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Executives

Robert J. Hugin - Chairman and CEO

Jacqualyn A. Fouse - EVP and CFO

Mark J. Alles - EVP, Global Head Hematology and Oncology

Scott Smith - Global Head of Inflammation and Immunology Business

Analysts

Geoffrey Porges - Sanford C. Bernstein & Co.

Robyn Karnauskas - Deutsche Bank

Eric Schmidt - Cowen & Company

Rachel McMinn - Bank of America Merrill Lynch‎

Gene Mack - Brean Capital

Geoffrey Meacham - JP Morgan

Mark Schoenbaum - ISI Group

Howard Liang - Leerink Swann

Yaron Werber - Citi

Michael Yee - RBC Capital Markets

Brian Abrahams - Wells Fargo Securities

Ying Huang – Barclays Capital

Ian Somaiya - Piper Jaffray

Joel Sendek - Stifel Nicolaus

Thomas Wei - Jefferies & Company

Josh Schimmer - Lazard Capital Markets

Matthew Roden - UBS Securities

Celgene Corporation (CELG) Q2 2013 Earnings Conference Call July 25, 2013 9:00 AM ET

Operator

Good morning and welcome to Celgene’s Second Quarter 2013 Earnings Conference Call. All participants will be in a listen-only mode until the question-and-answer session at the end of the conference. I’d like to remind you that this call is being recorded.

I’d now like to turn the conference over to Patrick Flanigan, Vice President of Investor Relations at Celgene.

Patrick Flanigan

Thanks, [Hyde]. And welcome everyone to our Second Quarter Earnings 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; Mark Alles, who is Global Head of our Hematology and Oncology Business and the Global Head of our Inflammation and Immunology Business, Scott Smith.

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 are available as part of the earnings release.

I’d now like to turn the call over to Bob.

Robert J. Hugin

Thank you, Patrick, and thank you, everyone for joining us this morning. I appreciate the opportunity to review the exceptional results and the progress achieved during the second quarter. Strong global operating momentum drove outstanding commercial and financial results across all of our products and geographies.

At the same time, we significantly advanced our pipeline from early research programs to key regulatory actions around the world. These results position us extremely well to accomplish our key goals for 2013 and to deliver on the promise of 2017 and beyond.

Our commercial performance in the second quarter was excellent. REVLIMID produced impressive results in markets around the world. ABRAXANE continued its accelerated sales trajectory that began with the launch of the lung indication in the United States late last year. And we’re very encouraged by the POMALYST results in the United States.

The first full quarter of sales exceeded our expectations, generating strong momentum for the rest of the year. Several important clinical and regulatory events in the second quarter also position our hematology/oncology franchise for the next phase of growth. Our REVLIMID franchise was strengthened by the approval in Europe for MDS deletion-5q and the approval in the United States for mantle cell lymphoma.

These label expansions reflect both perseverance of our teams and the focus on solutions for patients. And just two weeks ago, we also announced that MM-020, our Phase III study of REVLIMID and dexamethasone in newly diagnosed multiple myeloma, met its primary endpoint of progression free survival. We look forward to the presentation of this data at upcoming medical meetings and to advancing our regulatory strategies for newly diagnosed multiple myeloma.

And with pomalidomide we’re finalizing our launch plans in Europe having received a positive CHMP opinion in May. Our teams are also developing global launch plans for ABRAXANE in pancreatic cancer with the PDUFA date of September 21st in the United States and ongoing review of our application in Europe.

Over 400 data presentations at major medical meetings in the first half of this year highlighted the growing body of important clinical data from our portfolio. In a few moments, Mark will provide a more complete perspective on the progress and opportunities in our hematology/oncology franchise.

Our lead product in our inflammation and immunology franchise, apremilast continue to make excellent progress. Our regulatory applications for psoriatic arthritis in both the United States and Canada are under active review. Our psoriasis submissions in the United States and Canada, as well as our combined psoriatic arthritis and psoriasis submission in Europe, are on track for later this year.

In May we announced positive results from our six pivotal Phase III study of apremilast. The PALACE 4 study in DMARD-naïve psoriatic arthritis patients. apremilast was highlighted at EULAR, the European Congress of Rheumatology in Madrid last month, building the knowledge of this product in the medical community.

In a few minutes Scott Smith, the leader of our I&I franchise revise his insights on our commercial, clinical and regulatory strategies as we move toward launches in the United States and Canada hopefully next year. We continue to invest in the future as we seek to expand our high potential internal pipeline and portfolio of external collaborations. I’m very excited about the progress being achieved on multiple programs both at Celgene and with our partners.

Our pipeline is the lifeblood of our future and we’re energized by its promise. This outstanding operating momentum and the strength of our business model positioned us very well to accomplish our near and longer term objectives. Our outlook supports raising our full-year financial guidance for REVLIMID sales, total product sales and earnings per share. Jackie will provide her perspective on this revised guidance next.

