Celgene Corporation's CEO Discusses Q4 2012 Results - Earnings Call Transcript

| About: Celgene Corporation (CELG)

Celgene Corporation (NASDAQ:CELG)

Q4 2012 Earnings Call

January 24, 2013 9:00 AM ET

Executives

Patrick Flanigan – VP, IR

Bob Hugin – President and CEO

Jackie Fouse – EVP and CFO

Mark Alles – EVP and Chief Commercial Officer

Analysts

Geoff Porges – Sanford Bernstein

Marshall Urist – Morgan Stanley

Terence Flynn – Goldman Sachs

Eric Schmidt – Cowen & Company

Rachel McMinn – Bank of America

Geoff Meacham – JP Morgan

Mark Schoenebaum – ISI Group

Michael Yee – RBC Capital

Thomas Wei – Jefferies

Yaron Werber – Citi

Josh Schimmer – Lazard Capital

Matthew Roden – UBS

Operator

Hello, and welcome to the Celgene Fourth Quarter and Full Year 2012 Earnings Call. (Operator Instructions) Later we will conduct a questions-and-answer session and instructions will be given at that time. As a reminder, today’s conference call is being recorded. Now I’ll turn the call over to your host, Mr. Patrick Flanigan, Vice President of Investor Relations.

Patrick Flanigan

Thanks, Sahid, and welcome, everyone, to Celgene Corporation’s Fourth Quarter and Year End Conference Call. The press release reporting our financial results in addition to the presentation for today’s webcast can be accessed by going to the Investor Relations section of the corporate website at www.celgene.com.

Joining me in the room today with prepared remarks are Bob Hugin, our Chairman and Chief Executive Officer; Jackie Fouse, our Chief Financial Officer; and Mark Alles, who is Global Head of our Hematology and Oncology business.

As a reminder, during today’s call we will be making forward-looking statements regarding our financial outlook in addition to regulatory and product development plans. These statements are subject to risks and uncertainties that may cause actual results to differ from those forecasted. A description of these risks can be found in our most recent 10-Q on file with the SEC. These statements speak only as of today’s date and we undertake no duty to update or revise them. Finally, reconciliation of the adjusted financial measures to the most comparable GAAP measure is available as part of the earnings release.

I would now like to turn the call over to Bob.

Bob Hugin

Thank you, Patrick, and thank you, everyone, for joining us this morning. I appreciate the opportunity to review the results of 2012 and our outlook for 2013. 2012 was the year of exceptional accomplishments. We achieved remarkable results on multiple significant milestones across our portfolio. We’re generating strong operating momentum and with the opportunities created by these results, Celgene today is stronger than ever. Three new blockbuster potential products across three therapeutic franchises position us to significantly accelerate growth over the next five years.

The financial results for 2012 were outstanding. Revenues for the year were strong. Earnings per share exceeded guidance and operating margins improved significantly. And we actively managed our capital structure to enhance shareholder returns.

These results underscore the strength and leverage of our business model. Our commercial teams, across the globe, are maximizing the potential of our products in existing indications and are growing the business in new indications and markets.

Our Research, Clinical and Regulatory teams made tremendous progress advancing our products and pipeline. We completed key regulatory submissions including POMALYST, for relapsed/refractory myeloma, in both the United States and Europe and for REVLIMID in the United States for mantle cell lymphoma.

We realized positive data on a number of late stage clinical trials during 2012 and these data position us for both new product opportunities and new indications for existing products. These data are highlighted by the positive results for ABRAXANE in Phase III trials in both melanoma and pancreatic cancer. We now have positive data from five pivotal studies of apremilast in psoriatic arthritis and psoriasis.

Our early to mid stage pipeline also made significant progress. With oral azacitidine entering two Phase III trials, four INDs filed, seven programs progressing in Phase I and several new important collaborations established.

In 2013, we’re focused on capitalizing on the opportunities produced by the significant results of 2012. On creating new opportunities and accelerating our business. Four strategic imperatives guide us as we advance through this next phase of growth. We’re committed to maximizing the full potential of our Hematology franchise. REVLIMID continues to be an important growth driver. We’re preparing for launches of relapsed/refractory myeloma in China and mantle cell lymphoma in the United States. Broadening access to patients around the world with newly diagnosed myeloma is an important 2013 priority. Our extensive Phase III program also provides opportunities to extent REVLIMID’s potential into lymphomas and CLL.

The launch of POMALYST, this year, provides us with the opportunity to extend our global leadership in myeloma. The Phase III data presented at ASH demonstrating a significant survival advantage in a highly pre-treated population, illustrates the complementary nature of REVLIMID and POMALYST.

Our other high potential Hematology programs are advancing. We expect to see Phase III data of VIDAZA and AML later this year and are accelerating accrual in important trials of oral azacitidine, our Btk inhibitor, CC-292, ACE-011 and ACE-536.

In our Oncology franchise, we now have the opportunity to expand ABRAXANE into new indications, submitting our pancreatic cancer regulatory filings as soon as possible, around the world, is a major corporate priority. We also intended to finalize our clinical and regulatory plans for ABRAXANE in melanoma when we review the mature survival data from our Phase III trial in the middle of this year.

2013 is the year of a critical importance for apremilast as we transition from clinical development to commercialization. Let me review our 2013 plans for apremilast. We’re on track to submit our psoriatic arthritis application to the FDA this quarter and expect to submit in Canada shortly thereafter. In the second half of this year, we plan to file a combined submission in the E.U. for psoriatic arthritis and psoriasis and we also plan to file supplemental applications in the United States and Canada for psoriasis.

We’re preparing for a commercial launch of apremilast starting with the United States and Canada in 2014. We expect accrual of our pivotal Phase III ankylosing spondylitis trial to complete by year-end and are expanding studies of apremilast in other indications.

A tremendous market opportunity exists for an active, well-tolerated oral medication in serious inflammatory diseases. The potential impact of this franchise on Celgene’s future growth is extraordinary.

We’ll continue to invest in the future by advancing our early to mid stage pipeline to key decision points. There’s a tangible feeling of acceleration in our research and early development programs. And we will continue to focus in the areas where we have competitive advantage such as our IMiD platform, Epigenetics, selective kinase pathways and protein psyonsing.

We’ll also continue to partner with the finest emerging companies in the world so we can make an increasingly meaningful difference for patients with innovative therapies. We’re also looking forward to important milestones across our portfolio in 2013 that will capitalize on what we achieved in 2012 and also provide new growth opportunities for the future.

Let me now turn the call over to Jackie to review our financial results.

Jackie Fouse

Thank you, Bob, and good morning, everyone. Thank you for joining us on the call today. As a reminder my comments cover our adjusted financial results. The reconciliation of these results to our GAAP results can be found attached to our slide deck and press release.

