Celgene Corporation (NASDAQ:CELG)
31st Annual JPMorgan Healthcare Conference
January 07, 2013 11:00 am ET
Robert J. Hugin - Chairman, Chief Executive Officer, President and Chairman of Executive Committee
Geoffrey C. Meacham - JP Morgan Chase & Co, Research Division
Geoffrey C. Meacham - JP Morgan Chase & Co, Research Division
Good morning, everyone. Happy new year. Welcome to the morning session of the 31st Annual JPMorgan Healthcare Conference. My name is Geoff Meacham. I'm the senior biotech analyst here at JPMorgan. And per tradition, the first company presenting this morning is Celgene. Celgene is one of the global leaders in the hematology/oncology space, with lead assets including REVLIMID, thalidomide, VIDAZA, as well as emerging assets, apremilast and pomalidomide. And speaking on behalf of Celgene is the CEO, Bob Hugin. And also on the stage is CFO, Jackie Fouse. Bob?
Robert J. Hugin
Thank you very much, Geoff. It's very exciting for us to be here, and we appreciate the opportunity to come and speak at the conference. And I am certainly privileged to stand here today representing all the men and women of Celgene from all around the world, who are the ones that create the opportunities and deliver the results that I am so lucky and fortunate to speak of today. And we appreciate the opportunity to be at the conference because it is an opportunity for us to step back and strategically look at the progress we achieved in the past year and the accomplishments that were achieved and what needs to be achieved as we look forward the outlook and opportunities for 2013. So we appreciate that opportunity.
The presentation does include forward-looking statements and results may or may not be as are discussed here today.
We are making exceptional progress at Celgene building a market-leading global biopharmaceutical company focused in being -- developing, discovering new innovative therapies in the areas of cancer, immune-inflammatory diseases that really make a difference in patients' lives.
And we are focused on this mission because it unifies us. It gives us the vision, the reason why we are engaged in what we do. And we remember every day that there is no success for Celgene if we do not continue to make a meaningful, increasingly important difference in the lives of patients.
I can vividly remember being here a year ago. It was an exciting time for Celgene, just like it is today.
And I was outlining an ambitious list of milestone objectives, inflection points for Celgene in 2012. It was exciting presentation for me because we have spent a decade of focused, intensive R&D investments to bring 2 specific compounds that were developed, discovered in Celgene's laboratories and developed by Celgene, pomalidomide and apremilast. And we will bring a third compound that we had acquired in, ABRAXANE, and testing it in Phase III studies in areas where taxanes had never shown any activity. So it was an incredibly exciting time, ambitious milestones across our portfolio, but also one that gives us some anxiety. Because when you spend this amount of time and effort and bring this to a transition or crossroads where you're going to get the answer in a pivotal trial, it's a very -- a time of trepidation, but incredible excitement.
And today, I come here to report to you that with the exception of 1 delay, we have achieved remarkable positive results across the milestones that we outlined last year, remarkable positive results in 2012. And they position us today at Celgene to have 3 blockbuster franchises and accelerating growth for the next 5 years.
We look at Celgene as having 4 key pillars, strategic imperatives that guide and direct what we do every day. And these objectives that we had and the accomplishments of 2012 across all of these strategic imperatives, we achieved important milestones.
We think about the focus on operational excellence and producing high-quality outcomes, that was clearly what we did in 2012. Though our results are not yet audited, I can report to you today that we expect to announce later this month the first quarter where REVLIMID exceeds $1 billion in revenue. And at the same time, we're going to announce earnings per share for 2012 that will meet or even potentially slightly exceed the upper end of the guidance that we put out for 2012, which during the course of the year was raised twice. And at the same time, we'll announce improved operating margins, significantly improved operating margins, and the leverage of our model. And throughout the year, we assertively managed our balance sheet and our capital structure to ensure effective returns for our shareholders.
And certainly, when we think about our hematology franchise, the accomplishments of 2012 are extremely significant. REVLIMID had strong operating momentum, as I just mentioned, important new data at ASH, good duration gains in the marketplace, new territories being accessed and opportunities for new indications in the coming years, and preparing for new indications, as I mentioned.
Importantly, at ASH, we had presented the Phase III pivotal data for POMALYST, our new entry in our hematology franchise. And with profound survival advantage, we think it positions POMALYST to be the next blockbuster product in our hematology franchise. And today, our hematology franchise is deeper and more diverse, and the advancement is accelerating, of the compounds in those programs.