The achievement of the second quarter demonstrates the power of our strategic imperatives, maximizing the whole potential of our hematology franchise, expanding our oncology business, building a global I&I franchise and advancing our innovative early pipeline. We are focused on delivering on the extraordinary potential of our portfolio. Thank you.

Let me now turn the call over to Jackie.

Jacqualyn A. Fouse

Thank you, Bob and good morning everyone. Thanks for joining us on our Q2 earnings call. The Celgene team built on the strong momentum we created in Q1 of this year and produced yet another great quarter in Q2.

We accelerated year-over-year product sales growth in Q2 as POMALYST had its first full quarter revenues in the U.S. As ABRAXANE momentum continues to build with new indications contributing to that franchise has grown. Net product sales grew 17% year-over-year and REVLIMID sales grew 13% year-over-year with volume growth continuing to be the main driver for all products.

Sequential growth was 9% for the total net product sales and 5% for revenue. Our P&L metrics are strong across the board and our operating margin grew 180 basis points year-over-year and 20 basis points sequentially.

As previously announced, we completed our prior share repurchase authorization back in June, having repurchased 16.3 million shares for $1.8 billion in the first half of this year and our Board approved a new $3 billion authorization at its last meeting. We also invested in new R&D collaborations, including Concert, FORMA and Tengion and start a new collaboration agreement with MorphoSys. With the 17% year-over-year growth, total net product sales reached $1.564 billion, a new record sales for Celgene.

Total revenues also grew 17% year-over-year to $1.6 billion. All of our major products posted solid growth in the quarter across the globe. Our 17% product sales growth came from 16% volume growth and a net 1% positive contribution from the net of price in foreign exchange. The impact of foreign exchange was about $30 million negative for the Q2 year-over-year comparison inline with our internal plan.

As a reminder, that impact in Q1 was about $27 million negative. That brings the total negative foreign currency impact for the first six months of this year to about $57 million and we continue to expect about $100 million for the full-year with most of it impacting REVLIMID and with most of it coming for Europe.

Adjusted earnings per share was $1.52 for Q2, up 25% over Q2, 2012 driven by growth in operating income and our business model continues to deliver P&L leverage. Adjusted earnings per share grew by $0.30 versus one year-ago with $0.26 coming from operating income growth and a net $0.04 from the combination of tax rates and share count.

Reviewing the details of our net product sales, REVLIMID increased nicely, at about 13% year-over-year, up 16% in the U.S. and 8% in international, including a negative impact from foreign exchange on international sales. Excluding this impact, international year-over-year growth would have been 13% and total global REVLIMID growth

15%.

Sequential growth in the U.S. was a strong 10% and international sequential volume growth was very solid across all major markets that was offset by negative price and currency effects in the quarter. VIDAZA continues to grow well outside the U.S. and posted solid mid single-digit gains year-over-year and sequentially.

ABRAXANE is showing strong momentum following last year’s non-small cell lung cancer approval in the U.S., as well as good growth in the breast syndication outside the U.S. The product grew 41% year-over-year with the U.S. up 38% and international 55%. Global sequential growth was 26%.

We’re extremely pleased with the performance of POMALYST in its first full quarter of sales in the U.S. POMALYST growth was demand driven. Demand for the product is exceeding our expectations and the product is on track for an outstanding 2013 build into a strong full-year expectation for 2014 and we expect to have commercial sales in both the U.S. and Europe.

Looking at the components of REVLIMID’s growth for the Q2 year-over-year comparisons, total growth was about 13% with 11.4% coming from volume, 3.7% from price, and negative 2.5% from foreign exchange. The U.S. market 16% year-over-year growth for the quarter came about 60% from volume and 40% from price.

With respect to international, total year-over-year growth was 8%. The volume growth reached 15% as the net impact of price for the quarter was negative and the negative foreign currency impact was about 6% with the greatest impact being in Europe.

Our P&L dynamic continues inline with our expectations. We improved product growth margins to 95.1% driven by favorable sales mix. R&D expenses as a percentage of revenue declined, reflecting timing of spend on milestones in clinical trials.

SG&A expense as a percentage of revenues was higher in the quarter due to ongoing launch expenses for POMALYST, pre-launch expenses for ABRAXANE in pancreatic cancer, incremental expenses for Inflammation and Immunology and expenses related to a large number of medical meetings in Q2 of this year.

We expect SG&A as a percentage of revenue to trend lower over the remainder of the year. Our operating profit margin improved versus one year-ago and versus the prior quarter and reached 49.6% for the quarter. Our effective tax rate rose slightly in Q2 driven by higher sales for both POMALYST and ABRAXANE in the U.S. and their impact on geographic mix of income.