The Celgene business model continues to deliver strong financial results in 2012 added to our impressive track record. Total revenues for the year grew 14% and product revenues an even stronger 15%. Driven by volume growth profits in both the operating and net levels grew faster than revenues as we leveraged our model and fully diluted earnings per share grew 30% twice as fast as revenue growth. Our performance is fueled by our core operations and we are adding additional value with financial drivers mainly share repurchases for now.

Our team is delivering across all of our key metrics and we are producing outstanding performance in the present while investing appropriately for the long-term. In the fourth quarter, product revenues rose just over 14% on a year-over-year basis and as I already noted full-year 2012 product revenues grew just over 15%. This is very good performance on a base of business that reached about $5.4 billion in 2012.

Our growth continues to be volume driven and in the quarter, 11 percentage points of our 14 percentage points of growth came from volume. Price added about 3 points of growth and the impact of foreign exchange was negligible. This picture is essentially the same for the full-year of 2012 with volume contributing 12 points of our 15 percentage points of growth, price 3 points, and foreign exchange neutral.

Fully diluted earnings per share grew 26% for the quarter on a year-over-year comparison basis to $1.32 and 30% for the full-year to $4.91. This earnings growth was primarily operations driven as we expanded our operating margin by 300 basis points. For the quarter, $0.23 or 85% of our $0.27 earnings per share improvement came from operating income growth. The combined financial drivers added the remaining $0.04.

For the full-year, operating income growth contributed $0.85 of our $1.12 EPS improvements or 76%. The combined financial drivers added $0.27 primarily due to the cumulative impact of our share repurchase program on share count.

Turning to individual product sales, REVLIMID growth was robust in the U.S. and across international markets with year-over-year growth for Q4 of 18% and 16% respectively. We reached our first over $1 billion revenue quarter for REVLIMID in the fourth quarter and finished the year strong to produce 17% annual growth with equal contributions from the U.S. and international. Sequential growth for Q4 over Q3 was a very solid 3.3% and we are quite happy with REVLIMID’s 2012 performance, which was again volume driven and the result of positive duration of treatment trends, year-over-year share gains and further geographic penetration.

VIDAZA posted another great quarter, up 14% in the quarter on a year-over-year basis and finished up 17% for the full year, with international growing and exceptionally strong 24% as a result of volume fueled by share gains.

ABRAXANE ended the year with strong momentum on the heels of the approval for non-small cell lung cancer and the positive results on both the pancreatic and melanoma trials. The product grew 11% for the full-year 2012 over 2011 with over 40% growth outside the U.S. Q4 U.S. growth was impacted by a difficult comparison to Q4 of 2011 as the generic paclitaxel shortage experienced a year ago was rectified by Q4 of this year. We’re very optimistic about the future growth projectory for ABRAXANE given the highly positive clinical data we have seen recently and our expectations for future approvals of new indications for the product.

This slide shows the pattern of quarterly REVLIMID revenues that we have seen for the past four years. As we move into Q1 of 2013, I simply want to remind you that because the impact of certain items, like the Medicare coverage gap in the U.S., is more negative in Q1 than any other quarter, we can see the lowest essential growth of any quarter in the year in Q1. We feel very good about the momentum we saw in the REVLIMID business globally as we exited 2012 and that is reflected in our 2013 full year REVLIMID revenue guidance.

Our P&L continues to deliver higher operating margins. For both the quarter and full year, we saw improvements in product, gross margins and those stood at just under 95% for both time periods.

Q4 R&D expense as a percentage of revenues was down significantly versus last year’s Q4, as a result of milestone payments incurred last year. For the full year, R&D as a percentage of revenues declined 200 basis points. In any given year, how much leverage we see in this line item will depend on our evolving portfolio of clinical trials and their timing.

SG&A expenses were higher as a percentage of revenues in Q4 of this year versus last year due to the timing of sales and marketing spend associated with the launches of ABRAXANE and non-small cell lung cancer and the preparation for the POMALYST launch. For the full year, SG&A came in at 22.8% of revenues, the same percentage as 2011 as we invested in 2012 for our future commercial success.

A very attractive feature of our business model is our ability to deliver operating margin leverage through a variety of drivers and take the opportunity to invest, as appropriate, for the long-term while delivering higher margins in the short-term. In 2012, we improved our operating margin by 300 basis points and we expect to continue our positive leverage for many years. I will cover this in our outlook in just a moment. We also produced a 16.4% effective tax rate for the full year, slightly better than expected.

This graph summarizes our P&L leverage story of the past five years and demonstrates our ability to deliver on our margin targets. The core fundamental drivers of our business for the next five years are supportive of continuing these trends.

We focused on our balance sheet, returns and uses of capital, along with our P&L and you can see that leading to improved returns on invested capital. The figures in this slide are calculated based on GAAP income numbers and the invested capital base includes cash on our balance sheet. So these are conservatively stated returns.

Our cash from operations generations continues to be strong, with over $2 billion produced in 2012 and that is net of some payments related to collaboration agreements. In order to optimize our returns over time, we are trying to strike the right balance between investing in our business and returning funds to shareholders. Our preferred way of returning excess cash has been share repurchases and we bought back $2.1 billion of our own stock during 2012 after having done $2.2 billion in 2011. We entered 2013 with approximately $1.8 billion of repurchased authorization open for use.

I would like to wrap up my part of the discussion this morning with an affirmation of the 2013 guidance we gave you on January 7 and our outlook to 2015 and 2017, as well as provide you with a few more details behind that guidance.

We have a 2013 target of $6 billion for net product sales, year-over-year growth of about 11%, including a negative FX impact of about two percentage points that mostly impacts REVLIMID. In our $6 billion revenue target, we plan to be able to absorb up to two quarters of impact of a generic VIDAZA in the U.S. should it occur. We expect REVLIMID sales in $4.1 billion to $4.2 billion range, growth at the midpoint of about 10%.

Even with investing in our Inflammation and Immunology business unit during 2013, we still expect to produce earnings growth faster than revenue growth and see earnings per share in a range of $5.50 to $5.60 and growth of about 13%. This earnings guidance assumes a fully diluted share count of $430 million. With cost of goods, research and development and SG&A as a percentage of revenues targeted at 5%, 24% and 22% respectively, we have multiple points of leverage in our P&L and expect to deliver an operating margin improvement of at least 100 basis points in 2013. We expect our effective tax rate to be relatively flat at 16.5%.

The REVLIMID growth of about 10% comes from an expected 11% to 14% global volume growth slightly offset by 2% to 3% of negative currency impact for the year-over-year comparison 2013 over 2012. With 2013 as the anchor year for our long-term outlook to 2017, we expect to produce a 13% constant annual growth rate from our existing franchises in Hematology and ABRAXANE breast and lung. The hematology growth assumes approvals for REVLIMID and new indications including newly diagnosed multiple myeloma and a gradual ramp-up of those sales. It also assumes approval for of POMALYST in the U.S. by February 10th and in Europe in the second half of this year and myelofibrosis in 2015. We have not included revenues for any of oral azacitidine, CC-292 or VIDAZA for AML.