And certainly, our important strategic imperative of building new franchises in solid tumor oncology and I&I were important milestones for 2012 and very, very significant accomplishments.
In the fall, we received FDA approval for non-small cell lung cancer for ABRAXANE. And in the same few months, we received positive Phase III data in melanoma, the first time in 30 years that a chemotherapeutic agent had showed a differentiated advantage over the standard of care, dacarbazine, in melanoma.
And most importantly for ABRAXANE, just a month later, pivotal trial in pancreatic cancer showed a clear, statistically significant and clinically meaningful overall survival benefit with ABRAXANE in gemcitabine versus gemcitabine in pancreatic cancer, and that data will be presented in a major medical meeting later this month.
And the results on the I&I franchise were no less stunning. And in fact, because of the size of the market, the magnitude of impact on the company may in fact be greater. We achieved positive Phase III results in all 3 psoriatic arthritis Phase III studies, important Phase II data from -- positive data in Behcet's disease, a very difficult and debilitating inflammatory condition, and we fully accrued all of our 2 important psoriasis pivotal study with apremilast. Important advances in 2 emerging franchises for Celgene. And part of the model that we have is investing in the future, developing that virtuous cycle, significant accomplishments in terms of our investments for the long-term to ensure that we can sustain industry-leading, long-term growth for Celgene. 4 new INDs for Celgene in 2012 on the back of 3 in 2011, so 7 new Phase I programs in the last 2 years. There's a real tangible feeling of acceleration in all of our research programs, and we're very proud of the productivity that we're producing in these programs, both internally and with our important collaborators.
Overall, I think 2012 was a year of great, positive results and importantly positioning us today with 3 new blockbuster potential products and 2 new blockbuster franchises that are really now being turned from promise into reality for Celgene.
Our company is stronger today than it has ever been. We're extremely well-positioned to take advantage and capitalize on the important progress that was achieved in 2012 and to capitalize on the opportunities that 2013 presents. Our people are stronger in terms of accomplishing outstanding results in extremely challenging markets and extremely challenging times. We're expanding our product portfolio, and our investments are making great progress in terms of building sustainable, long-term growth for us and our shareholders.
And importantly, we are well-positioned with our people to make this difference, and our business model is extremely powerful and is allowing our people to have great impact.
Our business model in hematology has been one that we've been consistently focused on for this past decade. We target areas of large, unmet medical need, where there's a tremendous list -- number of patients who are underserved today. And we look to develop products that have breakthrough potential, capabilities that make a meaningful difference in the lives of these patients who are underserved. And then, we're focused in terms of where we invest and where we compete and where we look to add value. We pick specialty areas where we, as a company, can have great impact, and therefore, produce greater returns. And we're focused on operating excellence because we recognize it's the importance of delivering superior results that provide us the opportunity to invest in the future and capitalize on the great opportunities of making an increasingly important difference in the lives of patients in new areas with new products.
And we're looking to refine this model in terms of hematology to ensure that we actually continue to do better and better in hematology and export the lessons we've learned and the power of the model to our emerging franchises in oncology and immune-inflammatory diseases.
And we're going to do that in terms of looking at the same 4 pillars that give us the focus: enhancing the strength of our hematology franchise; expanding into new areas that make sense and have synergy with our existing businesses; continue to invest in the future to sustain innovation; and produce long-term growth, all with the focus of doing it in a way that produce superior results to allow to reinforce this virtuous cycle.
And in hematology, we made great progress in 2012 and we have great opportunities in 2013. We're preparing for multiple launches in our hematology franchise in 2013. We're on the near term for approval for the first time for REVLIMID in China. We're working for approval of MDS in Europe. We submitted mantle cell lymphoma for REVLIMID in the United States in the fourth quarter, and we're preparing for launch, our first launch, for REVLIMID in myeloma. We're importantly working on preparations for global launches of POMALYST. We're in late stages of a February 10 PDUFA date for POMALYST in relapsed/refractory myeloma. And we're advancing CC-486 into 2 pivotal studies, in MDS and AML, our oral azacitidine candidate. We've established an effective dose for CC-292, our BTK inhibitor, that we're rapidly accelerating into studies in combination in single agent in Phase II throughout the course of 2013, and accelerating other important programs like ACE-011 and ACE-536 that are addressing major unmet medical needs in the area of retractable anemias.
So great progress and great opportunity in hematology to really provide us long-term growth in our core existing businesses there. But also, important promise for us in the solid tumor franchise to ensure that we capitalize on the achievements of 2012 and the opportunities that 2013 provide us.