We are delivering sustainable operating leverage and on this chart we track our current year progress in that regard on a year-to-date basis every quarter and the trend in our metrics for the past few years. You can see, we continue in Q2 of 2013 to build on a strong start to the year from Q1. This performance is a result of excellent execution across all Celgene functions. And now that we have two quarters of 2013 and our trailing 12 months return on invested capital calculation, we also now see our return increasing for 2013.

Our cash and marketable securities balance at the end of Q2 still in just over $4 billion and our balance sheet remains very strong. In Q2 we generated over $700 million of cash flow from operations and we spend just over $800 million on share repurchases.

On the strength of our Q2 performance and given our outlook for the remainder of this year, we are updating our full-year financial guidance as follows. We are raising total net product sales to approximately $6.2 billion growth of 15% versus a 11% previously. We are raising REVLIMID sales to a range of $4.2 billion to $4.3 billion, growth at the midpoint of 13% versus 10% previously.

We are raising EPS guidance by $0.25 to a range of $5.80 to $5.90, growth of 19% versus 14% previously. We continue to assume a fully diluted weighted average share count of 430 million shares. We assume a possible generic VIDAZA entrant in the U.S. at the beginning of Q4. We also expect to ramp up our investment in Inflammation and Immunology commercial infrastructure in the U.S. as we move towards year-end and into 2014 in advance of an expected launch of the psoriatic arthritis indication for apremilast in the U.S. next year.

We forecast our operating profit margins to be at least 49% as we have P&L flexibility in both R&D and SG&A expense lines. We may see a slightly higher effective tax rate for the full-year versus our previous guidance of 16.5% depending on the mix of income between U.S. and international markets. As of now, we see that rate coming in between 16.5% and 17%. In the future it will then trend back to down to our 16.5% longer term guidance.

With this positive update, I’ll now close and turn the call over to Mark. Thank you very much.

Mark J. Alles

Thank you, Jackie. Good morning, everyone. As you heard from Bob and Jackie, our clinical regulatory and commercial teams delivered outstanding second quarter results. I’m pleased to have my perspective on second quarter product sales, current jars of growth and some of the significant franchise expansion opportunities for our Hematology and Oncology business.

In the second quarter excellent demand growth for REVLIMID and ABRAXANE, solid VIDAZA sales and the early commercial success of POMALYST, combined to generate total product sales of $1,564 billion, strong year-on-year growth of 17% and quarter-on-quarter growth of 9%.

REVLIMID second quarter sales grew 13% year-on-year and 5% sequentially to $1,052 billion. 1increased demand was the overwhelming driver of percentage. ABRAXANE second quarter sales were $155 million, representing 41% year-on-year and 26% quarter-on-quarter growth. Continued stable use in metastatic breast cancer and adoption in non-small cell lung cancer combined to produce this record quarterly results.

Our teams in the United States and in Europe and our partners in Japan, Australia and Latin America are all preparing for regulatory approval and the commercial launch of ABRAXANE plus Gemcitabine for pancreatic cancer, a major unmet medial need around the world. The POMALYST launch is confirming the unmet medical needs of patients with heavily pretreated multiple myeloma.

Commercially the U.S. launch is exceeding our expectations. Quarter-on-quarter sales grew by 132% to $66 million. I will provide more insight into launch of POMALYST later. The second quarter performance by our leading cancer brands is a key indicator of the momentum we’re generating. Important growth progress, duration of therapy, market share, geographic expansion and new launches combined to generate strong sales growth. Other significant franchise expansion opportunities are just now coming into focus, many more are in development.

Across markets, REVLIMID gain share in myeloma. Duration of therapy was up in the quarter. In Europe, our team is successfully growing share in duration in relapsed refractory multiple myeloma. We are pleased with the early launch success of REVLIMID in China and our teams in Japan, Canada and Australia produced excellent second quarter results.

The U.S. launch of REVLIMID for relapsed refractory mantle cell lymphoma acts as an immediate growth driver. Our European team is working to secure reimbursement across markets for the recently approved deletion-5q MDS indication. Optimizing the full potential of REVLIMID requires global regulatory approval for its Houston patients with newly diagnosed multiple myeloma.

A central element of our regulatory strategy is based on the results of the MM-020 study. Among the completed randomized Phase III studies designed potentially to get approval, the MM-020 study features important clinical outcomes, regulatory agencies, physicians and patients are seeking. As you know the primary endpoint was progression free survival. The primary analysis measure the difference in progression free survival between arm A and arm C.

Key secondary endpoints included overall survival response rates and safety. Earlier this month, we announced that the MM-020 study met its primary endpoint. Working with the study investigators and a consideration of our regulatory strategy we plan to submit an abstract of the American Society of Hematology for the December ASH meeting.