ABRAXANE breast and lung are expected to continue their growth as we further penetrate markets in those indications. For VIDAZA we assume generic competition in the U.S. no later than January 1, 2014, so the 2014 to 2017 time period includes that full impact.

When we add ABRAXANE pancreatic to our portfolio, we expect our constant annual growth rate from 2013 to 2017 to increase to 15%. There is further upside to ABRAXANE for melanoma and other potential indications. Apremilast in psoriatic arthritis and psoriasis has been layered into the portfolio according to the timelines we have provided you and these add 4 more percentage points to our expected growth trajectory to reach a 19% constant annual growth rate to 2017. With an ever more diversified portfolio of revenues from both new products and new indications we are highly confident in our ability to deliver on these targets.

We expect these drivers should allow us to double our revenue base from $6 billion in 2013 to $12 billion in 2017 and on this slide you can see the expected contributions from hematology, oncology, and inflammation and immunology in the 2013, 2015 and 2017 periods. By 2017 we expect our hematology business to reach $8.3 billion to $8.8 billion, ABRAXANE $1.5 billion to $2 billion and inflammation and immunology, $1.5 billion to $2 billion. We expect REVLIMID to continue its strong growth trajectory globally while declining as a percentage of total Celgene product sales to about 50% by 2017, given the faster growth in other products, such as POMALYST, ABRAXANE and apremilast. Our outlook does not include any contribution from acquisitions.

Over the 2013 to 2017 time period we expect to invest as appropriate in our I&I business unit infrastructure mainly in commercialization capabilities and still deliver consistent improvements in operating margins. We believe we could see a 52% to 53% operating margin by 2015 and around a 55% margin by 2017.

As for the financial drivers in this base case model we are holding them constant with a tax rate at 16.5% and fully diluted shares at $430 million. All of this combined feel an attractive long-term earnings per share growth target of 25% on a constant annual growth basis faster than a 19% top line growth target.

To summarize we delivered excellent financial performance on all metrics during 2012 and we did so while investing in our business to prepare for the next phase of our long-term growth trajectory. We enter 2013 very well positioned to continue to deliver sustainable leverage from our P&L, consistently improving returns and an ever more diversified revenue base that we expect to deliver an industry leading 19% top line growth out to 2017 and 25% earnings growth. We’re doing all of this while making tangible progress on the earlier stage projects in our R&D pipeline that hold upside potential for the future.

We look forward to sharing updates on those with you at our May Investor Analyst Day. I will now turn the call over to Mark who will cover more details of our commercial performance. Thank you.

Mark Alles

Thanks very much, Jackie. Good morning, everyone. Our hematology and oncology franchises entered 2012 with strong operating momentum with multiple opportunities for our products to achieve robust sales growth. And with the significant opportunity to deliver breakthrough clinical outcomes for patients whose lives are threatened by blood and solid tumor cancers. And we delivered. Total net product sales grew 15% year-on-year to $5.4 billion, sales of our flagship hematology brand REVLIMID increased 17% year-on-year, to $3.8 billion. The value propositions and the profiles of our cancer brands were improved by a steady stream of published an presented clinical research that helped to define new and better ways to treat patients.

Our global teams successfully delivered on our commitments and on our goals for 2012 and we are even more optimistic about the potential for 2013 and beyond. During the next few minutes, I’d like to offer my perspective on the existing and emerging opportunities for our Hematology and Oncology brands, on the key drivers important to our 2013 outlook and on the current pancreatic cancer market, including a high level review of the statistically significant and clinically meaningful ABRAXANE plus Gemcitabine Phase III data. As we begin 2013, our Hematology and Oncology business unit is executing our fully integrated plans for REVLIMID, VIDAZA, ABRAXANE and POMALYST; plans we expect which will give Celgene three Hematology and Oncology brands generating $1 billion or more in annual sales within the next three to five years.

While we were pleased that REVLIMID achieved sales of over $1 billion in the fourth quarter of 2012, important and meaningful opportunities for continuing strong growth should materialize. REVLIMID has a long growth runway, with multiple drivers. Throughout 2013 and 2014, we expect more mature results from the longer-term follow-up of the three existing Phase III studies of REVLIMID in patients with newly diagnosed multiple myeloma and MM-015, CALGB 104 and the IFM 0502 study and to have final progression-free survival and interim overall survival data from our large international Phase III study, MM-020. We continue to expect results from MM-020 to be available by early second quarter.

Collectively, the results from these four REVLIMID studies in newly diagnosed multiple myeloma will inform and dictate our global regulatory submission strategies. Exiting Q4 2012, REVLIMID’s overall multiple myeloma market share in the United States was strong, at approximately 55%. In our core international markets, REVLIMID market share in second-line myeloma trended higher and is now above 50%. In 2013, we expect REVLIMID sales to continue to grow by gaining market share in relapsed/refractory myeloma by improving duration of therapy and by launching the brand in new markets such as China.

In early December, we submitted the SMBA for mantle cell lymphoma, making this application the first of what we expect to be several REVLIMID lymphoma indications. The clinical profile for REVLIMID in the diffuse large B-cell Lymphoma, follicular lymphoma and Chronic Lymphocytic Leukemia was enhanced by data presented during last year’s American Society of Hematology meeting and our clinical and regulatory commitment to these indications remains firm.

VIDAZA has the near-term potential to become one of our brands with annual sales greater than $1 billion. Year-on-year 2012 sales growth was 17% to just over $820 million. VIDAZA’s use is used as a standard treatment for high risk MDS and a subset of Acute Myeloid Leukemia continues to grow. Duration of therapy is improving and our expansion into new markets continues. We look forward to the results of VIDAZA Phase III study, AML-001, late this year.

We expect to significantly extend our leadership position in multiple myeloma with the upcoming launch of POMALYST given the high unmet medical need in patients with relapsed/refractory multiple myeloma and the significant survival advantage demonstrated by POMALYST in combination with low dose dexamethasone, we believe that POMALYST is positioned to become our next blockbuster in Hematology. We are on track for marketing approval in the United States by the PDUFA date of February 10 and in Europe, by CHMP during the second half of this year.

In the United States, our Commercial and Medical Affairs teams are ready to launch and to support the thousands of patients who have exhausted all existing myeloma therapies. Successfully launching POMALYST is a major corporate objective and we are ready. We also continue to expect the results of the POMALYST Phase III study in myelofibrosis during the first half of this year. With positive data, we would submit marketing applications in the United States and in Europe as soon as possible.