We're continuing our launch in non-small cell lung cancer in ABRAXANE in the United States. And we are working very hard to ensure that we get our pancreatic cancer regulatory filings done around the world as quickly as possible, and certainly in the next few months, the United States to be the first place to launch pancreatic cancer for ABRAXANE.
And in melanoma, we think the data is clinically meaningful and extremely important. And in the first half, the middle of the year, we'll actually have the mature survival data that we'll be able to put into context the very significant progression-free survival that was demonstrated in the study already. So much work to be done with 2013 being a year to capitalize on the advances that were achieved in 2012 in our solid tumor franchise. And it is a deeper and more diverse franchise today in the pipeline in solid tumor oncology. We significantly advanced an internal compound, 223, where today, we're now moving it on to multiple registration tracks upon the completion of proof-of-concept studies in Phase I, and other compounds are moving forward in our solid tumor franchise.
Solid tumor cancer provides a great growth opportunity for us over the next 5 years, and certainly, so does our I&I franchise.
We're extremely excited to be here today to talk about the fact that we are, in this quarter, going to submit our first application for apremilast in the United States for psoriatic arthritis based on the successful completion of 3 pivotal trials in psoriatic arthritis, the largest program ever undertaken in Phase III in psoriatic arthritis.
We've completed the enrollment of our Phase III psoriasis trials. We're rapidly accruing our Phase III study in ankylosing spondylitis, and we're going to move into other indications with apremilast throughout the course of 2013. And we're looking to add more programs and advance the programs in our I&I franchise.
And as I mentioned earlier, we really do believe that you have to invest in the future to produce sustained, long-term growth and impact on patients. We're very excited about the progress and the productivity that we're making in our drug discovery and early development and strategic collaborations. We are focused on our research and drug discovery areas where we have competitive advantage, where we have internal knowledge, patents or intellectual property that gives us the opportunities to make a meaningful difference in areas where we think we can produce breakthrough therapies. And it is imperative to have internal expertise at the highest level in the areas where you believe you have competitive advantage. But at the same time, it is critical that you work with the leaders outside of your company that also have great opportunities in the areas that we are expert in and we're focused on. And we're indeed fortunate to work with some of the finest emerging companies in the world that have some of the top thought leaders and practitioners in the areas where we believe we can make a meaningful difference for patients and produce new innovative breakthrough therapies. And the progress is really clear with 4 new compounds into the clinic in 2012 and the expectation that in 2013, we will also add 4 new compounds into development in Phase I this year, both from ourselves and from our collaborators.
And we can't make these investments that give us the opportunity for long-term high growth if we don't deliver outstanding results and focus on operating excellence. And our team is disciplined and focused and leads on this issue.
We're focused to ensure that we manage our balance sheet and our operating performance to improve operating metrics, and if you look at the steady improvement in operating margin and effective management of resource uses, to improve P&L performance and to clearly improve returns to our shareholders. Important considerations to allow us to invest in the future and continue the virtuous cycle that produces the promising deep, diverse pipeline that we have today.
And this focus on operating excellence has produced a track record of outstanding financial returns over the past 5 years. We're very proud of what we've achieved at Celgene over these last 5 years, and these have been very good years. But we absolutely believe that the best days of Celgene are in front of us. And we think we have the opportunity to accelerate growth, build out these new franchises and have a great promise and great results over the next 5 years.
In fact, we come to you today to update our 5-year guidance, which we have done on occasions, and I'm going to talk about the actual numbers in a moment. But we believe over the next 5 years, our franchise can produce a compounded annual growth rate and product sales of almost 20%, 19%. And that -- the components that make up that growth come from 3 different components, our existing franchises. We believe, with the growth prospects in our existing franchises, we can produce a compound annual growth rate of 13%. And the way we'll do that, REVLIMID will continue to be an important growth driver for us.
We're seeing good operating momentum, as I mentioned, in the fourth quarter results for REVLIMID. We have clarity on the data that we'll need and when we'll get that data to expand the label around the world, the newly diagnosed myeloma. We had good positive data presentations at ASH just last month in Atlanta. We're awaiting for regulatory approval in China and other markets, there will be continuous flow of data. REVLIMID will continue to be an important growth driver for Celgene over the coming years.