Given the strength of the data package we now have, we’re moving forward with our plan to submit regulatory applications for REVLIMID for the treatment of newly diagnosed multiple myeloma in the U.S. and in Europe by the end of this year. Other global submissions will follow.

Presented at ASCO and again at EHA, the demand on Phase III study of REVLIMID maintenance for newly diagnosed multiple myeloma after treatment with either nPR or Autologous stem cell transplantation is the third randomized trial in the younger transplant eligible population to demonstrate superior progression free survival and the second study in this population to demonstrate an overall survival advantage when REVLIMID is used as maintenance therapy until disease progression.

Recent international medical meetings have also featured key data on REVLIMID in non-Hodgkin's lymphoma. We are particularly impressed with the activity and safety of the combination of REVLIMID plus rituximab. As you know we’re conducting a series of late stage trials seeking to define the optimal patient population as part of our registration strategy for this chemo free regimen.

The results for the CALGB 5803 Phase II study of REVLIMID plus rituximab in patients with previously untreated follicular lymphoma were presented during the International Congress on Malignant Lymphoma. This multi-center study reported a response rate of 93% by PET scan, 72% achieved the complete response. The medium follow-up was just over 1 and 1.5 years. This is the second Phase II trial of the R2 regimen in untreated follicular lymphoma to demonstrate a greater than 90% overall response rate with a very high percentage of complete responses.

We believe that these data provides compelling support for the ongoing conduct of the relevant study, our randomized Phase III registration trial comparing the combination of REVLIMID plus rituximab to rituximab plus standard chemotherapy in first line follicular lymphoma. Enrollment is on target, with full approval expected to be completed by the second half of 2014.

Approximately 50% of patients with Diffuse Large B-Cell Lymphoma, who complete treatment with rituximab plus CHOP chemotherapy achieved long-term remissions and can be considered cured. The other 50% do not do well and are usually treated with a series of therapy spending months or even years before eventually dying from their disease.

We are committed to developing novel therapies for these patients. This is the population where we anticipate REVLIMID maintenance therapy could provide substantial clinical benefit. The REMARK study is a randomized Phase III trial testing REVLIMID maintenance versus placebo following through standard R-CHOP in patients with Diffuse Large B-Cell Lymphoma. We expect enrollment in REMARC to be completed by the end of this year.

Last week we announced the discontinuation of the CLL-008 study due to an imbalance in the number of deaths in patients treated with REVLIMID versus chlorambucil. We are disappointed with this outcome, but we have learned more about the efficacy and safety of REVLIMID in previously untreated patients with CLL who also have extensive comorbidities. Importantly all other REVLIMID sponsor studies and investigator initiated studies in CLL are continuing further existing protocols. REVLIMID remains one of the most active drugs in development for CLL, and we’re investing in a robust program focused on a variety of clinical studies.

For example, our Phase III study CLL-002 testing REVLIMID maintenance following documented response after one or two lines of therapy is enrolling well with greater than 60% of patients now approved. Success in CLL-002 potentially defines a very unique segment of the market and may represent the optimal treatment strategy for single agent REVLIMID in this disease. Our early drug development team has made important progress to finding the dosing schedule of CC-292 our potent Btk inhibitor. Phase I studies in hematology have been initiated for the combination of REVLIMID plus CC-292, REVLIMID plus ibrutinib and the combination of CC-292 plus rituximab.

Driven by the outstanding execution of our commercial team and significant patient need, second quarter sales of POMALYST were excellent. Year-to-date grand performance across all of our internal metrics is exceeding expectations, while it is much too early to appreciate the length of the treatment duration where key prescriptions are being dispensed to a high percentage of patient’s. The successful launch of POMALYST in the U.S. market is helping us prepare for a launch in Europe immediately following the final approval decision by the European Commission, a regulatory approval we expect to receive very soon.

We were pleased with the diversity of clinical data presented during ASCO and EHA supporting the clinical profile of POMALYST and expect presentations of updated and new data to continue through the ASH meeting in December and beyond. ABRAXANE has entered a new phase of sales growth and potentially transformative clinical development. Our near term priorities for this major cancer brand have not changed. We need to maximize it's fully potential in metastatic breast cancer, optimize the opportunity in non-small cell lung cancer and secure global regulatory approval and market access for the treatment of metastatic pancreatic cancer. We continue to expect final overall survival results from our Phase III study in metastatic myeloma in the fourth quarter and supporting studies in bladder cancer and other solid tumors. ABRAXANE is on track to become our first oncology blockbuster brand.

Years of strategic thinking, innovative clinical research and consistently strong operational execution are coming together to create significant new opportunity for our global cancer franchise. Our inline portfolio offer substantial value to patients, physicians and payers supporting our efforts to effectively commercialize our market leading cancer therapies. For the next five years and beyond we have numerous high value catalysts that support our robust outlook for growth, and we intend to capitalize on every one of them. Speaking of our outlook for growth, I’d like to turn the call over to Scott Smith, the Global Head of our Inflammation and Immunology franchise. Thank you very much.