The fourth quarter of 2012 was remarkable for many reasons, but the Phase III data supporting ABRAXANE as a potential new therapy for the treatment of Meta Melanoma and pancreatic cancer was among the most promising. Q4 began with the FDA approval of ABRAXANE plus carboplatin for the treatment of non-small cell lung cancer, followed quickly by the highly statistically significant and clinically meaningful progression free survival data from the ABRAXANE Phase III study in melanoma and most recently the significant improvement in overall survival demonstrated by the combination of ABRAXANE and Gemcitabine in patients with advanced pancreatic cancer.

As you know, pancreatic cancer is a disease with a long history of failed drug development and virtually no improvements in median and one-year survival. Improving quality of life has been a secondary outcome to improving survival. But still, treatment outcomes have been consistently poor. Nearly all patients will die of their disease and most will die within one year.

The conclusion from this slide is clear. Oncologists in the United States and around the world have very few good choices to treat advanced pancreatic cancer. Gemcitabine is used alone or in various combinations to treat approximately 60% of newly diagnosed patients. The combination of four chemotherapies, Leucovorin; Fluorouracil; irinotecan; and Oxaliplatin, also known as FOLFIRINOX regimen; is used to treat approximately 25% of patients. A variety of other treatment strategies are used for the remaining patients. Currently, various sources estimate that approximately 24,000 patients are treated with first-line therapy in the United States. But due to the rapidly progressive course of this disease, less than half receives second-line therapy.

In our pivotal randomized Phase III study of weekly ABRAXANE plus Gemcitabine versus Gemcitabine alone, in patients with previously untreated metastatic pancreatic cancer, 842 patients were randomized to be treated by weekly ABRAXANE followed immediately by Gemcitabine or Gemcitabine alone. The primary end point is overall survival. Key secondary end points included progression free survival and overall response rate. The combination of weekly ABRAXANE plus Gemcitabine met the primary end point by demonstrating a statistically significant and clinically meaningful improvement in median overall survival, 8.5 months versus 6.7 months. The hazard ratio equals 0.72 and the p-value is p equals 0.000015.

Importantly, ABRAXANE plus Gemcitabine increased the percentage of patients alive at one year by 59%, 35% versus 22%. The percentage of patients alive at two years doubled, 9% versus 4%. The combination of ABRAXANE plus Gemcitabine also demonstrated significantly improved progression free survival with a median PFS of 5.5 months versus 3.7 months for Gemcitabine alone.

The response rate tripled for the combination to 23% compared with a very predictable single-agent Gemcitabine response rate of 7%. Treatment with ABRAXANE plus Gemcitabine was associated with a slight increase in Grade 3 and 4 adverse events, including more neutropenia, febrile neutropenia, fatigue and neuropathy. We look forward to the oral presentation of the full results tomorrow afternoon during the ASCO GI symposium in San Francisco. Submitting regulatory applications in the United States and Europe during the first half of this year, and global submissions in key international markets.

My colleagues and I are completely focused on our mission to build an industry-leading Hematology and Oncology company. REVLIMID is one of the most successful cancer therapies ever developed and yet we see a long and significant growth runway in front of us. Our team is focused on the top priorities that matter most. Increasing share and duration, establishing REVLIMID as the global standard of care for newly diagnosed multiple myeloma, opening up emerging markets and developing REVLIMID as an important monotherapy and combination agent in the treatment of lymphoma and leukemia.

Our existing multi-billion dollar multiple myeloma franchise will soon expand with the approval and launch of POMALYST. Together with REVLIMID, this novel therapy may help make it possible for hematologists and their patients to think of a future when this incurable cancer becomes a chronic disease.

Our scientific exploration and understanding of all categories of MDS and AML are the driving forces behind the full development of VIDAZA, CC-486 and REVLIMID as part of an integrated global MDS franchise strategy. The full potential of ABRAXANE is just starting to be appreciated. In addition to our global plans in lung cancer, pancreatic cancer and metastatic melanoma we are rapidly advancing the development of ABRAXANE plus Gemcitabine for the treatment of women with triple negative metastatic breast cancer. We expect the randomized Phase II study to begin during the second half of this year.

We are entering a period of expected new growth, driven by brands and outcomes that are the result of years of investment and risk taking. REVLIMID will be joined potentially by at least $3 billion plus brands. ABRAXANE, POMALYST and apremilast and we expect additional landmark therapies to come from our robust early drug development pipeline.

Thank you very much, and I’d like to turn the call back to Bob.

Bob Hugin

Thank you, Mark, and thank you, Jackie. 2012 was an outstanding year for Celgene as we delivered excellent operating results and advanced our portfolio positioning us for accelerating growth. 2013 will be a year of many milestones across both our approved products and our earlier stage programs. Our teams are energized and focused on capitalizing on the significant achievements of 2012, and on creating the next generation of opportunities to make a meaningful difference in the lives of patients around the world.

Thank you for joining us this morning. We look forward to updating you throughout the year. Operator, let’s now open the call to questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) Our first question comes from Geoffrey Porges from Bernstein Research.

Geoff Porges – Sanford Bernstein

Thank you very much for taking the question. Congratulations everybody on the terrific results for the year. Jackie, could I just ask a question about the margins again? You indicated that you expected about 100 basis points of operating margin improvement in your guidance for 2013. But I’m just interested in, what will happen if for example you don’t face the VIDAZA generic or you see other sources of upside on the revenue line, would you expect that that to be reflected in even more positive trend on the margin or do you think that there are incremental projects that you’d invest in and you’d stick with that 100 basis point improvement as a maximum sequentially? Thanks.

Jackie Fouse

Hi, Geoff. Thanks for the question. When we give this kind of guidance the way that we frame it is what we believe that the minimum is that we’re able to deliver. Because we have so many different drivers in the model now, as the model has continued to evolve and grow, we’ve got lots of opportunities there. So I would just reiterate that we’ll deliver at least 100 basis points of improvement. And as you’ve heard with everything that we’ve got going on, there may be some opportunities to invest in projects that we don’t have the radar screen on today, on the radar screen today but if we do that, it will be because we’ve got some upside there. And we saw that we delivered upside in 2012 versus what our original operating margin target was.

Geoff Porges – Sanford Bernstein

Terrific. Thanks very much.

Operator

Thank you. Our next question comes from Marshall Urist from Morgan Stanley.

Marshall Urist – Morgan Stanley

Good morning. Thanks for the question. So just first, can you give us a sense of kind of sequential trends in international REVLIMID and kind of what you guys saw quarter-over-quarter? Obviously not a ton of growth in dollars so just kind of understanding the dynamic there with that hedges or something else going on. And then second, just on the 2017 guidance, can you give us your thoughts on the importance in how much incremental growth you guys see from MM-020 in a formal, frontline label for REVLIMID in Europe? And how much growth acceleration should we think that that’s worth to the business over the next five years. Thanks.