And it, with POMALYST, provides us with the opportunity to extend our leadership in multiple myeloma. Important, robust survival data presented at ASH in smoldering myeloma in high-risk patients for REVLIMID showed its continued importance both in early-stage myeloma. And the data presented by POMALYST at ASH in terms of its survival advantage at a Phase III study in highly, highly pretreated relapsed/refractory myeloma illustrates the complementary nature of pomalidomide and REVLIMID and allows us to further extend our leadership and growth in multiple myeloma for the coming years.
POMALYST has the potential to be our next blockbuster. It's a drug that was discovered in our laboratories, developed throughout our clinical and regulatory organizations and will be commercialized globally by our organization. It has a very differentiated mechanism and has strong, strong data. And we're working hard to accelerate its regulatory approvals around the world. We're expecting positive news in the United States in the next month or so, and we're working to get regulatory approvals in Europe by the end of this year. And additionally, we're developing other indications, including myelofibrosis where the Phase III trial is fully accrued and data expected in the coming months, and we're investigating it in systemic scleroderma. Exciting opportunities that develop and deliver market-leading, industry-leading growth from our existing franchises for the next 5 years.
Clearly, ABRAXANE, with pancreatic and melanoma, provides us the opportunity to increase our growth rate over the next 5 years. In our existing franchises, we include our breast cancer and lung cancer indications. But in our opportunity to enhance our growth rate for the next 5 years, the opportunity to get regulatory approval in pancreatic and melanoma gives us the opportunity for increased growth in our overall franchise.
And as I mentioned earlier, ABRAXANE showed clear, differentiated advantage, clinically meaningful opportunity -- advantage in disease where taxane had previously never shown activity. And we're working very hard to get the drug approved in this new indication as quickly as possible. Pancreatic is specially important to give us a global opportunity and make ABRAXANE the kind of important product for patients all around the world.
And apremilast is certainly going to provide us that opportunity to have even further accelerating growth over the next 5 years. I mentioned to you the successful completion of 3 Phase III trials, pivotal trials in psoriatic arthritis and the fact that we had completed the accrual of the 2 psoriasis pivotal trials and we're enrolling the ankylosing spondylitis. We're going to extend apremilast's reach into other indications, and we're on track to deliver the timelines in terms of regulatory submissions.
I'm also excited and privileged to provide to you some breaking news. Because just yesterday, late yesterday, we completed the analysis of our ESTEEM-1 and 2, our 1,250-patient pivotal studies in psoriasis. And I'm very happy to report to you today that the results are highly statistically significant, and they will be presented at a major medical meeting. So it really is -- allows us to position the opportunity for apremilast much more clearly now that we know we have 5 successful pivotal studies in psoriatic arthritis and psoriasis completed. And we'll look to accelerate our regulatory strategies for apremilast now, psoriatic first in the United States and Canada later this year -- psoriasis in the United States and Canada. And in the second half of this year, a combined application of psoriatic arthritis and psoriasis in the European Union. And we'll seek to expand it, because the market opportunity is in the millions for this product. It has the potential to satisfy a tremendous market opportunity for a safe, effective oral treatment in advance of biologics in inflammatory diseases.
And therefore, that provides us the roadway, the roadmap, for us where we can say, we were at $3 billion of revenue and $3 per share a few years ago, $5 billion of revenue and $5 per share, went to $8 billion of revenue and $8 per share, and we're affirming those guidance. At the same time, we're establishing new targets for ourselves of $12 billion of revenue in 2017 and $13 to $14 of EPS in 2017. Ambitious but achievable growth targets for our company and our products.
And for 2013, we're focused on delivering industry-leading, double-digit increases in revenue and earnings per share, at the same time, of investing in these new franchises in oncology around the world and bringing apremilast to patients, and overcoming a headwind of about $100 million in foreign exchange difference in REVLIMID.
So I stand here today very excited about the future of Celgene. And a year ago, we gave you a list of milestones that were major inflection points for the company. And today, I give you a list that is no less important than the one we provided last year. We have important milestones across our portfolio in 2013 that are both designed to capture the benefit of what we announced and achieved in 2012 and extend that benefit. But also, we have multiple, additional milestones across the portfolio that provide additional new growth opportunities for us.
So in closing, I'd like to tell you that the state of Celgene has never been stronger. We have never been better positioned to take advantage of the opportunities that are out there for us. Our people are energized and focused. We're working with the most important and best collaborators around the world. We're very excited about the promise and turning that promise of Celgene into reality. So thank you for joining us this morning, and we look forward throughout the year to update you on the developments of the course of the year. Thank you.
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