Scott Smith

Thanks Mark. It's a pleasure to be here with you today speaking about the INI franchise and the progress that we’ve made over the past months. Today for apremilast we have enrolled over 4000 patients in the global commercial registration programs and in the past 12 months we’ve seen positive results in six Phase III trials in arthritis – in psoriatic arthritis and a positive Phase II trial in Behcet’s disease. We’ve also made significant progress with our regulatory filings. We submitted to U.S. PsA NDA in March and have since received acceptance of the filings PDUFA date of March 21, 2014. In Q2 we submitted the NDS for PsA for the Canadian authorities and we’re also on track for a combined PsA psoriasis submission in the EU as well as a submission for psoriasis in U.S. and Canada later this year.

In addition the apremilast Phase III POSTURE trial in ankylosing spondylitis is rapidly accruing and we anticipate complete enrollment this quarter. We also initiated enrollment in a Japanese psoriasis PsA registration trial earlier this year. Last month of the EULAR European Congress at Rheumatology we presented a PALACE 3 top line data as well as the PALACE 152 week results and you can see from the graph on the left the results of PALACE 3 are remarkably consistent with PALACE 1 results with the apremilast 30 mg BID arm achieving an ACR 20 score a 43% at week 16. Additionally the 30 mg BID arm achieved statistical significance on a number of key secondary end points including ACR 50, ACR 70 as well as other key measures of physical function, quality of life at week 24.

What created a lot of excitement was the graph on the right that demonstrated there was continued treatment the ACR 20 scores of apremilast continue to improve to the 50 to 60 plus percent level by week 52. It should be noted that apremilast was well tolerated and the prolonged exposure did not result in any unexpected increase in adverse events or laboratory abnormalities. Posted the randomized Phase II trial BCT-001 investigating apremilast 30 mg BID versus placebo in Behçet's disease also generated a lot of excitement at EULAR. Behcet’s disease is a very significant immune-mediated disease with limited treatment options in this 111 patient trial there was a 71% complete response rate and 89% of overall response rate for apremilast is shown in the graph on the left. As well there was a very rapid response demonstrated by the change oral azacitidine that you can see from the graph on the right. We are continuing our meetings with various health authorities discussing the possibility of using the data from this trial for a potential Behcet’s approval.

The second half of 2013 promises to be even more substantial in terms of the quantity and quality of additional data that we will bring to the medical community. This data should include presentations of PALACE 2 and PALACE 3 52 week data, data in difficult treat symptoms of PsA such as enthesitis, dactylitis and additional deeper views of ESTEEM 1 and Behcet’s trials. We have also made significant progress in filling out our key global commercial and medical affairs leadership roles. These positions have been filled with high caliber candidates that have significant and deep experience at successfully launching and commercializing blockbuster drugs in the immunology space.

In the mean timer our new heads of U.S. commercial and global marketing had already begun to have a major impact. We are accelerating all key launcher activities to ensure full preparedness for early 2014 U.S. and Canada launches. We are very, very excited as we prepare to bring a potentially significant new treatment option to the millions of patient’s world wide with PsA and psoriases. We are very confident about the opportunity ahead of us; the opportunity to create a new global standard for the treatment of psoriatic disease.

Thank you very much and I’d like to turn it back to Bob.

Robert J. Hugin

Thank you Scott and thank you Jackie and Mark. The second quarter was truly outstanding. I want to thank all of my colleagues at Celgene for their commitment to producing outstanding results and for striving to improve the lives of patients worldwide. We’re energized by the progress achieved in the first half of the year and are focused on producing outstanding results for the full-year. Much has been achieved in the past few months. Even more importantly because of our investments in innovation and our focus on patients, the future of Celgene has never been brighter. We look forward to updating you multiple times later this year, including on or quarterly conference call on October 24, at the American College of Rheumatology meeting in late October in Santiago, and at the American Society of Hematology meeting early December in New Orleans.

Thank you very much for your support, and operator we can now open the call for questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) The first question comes from Geoff Porges from Sanford Bernstein.

Geoffrey Porges - Sanford C. Bernstein & Co.

Thanks for taking the question and congratulations on a very strong quarter and the helpful guidance and information. I have a question on ABRAXANE that was a surprise that the result was so strong and plus you gave us some color on that particularly how much of the growth came from pancreatic cancer based on new some of the companion listing. And secondly, could you talk a little bit about the exact status outside the U.S. of the approval for ABRAXANE, and are you going to have a full scale launch in Europe and in other geographies or is it going to continue to come out on a more restricted basis? Thanks.