Jackie Fouse

Thanks, Marshall. Let me start with the first part of your question. I’ll probably hand it over to Mark for the MM-020 comments. Just the – what we saw in Q4 over Q3 as you heard I think was about 3.3% sequential growth in REVLIMID globally as we finished last year, which we felt was very solid performance on a product that’s becoming extremely large.

As we go into the beginning of every year, what you regularly hear me talk about is the pattern that we see in the past for Q1 just because of some of the impacts that we have where they’re more negative in the first part of the year most notably in the U.S., on things like the coverage gap issue and things like that. So we feel very good about the momentum that we have going into the first part of 2013. We’re just mindful that that quarter sometimes can be the lightest of all the quarters of the year from a sequential growth standpoint. So let’s see where we come in with that.

And to your question about 2017, I mean, I think we highlighted on the slides that the major assumptions behind how the franchises are expected to evolve over the next four years out to 2017. And we’ve – you might assume that we’ve layered in assumptions around timing and ramp-up in terms of how much share we take and how quickly we expand geographically. And that we might have been conservative on all of those things.

We have so many things going on that as the portfolio gets more and more diversified we’re increasingly confident in our ability to deliver on those targets. We also do continue to assume things like pricing pressures in Europe and places like that. So that’s all built into our model. And maybe on MM-020 I’ll turn it over to Mark for some comments.

Mark Alles

Sure. Hi, Marshall. Thanks for the question. So the model as Jackie points out has label expansion globally to a newly diagnosed multiple myeloma coming in that window of 2014 through 2015 with reimbursement layered in. MM-20 is an important study as you well know and everyone knows because we’re trying to establish REVLIMID dexamethasone not only as a standard of care in relapsed/refractory myeloma but importantly in all stages including smoldering and the broader newly diagnosed category.

But it is an expansion opportunity on top of the post-transplant opportunity and the induction maintenance opportunity for elderly patients through MM-015. So the composite of these studies and overall myeloma strategy really will blend and provide growth through the five-year model and then we’ll see how we accelerate late in the model and into the following five years. A positive outcome is important but it’s certainly not the only driver of our performance in newly diagnosed myeloma or myeloma overall.

Marshall Urist – Morgan Stanley

Okay. Thank you.

Operator

Thank you. Our next question comes from Terence Flynn from Goldman Sachs.

Terence Flynn – Goldman Sachs

Thanks for taking my question and congrats as well on all the progress last year. Was just wondering, two questions really. As a follow-up to Marshall’s question, I was wondering if you can comment about just the strategic importance of 020 more on the pricing dynamic side given the cost of MPT and then assuming Velcade goes generic in the 2017, 2019 timeframe? And then a question for Jackie just on the target-operating margin, the mid-50% range. Was just wondering if maybe you can rank order for us some of the drivers of getting to that level? Thanks a lot.

Bob Hugin

So thanks for the question. The value proposition for REVLIMID and myeloma is growing all the time. And, of course, the positive result of MM-20 not only provides some direct comparison on the value with respect to price, but much more importantly, it takes a toxic regimen led by the use of Melphalan Prednisone and it puts it into a category of an alternative use versus a standard use. So I think the most important outcome of MM-20 is not a price comparison but a huge difference in the value proposition overall for RevDex while MPT or Melphalan would still remain an important consideration for the treatment of myeloma.

Jackie Fouse

And with respect to the operating margin targets out to 2017, so we’ve said that we think we can get in the mid-50s in 2017 and about 52% to 53% by 2015. If we go back and look at the history of where this has come from, where in a great place with respect to how the Celgene model has evolved from the standpoint both of diversified drivers within the P&L, the geographic expansion and the ever increasing size of the base of some of the fixed costs in the model and things like that. So if we look at 2012, what you saw was that we delivered 300 basis points of margin improvement with that coming from cost of goods and from R&D principally because we continue to invest in the SG&A infrastructure in preparation for everything that’s to come on a go-forward basis.

In the guidance built into 2013 we should see the numbers there but we expect a continued modest contribution from cost of goods. We’ve actually got R&D going up a touch as a percentage of revenues and SG&A down a bit.

So it’s coming from multiple places and all of those have the potential to have some upside associated with them or the ability for us to deliver even if one line doesn’t go exactly the way that we see it playing out today. So those different things and the reason why I continue to highlight the fundamentals associated with the model as this plays out over a long period of time, the natural evolution of this model should allow us to appropriately reinvest for the long-term health and growth of the business while having some natural leverage in particularly the research and development lines in the SG&A lines of the P&L.

And why is that? We have a very focused business model that from a commercial infrastructure standpoint is dealing with specialty physicians and you don’t need thousands and thousands of people in your commercial infrastructure to sell these products. So we’re in a very good place where I think that 100 to 150 basis points a year is pretty straightforward to do without a huge amount of effort. It’s natural part of the model. And we can take the opportunity to invest along the way as upside potential comes along. So it’s going be a combination of R&D over a period of time and SG&A mostly.

Terence Flynn – Goldman Sachs

Thank you.

Operator

Thank you. Our next question comes from Eric Schmidt from Cowen & Company.

Eric Schmidt – Cowen & Company

Question first on the 2017 guidance with the $1.5 billion to $2 billion of apremilast sales included there. Should we now assume that you’ve made the decision to go at it alone including in dermatology and also including around the world? And then second, on ABRAXANE for melanoma, what will be required do you think to file there? Do you need specifically an overall survival advantage?

Bob Hugin

Thanks, Eric. It’s Bob regarding apremilast. We are moving forward internally with the view that we will commercialize globally ourselves. That’s important as we build a franchise to have that focus in doing that. We are looking to ensure that we do maximize the strategic value of this franchise but as the clock ticks we really have about the next six months or so to make sure that we understand all the opportunities that are out there to both accelerate the development through assistance and partnerships whether it be targeted geographically or by support and other indications. But our base case internally is to go alone and that’s where we’re headed but we are – we still are examining other opportunities and I would imagine this summer is sort of the timeframe that would have to be clear if we’re not going to go completely alone. But that is the base case that we’re operating under.

Jackie Fouse

And that’s the way the financial model has been built out to 2017 to include those costs.

Eric Schmidt – Cowen & Company

Okay. On ABRAXANE?

Bob Hugin

With respect to melanoma, thanks for the question. The base case we have is that we have a robust outcome of PFS. We do want to hold on for mature overall survival events with what we would expect would be a continuing very positive trend and maybe even a significant overall survival outcome. We should have that information by the middle of the year and that would really inform our global filing strategy. Certainly the U.S. is an opportunity but internationally we think mature survival data, whether or not it’s significant is important for regulatory acceptance.

