REVLIMID in combination with rituximab (R²) in patients with relapsed and/or refractory indolent non-Hodgkin lymphoma (NHL)
A New Drug Application (NDA) was submitted to the U.S. Food and Drug Administration (FDA) for fedratinib for the treatment of patients with myelofibrosis. Celgene plans to submit a Marketing Authorization Application (MAA) with the European Medicines Agency (EMA) in the first half of 2019. In addition, the phase III myelofibrosis program (FREEDOM and FREEDOM-2 trials) evaluating fedratinib in patients resistant or intolerant to ruxolitinib is initiating
A supplemental NDA (sNDA) was submitted to the U.S. FDA for REVLIMID in combination with rituximab (AUGMENT trial) for the treatment of patients with relapsed and/or refractory indolent NHL. The anticipated U.S. FDA action date for this application is in the second half of 2019
In the fourth quarter, Celgene and partner bluebird bio announced the completion of enrollment for the KarMMa pivotal trial evaluating bb2121 in patients with relapsed and/or refractory multiple myeloma (RRMM)
The phase II TRANSCEND OUTREACH trial evaluating liso-cel (JCAR017) in patients with relapsed and/or refractory diffuse large B-cell lymphoma (DLBCL) in the outpatient setting initiated in the fourth quarter
The phase II pivotal trial evaluating liso-cel in patients with relapsed and/or refractory CLL is initiating
The phase III ADVANCE trial evaluating OTEZLA in patients with mild to moderate plaque psoriasis is initiating
Business Update Summary
In January, Celgene and Bristol-Myers Squibb (BMS) announced that they have entered into a definitive merger agreement under which BMS will acquire Celgene for approximately $74 billion (based on closing price of BMS on date of the agreement). Under the terms of the agreement, Celgene shareholders will receive for each Celgene share $50 plus one BMS share and one tradeable Contingent Value Right (CVR), which will entitle the holder to receive a cash payment of $9.00 upon the achievement of FDA approval of all three products (ozanimod, liso-cel and bb2121) within specified time periods. The transaction is subject to approval by BMS and Celgene stockholders and the completion of customary closing conditions and regulatory approvals. BMS and Celgene expect to close the transaction in the third quarter of 2019.
Q4 and Full Year 2018 Conference Call and Webcast Information
Celgene will host a conference call to discuss the fourth quarter and full year of 2018 operational and financial performance on Thursday, January 31, 2019, 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 January 31, 2019, until midnight ET February 7, 2019. To access the replay in the U.S., dial 1-855-859-2056; outside the U.S. dial 404-537-3406. The participant passcode is 7075709.