Mark J. Alles

Geoff, thank you. It's Mark, thanks for the question. So, yeah we're very pleased with the quarter and ABRAXANE sales trajectory. The majority of the incremental gain comes from the lung cancer launch. We are seeing adoption starting in the pancreatic cancer segment as you know the NCCN guidelines upgraded the category to one. The data have been presented multiple times starting back in January, again at ASCO at the world GI Symposium that just happened, so awareness of the survival advantage and then the access in the U.S. is starting to create that momentum. OUS, Europe is very important for us in terms of regulatory work and we look to a full scale launch of the pancreatic cancer indication in Europe we’ll build the clinical program with Europe and U.S. collaboration for an adjuvant pancreatic study so that will support the ongoing profile of the product for years to come. You recall in Australia we have a partner and in Japan in fact in the quarter our partner was successful getting not only a lung cancer approval, but also gastric cancer. So, a lot of things happening in ex-U.S. and of course we’re very pleased with the progress in Q2 in the U.S.

Geoffrey Porges - Sanford C. Bernstein & Co.

Thanks very much. That’s very helpful information.

Operator

Thank you. Our next question comes from Robyn Karnauskas from Deutsche Bank.

Robyn Karnauskas - Deutsche Bank

Numerous question’s, and just given the recent positive data with 020; I was wondering if you could comment on what are the next steps for figuring out what Europe wants to see as far as 020 for filing and 015, and how do you think about using these two trials to get approval of REVLIMID in Europe? Thanks.

Mark J. Alles

Thanks Robyn, it's Mark again. Bob, if you will comment please. But Robyn we’re very pleased that MM-20 met its primary endpoint. We continue to follow up on the results of MM-015 and the two maintenance trials as well. So our intent is to continue to move forward with filing strategies by the end of the year in the U.S. and in Europe followed by other markets around the world, the comprehensive data will be considered all the way through the process.

Robyn Karnauskas - Deutsche Bank

The follow-up though, do you know yet whether you will file on both together or one on them separately.

Mark J. Alles

Yeah, we’re beginning discussions with regulators now and so we want to leave the diversity of options for us and them wide open.

Robert J. Hugin

Yeah, I think we want to make sure that patients all around the world have the most rapid access to REVLIMID in newly diagnosed myeloma, and so as we finalize that strategy we’re going to do the one that get access the most quickest, but we’re very optimistic that we’re going to begin by the end of the year the filings.

Robyn Karnauskas - Deutsche Bank

Thank you.

Operator

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

Eric Schmidt - Cowen & Company

Thanks for taking my question, and congrats again on a great quarter. Maybe another one for Mark; it does look like apremilast and ABRAXANE as Geoff mentioned are doing very, very well. Could you provide us some sort of a benchmark for where you are in terms of market share in the relapsed refractory myeloma population for POMALYST and off label ABRAXANE and pancreatic cancer?

Mark J. Alles

Eric, thanks it's Mark. With respect to pomalidomide we are very excited about the launch, it's going extremely well. We have a lot of metrics to look at because the product is in the market just for months we're beginning to see shared gains that are meaningful, but I think it's a bit early to declare what market share is or isn’t, certainly in line 3 plus the share is meaningful and very competitive given the market place as you know it. With respect to the ongoing launch we see a lot of interest in combining POMALYST with other noble agents so I think that’s going to drive the brand and the data that recently came out including subsets of patients renal insufficiency et cetera these are very important confidence builders in the launch of the product. With respect to ABRAXANE and share in pancreatic cancer there is a meaningful share starting to show up, but again it's early in terms of from the time the data is in the market, market access becomes stronger and what we’re doing in terms of preparing for launch we’re going to be in a good place to run to the PDUFA date remind you that the PDUFA date is in September – September 21 and we still expect given the progress we’re making in Europe that we could have an end of year launch approval launch in Europe, so I think all systems go for ABRAXANE and pancreatic cancer.

Operator

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

Rachel McMinn - Bank of America Merrill Lynch‎

Yeah, thanks. Maybe another way of asking the question; can you talk a little bit about the REVLIMID versus pomalidomide dynamics, so I mean to what percentage of POMALYST is coming from REVLIMID, patients that would have otherwise been on REVLIMID. And then just totally a separate question, on 020 can you think that overall survival trends are going to be important in getting European regulators comfortable with the data set or is PFS alone when we see those curves is that sufficient to you know really kind of answer outstanding questions on the product. Thank you.

Mark J. Alles

Hi, Rachel its Mark; thanks for the question. First there is absolutely no cannibalization going on between pomalidomide and REVLIMID, if anything REVLIMID is expanding in share and in duration as a consequence of the confidence in the market being able to transition for patients who really exhausted first and second line therapy to be able to then have that confidence to go to a third or even a fourth line therapy, pomalidomide’s, profile with an overall survival advantage in that setting is comforting to the market. With respect to MM-020 the PFS advantage of course is the center point of the comprehensive data package we have. There is no doubt that the overall benefit risk in front of all regulators includes the assessment of trends for overall survival and then of course in the context of the safety profile that there’s nothing going on in the survival trend positively or negatively that is being driven by particular side effects. So, I think in the end PFS stands alone, other endpoints including the overall safety and other trends in clinical outcomes are part of that consideration. Thank you.