Eric Schmidt – Cowen & Company

Thank you.

Operator

Thank you. Our next question comes from Rachel McMinn from Bank of America.

Rachel McMinn – Bank of America

Yeah, thanks very much. Two questions. One specific, one a little bit bigger picture. Just the specific question on ABRAXANE. Why is the duration of therapy four months actually shorter than progression free survival? Is that physicians that’s pulling patients off for toxicity or for whatever reason just stopping them before they’re actually progressing? And then my second question is just thinking about the big picture, ex-U.S. REVLIMID sales, if you look at other major myeloma products, Velcade or look at VIDAZA for example, the majority of revenues are coming from outside the U.S. in those products but they’re not for REVLIMID. Do you think you need to get front line label expansion in order for ex-U.S. revenues to eclipse the U.S.? Thanks.

Mark Alles

Hi, Rachel. It’s Mark. Thanks for the question. First of all with respect to ABRAXANE duration of therapy, and looking at progression free survival versus overall survival. I think a lot of the explanations will become clear as part of the presentation tomorrow in the Q&A. So speculating today in the absence of a full presentation, I don’t think it’s helpful. With respect to the overall composition of international versus U.S. sales, we certainly need market expansion internationally for REVLIMID into newly diagnosed multiple myeloma no matter what. But for REVLIMID to eventually become a bigger selling product internationally than the U.S., that indication is absolutely critical. There’s no doubt.

The overall mix of things that are happening though is quite interesting. I don’t know that it’s a forecast or prescription for drug therapy in the world that the U.S. would be larger or smaller than certain regions or other ways. It could be that with the pending inevitable changes in healthcare, reimbursement, the way the systems will work in the U.S., other things, it’s hard to know in the future how the mix will come together. That said, I think our business is robust. I think we have opportunities for growth in many emerging markets. In the regions that we currently have our franchises built out and our portfolio is quite strong. So thanks for the question.

Mark Alles

Bob, this is Mark, I’ll add a little onto it also. We do have our MDS 5q application pending in Europe and it’s taken us longer in terms of the scrutiny there to get that approved. So that will also help ex-U.S. sales given the MDS approval. And as we look at other indications with REVLIMID in terms of lymphomas and CLL, we in fact may see bigger opportunities ex-U.S. for those indications. Some of those may even come sooner outside the United States than the U.S. So I certainly do think newly diagnosed is important and we’re certainly committed because REVLIMID is such an ideal therapy for newly diagnosed patients and with these other Indications MDS, et cetera, over time we do believe that ex-U.S. sales will be significantly larger than U.S. sales over time with REVLIMID.

Rachel McMinn – Bank of America

Thank you.

Operator

Thank you. Our next question comes from Geoff Meacham from JP Morgan.

Geoff Meacham – JP Morgan

Good morning, guys. Thanks for the question. I got a couple on 020. So the first one is, what do you think the market share opportunity is that you can take from cell–based on the study? And the second part is how much of an opportunity do you guys view the smoldering market is and for myeloma? And then the last piece I guess from a regulatory perspective, will the 020 filing in the U.S. just include that study or you guys going to be including other studies that have RevMP like IFM, CALGB, CLGB for various safety or efficacy reasons?

Mark Alles

Hi, it’s Mark. Thanks for the question. So with respect to the market share of thalidimide versus REVLIMID and what would happen with an MM-020 win, I think it’s important to understand around the world the standards for newly diagnosed myeloma are slightly different. For example in the U.S., RevDex overall is a standard and thalidimide base regimens make up a very small percentage of the newly diagnosed myeloma market.

Wherein in other markets, for example the U.K., thalidimide is reimbursed as the only first line regimen followed by Velcade second line and then REVLIMID in the third line. So it really is a question of local market practices, reimbursement, access, et cetera. With that said, we would think that the way MM-020 would play out would not be just an MP cell question, but where Melphalan prednisone, thalidimide, where Melphalan prednisone and Velcade, any regimen that would include Melphalan prednisone we would assume once we had approval and reimbursement, significant share gains from those regimens.

You asked about smoldering myeloma and I think that’s an important dynamic in newly diagnosed myeloma today. Smoldering myeloma is being redefined as a segment of newly diagnosed myeloma. The international myeloma working group continues to look at patients who are at high risk of relapse or progression with the classic smoldering condition and more and more, they’re adding to the definition of a newly diagnosed myeloma.

So we think that that could add anywhere from 2% to 8% of patients eligible for treatment over time. So the opportunity is clear. We understand the composite and then with respect to the label in the U.S. or around the world, as I mentioned in my prepared remarks, we look to the composite of MM-015, IFM, CLGB and MM-020 to inform and to really dictate the strategy for submissions to the U.S., to regulatory agencies in Europe and then, of course, around the world. So we will know much, much more in the next few months about exactly what our strategies will look like and, of course, we’ll inform everyone at that time. Thank you.

Geoff Meacham – JP Morgan

Thanks.

Operator

Thank you. Our next question comes from Mark Schoenebaum from ISI Group.

Mark Schoenebaum – ISI Group

Hey, guys. Congratulations on a great January. Hey, Mark, this has come up here and there and I want to address a little more dead on if you don’t mind. What do you think the consequences are, if any, if the MM-020 happened to actually fail as primary end point? And then on apremilast the 1.5 billion that’s implied in your 2017 numbers, was I think probably the biggest variant from where your analysts sat on that, certainly including me. I was just wondering if you can help us, if you can help make the case I guess for that 1.5 billion to get us all a little bit more comfortable with. Thanks a lot.

Bob Hugin

So, Mark, you put people on dangerous ground when you talk about speculating on the downside for trials that we built with great strong assumptions of very, very important knowledge base about the disease a decade of drug development in the space. And so I have to start by telling you we are still very confident that MM-20 will produce the results the trial was designed to test.

Mark Schoenebaum – ISI Group

Okay.

Bob Hugin

That said, you’re asking me to speculate. So what I will tell you is the downside risk as we’ve described a couple of different places and even when we’re together at JPMorgan I spoke to it is more a long-term dynamic with respect to how myeloma would be treated. For example, the question about stem cell transplantation would still the primary question for newly diagnosed patients.

In a scenario where RevDex is not superior to MPT, one could look at the newly diagnosed myeloma marketplace and say that the next opportunity for REVLIMID would be in combination with a prodisome inhibitor from some of the studies that are going on now. But these are more long-term, 2017 through 2018, 2019 implications. The short-term business for REVLIMID in a failed MM-20 environment are limited. We see good strong growth in relapsed/refractory myeloma. We see novel agents coming into the market in combination with REVLIMID. And so in the end we think the five-year window is not that affected by MM-20 if the results wouldn’t be positive but the longer-term outlook is a little bit more uncertain. Thanks.