Operator

Thank you. Our next question comes from Gene Mack from Brean Capital.

Gene Mack - Brean Capital

Actually, I was wondering if Mark maybe and Jackie if you guys could comment on some of the strategies driving the MorphoSys deal and how you see maybe the development of that compound impacting the various settings in myeloma well maybe where, I know it's early days but maybe where we should see trials beginning to unfold; and then maybe Jackie I don’t know if it's too early to tell, but is there something that could wind up impacting 2017 guidance? Thanks.

Mark J. Alles

Yeah, hi its Mark let me jump in. Jackie and I will probably go back and forth a little bit on the answer. The coverage of MorphoSys is very important because it represents a new therapeutic way of thinking about the treatment of multiple blood cancers, myeloma for sure but we think CD38 is a target beyond multiple myeloma and we fully intend to investigate that. So we this is an important maybe best in class therapeutic antibody against CD38, and are looking to fully develop it. With respect to R&D, I think that there are different segments one could think of we are very early in that assessment, but have pretty good ideas about how we would with MorphoSys think to develop the asset in multiple blood cancers. With respect to guidance long-term, I think Jackie can answer that question, but my view is this is complementary to our R&D program.

Jacqualyn A. Fouse

I completely agree, I would say that today we don’t see an impact on 2017 guidance, we have a number of projects that are not included in our assumptions for guidance in 2017 that could represent upside to that guidance and we’ve talked about those some in the past and I would put this in that category as well as the timing is faster than what we’re thinking about today.

Gene Mack - Brean Capital

And is it too early to tell when this drug might become commercially available?

Mark J. Alles

I think it's a little bit early, I don’t know about too early. We certainly look forward and think that it could be in a sort of classic Phase II to Phase III development cycle. On the early side maybe four years on the longest side maybe a five to six year window. But again a lot of that depends on once the full integration of the collaboration happens we can get started.

Gene Mack - Brean Capital

Great. Thank you.

Operator

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

Geoffrey Meacham - JP Morgan

Nice results on the quarter, and thanks for taking the question. I got one on 020 and one on REV and CLL, so there’s been a big benefit for you guys waiting for 015 to mature with respect to SPM, PFS to OS. I am just curious if you thought 020 at this point was mature enough to make a compelling case review, looks like there is a benefit to waiting a bit longer these are things to mature. And then on REV and CLL when you look at historically tumor lysis syndrome had been a concern previously was this an issue in the origin study or was it just the type of patient enrolled on that study? Thanks.

Mark J. Alles

Geoff thanks for the question. We are comfortable that we are ready to begin very, very direct dialogue with regulatory agencies with our intent to file in the U.S. and Europe submit by the end of the year filing of course is a regulatory decision. And then go outside of those markets very rapidly. So our plan is intact, we’ll submit before the end of the year, hopefully in both parts of the world and we will use 2014 to go to the rest of the world. With respect to TLS and CLL I think it is an important question. There is a heterogeneity across the patient desk the imbalance in the CLL-008 study, there are no patterns, there’s no direct cause in effect that we see, the deaths were early so we think that what's really happening in this setting was that extensive comorbidities and the age of the population led to some early deaths probably linked to disease resolution that’s hard to really know. That said, I think we’re very, very comfortable with the idea that REVLIMID in combination to CLL all of the different studies that are ongoing, the profile even in the setting of some morbidities is quite good. In the setting of maintenance after patients are (indiscernible) we’re very excited because we think once the tumor load is less and we think the immuno surveillance effect of REVLIMID that mechanism is going to be quite effective. So, optimistic we learned a lot and we’re moving into a more confident way of segmenting CLL going forward.

Geoffrey Meacham - JP Morgan

Thanks.

Operator

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

Mark Schoenbaum - ISI Group

Jackie has been not asked a lot of questions, so I thought I’d bring her into the dialogue if I might. I would love to get updated thoughts on use of cash. There’s obviously been rumors and press reports of lots of M&A activity in the space, I’d love to know kind of where your head is Jackie, and perhaps Bob on the use of cash and specifically I’ll go out on a limb and ask, are you – would you be willing to comment on whether or not you’ve entered the process that’s going on over at Onyx and then the follow-up is maybe just, I know in the past you said you’re keeping your partnering options open for apremilast and now that we’re getting dangerously close to the producer and the launch I’d love to know your updated thoughts on that if any. Thanks.