Jackie Fouse

Let me start maybe on the apremilast question, Mark, and then we have Scott Smith in the room with us and so I’ll pass it onto him for comment. But just to make sure we’re clear about that $1.5 billion to $2 billion range, it includes psoriatic arthritis and psoriasis approvals according to the timelines that we’ve laid out for you and we have made some assumptions around how we’ll price the product, what kinds of shares that we take. I think we’ve been very conservative in terms of what we’ve assumed for ramp-up on this product given that it will be a new paradigm in the treatment options for these diseases. But we feel very strongly and I think that you are hearing this now from physicians. In the psoriatic arthritis indications you will hear it and you’ll have a better view on things when you see the detailed psoriasis data.

But we believe strongly that a safe, effective, well-tolerated convenient oral therapy will have a distinct place to take in the market early on in the treatment paradigm for these indications. And we think it has a lot of advantages to offer to patients and the physicians will embrace it. And with that maybe let me let Scott make additional comment.

Bob Hugin

Yeah, I believe that there’s a tremendous opportunity in the pre-biologic space for patients who have not moved onto biologic therapy. In recent TOPO data that’s been released and others really showed there’s tremendous utilization of these drugs early ahead of biologics and that’s where there’s a real significant unmet need for oral compound effective with a good profile. And so we believe that there’s significant need. That coupled with five positive oral trials in a row, psoriasis and PsA, with strong consistent data across the board, we believe that the opportunity is tremendous for a product. Again, and the real soft spot in this market, the weak spot in the market is for that pre-biologic early utilization space.

Mark Alles

And, Scott, we expect to see the psoriasis data presented at medical meetings here in the first half of the year which I think will be important for the marketplace to understand the risk benefit opportunity here and the dynamic of what apremilast presents in terms of the safety profile, the activity, et cetera. So we’re very much looking forward to that psoriasis data the first half of the year.

Mark Schoenebaum – ISI Group

Thank you.

Operator

Thank you. Our next question comes from Michael Yee from RBC Capital.

Michael Yee – RBC Capital

Hey, a question on POMALYST since this could be launching soon. In your long-term guidance, what are the key drivers that you were thinking in your assumptions? As I think that was another area versus where consensus may be modeling. Maybe walk through that. And then just a really quick question for Mark. When you think about the SWOG 232 study that is out there with RevDex, how should we think about that in terms of handicapping how you designed 020? Thanks.

Bob Hugin

Thanks for the question. So your first question about POMALYST. We see a partial year launch effect this year and we expect significant ramp-up over the five-year model primarily in third and fourth line multiple myeloma. The survival data is well understood coming out of ASH. And in the U.S., we think access will be immediate and that we will do very well.

In Europe, we have a parallel launch approach. In fact in certain markets in Europe now we already have access programs, the ATU program in France and the main patient program that will roll out in different markets throughout the remainder of the year. So we have paralleled registration tracks ongoing. And access from 2013 through 2014 and into 2015 in the major developed markets in the world. Even Japan, the bridging study for POMALYST is ongoing.

The first indication for example in Japan will be myelofibrosis. So the other catalysts besides just myeloma for POMALYST is our high expectation that POMALYST will resolve transfusion dependent anemia for patients with very, very difficult disease course with myelofibrosis. So that’s POMALYST. The SWOG 232 study is one of those other trials that informed our overall assumption base for MM-20.

That is when one looked at ECOG E4A03, SWOG 232, even the registration trials of RevDex, the MM-009, 010 studies that of course are the basis for REVLIMID’s approval around the world. We modeled and assumed then a median progression free survival time for RevDex in the MM-20 study versus the MPT arm which was a modeled of course after this cone data, MPT versus MP. So I thank you for the question. It was one of the studies that we looked at and considered in designing MM-20.

Operator

Thank you. Our next question comes from Thomas Wei from Jefferies.

Thomas Wei – Jefferies

Thanks. I had a couple questions. Just to help on the $1.5 billion to $2 billion number for apremilast I guess I’m curious as to what is your current estimate of what the sales of biologics are in psoriasis, in psoriatic arthritis and how fast is that growing? And it also sounds like based on your answer to Mark’s question, you think that $1.5 billion to $2 billion is largely additive. And then I just wanted to ask about a comment that you made, Bob, on some of the European indications in lymphoma and CLL may come sooner in Europe than in the U.S. Can you be a little bit more specific there? Are there specific settings where the Europeans are accepting a shorter-term end point?

Bob Hugin

Well, no, I just think when we look at CLL and certain lymphomas, important studies are being done by leading European thought leaders, investigators there. So the opportunity to have a strong endorsement and understanding especially with CHMP process how decisions are made, it’s important to have strong European endorsement to get a rapid review and understanding of it. So there isn’t something unique to it. It’s just the positioning of those trials and the opportunity that we see with those investigators to help us lead to effective and expeditious regulatory review of those indications.

Thomas Wei – Jefferies

And this is Scott. Thanks for the question. Total biologic sales approximately in the $22 billion to $23 billion range. The proportion of that which is psoriasis and PSA varies by product but it’s very significant portion of that $22 billion to $23 billion. But I don’t think biologic sales in and of themselves clearly identify the true market opportunity for apremilast. It’s got a very different profile, different benefit risk. And a very significant number of patients particularly in the psoriasis and PSA areas are not treated by biologics and biologic therapies. So we believe the opportunity is greater than just competition for the biologic space.

Jackie Fouse

Operator, I think we have time for about three more questions, please?

Operator

Thank you. Our next question comes from Yaron Werber from Citi.

Yaron Werber – Citi

Okay. Great. Thanks for taking my question. So I’ve got just a couple of questions, really, for Mark and Jackie. First of all, REVLIMID 2017. So it looks like your guidance at this point is not including contributions from CLL or NHL. They’re talking about outside of mental cell. Is that correct? And then if so – yeah, go ahead. If so, why? And then I have a question on ABRAXANE.

Jackie Fouse

They are in there according to conservative assumptions on timelines and ramp-up and so on and so forth. So the contribution in 2017 from those other indications that you highlighted is quite modest in our model. And the way that we think about them is the long-term growth potential for those really comes beyond the 2017 timeframe.

Yaron Werber – Citi

So the CLL, when are you expecting data? You’ll finish accrual, it sounds like, this year? Can we see data next year? When do you expect data from NHL?

Mark Alles

Yeah, so, Yaron, it’s Mark. Just to try to answer that question as specifically as we can. So you know that we have two principal studies in CLL-008 and 002. One is 008 is the head-to-head versus (inaudible) and 02 of course is our maintenance trial of single agent REVLIMID. So we would look for data from 008 in the middle of 2014. That’s our current expectation. For CLL-002, given that it is a maintenance trial, the data would come in the 2015 timeframe. So this speaks directly to Jackie’s point about the model. And even if these results would be astoundingly positive, then we have regulatory approval, then we go through reimbursement. In CLL we would see the impact to the revenue contribution that would be relatively modest in our model. The lymphoma studies remark and then the follicular studies are ongoing. Again, the data could read out because this is, again, remark of the placebo control trial, sooner if the magnitude of benefit is great. But right now we’re still in that 2015-ish timeframe with data expected. Hope that answers the question.

Yaron Werber – Citi

Okay. Great. And then ABRAXANE, for this year it looks like the guide is between 600 and 700. Give us a sense what’s driving that? If you can, how much of that is lung versus pancreatic?

Bob Hugin

Yeah, so the majority in the model of the upside from where we are in 2013 is coming incrementally from what we expect will be the broad adoption of ABRAXANE in pancreatic cancer. That said, the early metrics in lung cancer, especially this physician-driven decision to treat history logic subsets. And you know the data was preferential to patients with (inaudible) non-small cell lung cancer. The early read in the launch phase has been quite positive with respect to making a treatment decision based on histology. So early lung cancer results are promising, but, as I know you know, the pancreatic market is really just so underserved, we model physician uptick pretty dramatically.

Jackie Fouse

And just to make sure we’re clear on all of that, the – I mean, as we go into 2013, Q1 is going to be the first full quarter post the lung launch late last year. So I think we’ll be able to give you more color on that when we have the Q1 call. As Mark said, we think we’re off to a great start. And then whether we’ve been conservative or not in our assumptions around pancreas, I don’t know. But if you look at the timelines for regulatory submission, which we are working exponentially towards, and then when we might expect approval, the contribution from that, from an approval standpoint, would be later in the year. Then we would expect a much more rapid ramp in 2014 for the pancreas-specific sales. That being said, the data, obviously, is very positive for the moment on ABRAXANE.

Bob Hugin

Yeah, this is another scenario, just to close out the point on pancreatic cancer, where Celgene is working with global regulatory authorities to make sure that they understand the data, they have the full review opportunity, and, of course, in the marketplace, we will appropriately support physicians and patients. But this is not a commercially directed opportunity until after we have approvals.

Jackie Fouse

I think we have two more questions now, please?

Operator

Thank you. Our next question comes from Josh Schimmer from Lazard Capital.

Josh Schimmer – Lazard Capital

Is there opportunity an opportunity to re-price ABRAXANE with new data in any of the territories? What percentage of long-term estimates are derived from U.S. versus ex-U.S.? And then separately on 292 when would you expect to advance that into inflammatory indications and is there any rationale to combine it with apremilast? Thanks.

Jackie Fouse

Let me jump there real quickly just on couple of things and then pass it over to Mark. Just to be clear with respect to our financial model out to 2017 we have not assumed anything different for ABRAXANE from a pricing standpoint versus the dynamic that we have today. So just be clear about that from a modeling standpoint.

And then Bob may want to jump in later on 292 but I would just highlight the fact that we are planning an Investor Analyst Day in the early part of May where we’re going to go into a lot more detail on all of our earlier stage projects and platforms and talk not only about the progress that we’ve made over the last 12 to 18 months with something people will be pleased with but also the development plans for some of these molecules. So with that, let me turn it over to Mark for some comments on the pricing aspect of ABRAXANE.

Mark Alles

The part of your question I wanted to start with the mix of U.S. versus international sales for ABRAXANE in the model for the five-year window we’ve been discussing. U.S. sales of ABRAXANE are the majority of those sales. The pancreatic indication as it launches around the world would provide a nice opportunity but for the five-year model, U.S. remains the majority of sales. That goes directly to the question about price.

We will be opportunistic in markets where ABRAXANE today really doesn’t have a presence or an opportunity in either breast cancer or non-small cell lung cancer. That said, it’s difficult to imagine direct opportunity in those markets where currently the brand is reimbursed for the treatment of breast cancer. We will update the value dossier. We will seek pricing where we can provide for a better outcome compared to for example generic Taxane, et cetera. But that’s going to be a market-to-market opportunity.

Josh Schimmer – Lazard Capital

Thank you.

Bob Hugin

Sorry. On 292, now that we have a defined dose in hematological malignancies we are rapidly accelerating combination studies with 292 there. For a plan as we look at inflammatory disease with 292 would be to begin as monotherapy examine as we see the data, understand the potential in those indications as to what the strategy would be but obviously initially would begin as a monotherapy.

Jackie Fouse

Operator, we have time for one more question, please. Thank you.

Operator

Our last question comes from Matt Roden from UBS.

Matthew Roden – UBS

Great. Thanks for taking the question. I wanted to come back to apremilast and how you guys are positioning this for the launch. Is there anything that you guys can learn from the way payers are managing Zelgens which we understand that despite its label has been put behind one or two or in some cases three TNFs by some large payers. Realize that RA isn’t the same as psoriatic arthritis or psoriasis but what can you do to avoid this from happening with apremilast? Is it just price? And then related among the things on the to do list here is to raise awareness of apremilast among prescribers which by I think some measures lags other categories including the jacks. What can be done on both of these fronts to maximize the impact of the apremilast launch? Thank you.

Bob Hugin

So relative to the first question on price, from the utilization data that I see in TOPO there’s significant use of that in the pre-biologics space as well as post biologics despite indications where payers may be putting it. We look at price may be definitely than that a little bit and price should I think reflect where you want to be positioned in the marketplace and we would be looking at that pre-biologic early space. On the second question and the prescriber in KOL awareness of apremilast, I think we’ve made a tremendous stride in the last couple years in really increasing and accelerating the awareness of the compound amongst prescribers in KOL.

I think you really get a nice boost when you got good Phase III data. We’ve released a Phase III data from our initial trial in PSA (inaudible) trial and we will be, as Bob mentioned earlier, hopefully appropriate medical meetings in this year and hopefully early in 2013 getting that psoriasis data out there. And then with getting the data out there and in socializing it through important medical meetings and with others, that’s when the awareness continues to grow. But I think from my personal perspective, I’ve seen the awareness of apremilast grow very, very significantly over the last year.

Mark Alles

And we’re still a year away from launch. So that would be the critical time where, as people see Phase III data applications submitted and regulatory review and approval, there’s an opportunity to really increase the awareness. And certainly we recognize that in this marketplace, that is going to be critical. And I think we have a very robust plan to ensure that this will be a very well known drug at the time of launch.

Matthew Roden – UBS

Thank you.

Jackie Fouse

So with that, thank you, everybody, for joining us on the call today. Anybody who was in the queue didn’t get to ask a question, apologies for that. We will be happy to follow up with you after the call. So thanks again, and talk to you soon.

Operator

Ladies and gentlemen, thank you for participating in today’s conference. This concludes our program for today. You may all disconnect, and have a wonderful day.

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