Jacqualyn A. Fouse

Thank you, Mark I was feeling a little bit neglected here with no questions up to now, so I appreciate it, and I am sure Bob will want to jump in.

Robert J. Hugin

I’m here for you.

Jacqualyn A. Fouse

I think as we’ve often said, I mean we don’t comment on specific transactions in the M&A space that maybe out there in the environment. What I would reiterate and you’ve seen it from our activity thus far this year is that we continue to place a higher priority on the kinds of agreements that you’ve seen us strike with more process and others so that we are complementing our internal research capabilities in our internal technology platforms with other technologies and compounds that we think could lead to breakthroughs or represent best in class products in the future and we think layering that on top of an extremely strong organic growth profile that we have for many, many years to come is a top priority for us right now. So, with that, I think I’ll move on to the apremilast partnering question or maybe let Bob chime in as well, and then we’ll let Scott talk about apremilast partnering.

Robert J. Hugin

Yeah, I think before Scott talks about apremilast I just want to reiterate our strategic perspective of how we’ve looked at new franchise and opportunities, and there are key factors that drive our decision making and our thinking on it. And the two that are most significant when we look at new franchises are is the data strong enough to really allow an entrance to make a new marketer or a new impact on existing markets in a meaningful way and the data strong enough to justify that kind of issue. So in the first case there I think is becoming more and more clear with six positive pivotal Phase III studies and the continuing positive maturing of the data very, very important for us as we look at those as those decisions. And secondly the other really important factor to us is can we attract and have the right people that can lead the efforts to ensure that we have the expertise and the capability to really deliver and maximize the value of the franchise and the asset that we think of ourselves. Clearly from a strategic perspective maintaining ownership of your products and reaping the full benefit from them for your shareholders and your franchise for yourself has great long-term value like the proposition that we’ve achieved globally both financially and operationally with REVLIMID in our hematology, oncology franchise which have accrued great benefit to us. So I think that strategically over the past six months we have resoundingly answered the questions about the quality, the importance of the data that benefit to have a significant impact on patients. And I think Scott and the team have done a spectacular job of really attracting and building a leadership team that gives us the capability to take on whatever challenges and opportunities we seek to pursue. That being said, we should always be open minded about opportunities and indications and geographies to ensure that we maximize the full net present value of the franchise, but I hope you can tell from my comment, but I think this is a very exciting opportunity to strengthen the breadth of our Company strategically and the key decisions that we are faced with are ones out of clear strength from the data and the quality of the people leading the effort.

Scott Smith

And not much to really add to what Bob said, we’re building a tremendous leadership team, we’re in full commercialization mode in acceleration getting ready for launches both in the U.S. and Canada which are likely to come in the early part of 2014. So we are fully committed to that build and moving forward and accelerating all our activities and as Bob said we’re also engaged in some geographic and therapeutic discussions to see if we can accelerate our overall top line by engaging in that, but we’re hiring a leadership team with the feel but we’ve got a tremendous asset, great data and we’re hiring the best people we can hire in the world, and for us to maintain core commercialization of the asset.

Jacqualyn A. Fouse

And just mainly to close the loop I mean we talked specifically about kind of our view on the M&A. Bob and Scott just covered how we’re thinking about Apremilast and maximizing that opportunity just on the broader implied question of use of cash, I mean you’ve seen us execute on a business strategy for the past few years and a financial strategy that supports the business strategy and that is focused on creating shareholder value and you’ve seen what we’ve delivered on that and you’ve seen that we’ve renewed our share repurchase authorization which is just one tool amongst an armamentarium of tools that we had to manage the business investment and the capital structure and you’re going to see us continue to consistently apply those strategies on a go forward basis.

Mark Schoenbaum - ISI Group

Thank you.

Operator

Thank you. Our next question comes from Howard Liang from Leerink Swann.

Howard Liang - Leerink Swann

Thanks very much. I just have a question on R2 is there a plan to see companion listing based on the CALGB data presented with Dr. Martin and MD Anderson data and can you update us on the plans to have an interim look for the RELEVANCE trial.

Mark J. Alles

Thanks Howard. So, currently REVLIMID with (indiscernible) approval and other data including R2 has very good access in the U.S. market, of course it's different around the rest of the world. The RELEVANCE trial would be un-blinded for the results on an event driven basis, again this is like we’ve been talking about with MM-20 for so long, there’s no plan to do anything before it would happen exactly on time with respect to the protocol. In terms of CLL so across the Board this regimen R2 has become a chemo free doublet where not only can we look at it in the context of acute therapy but also along the course of therapy because of the lack of certain toxicities. I think the other thing that’s important is we’re building an R2 strategy in first line Diffuse Large B-Cell Lymphoma we have very, very important ongoing analysis that are informing us about using an R2-CHOP versus an R-CHOP Phase III approach and we think that this biomarker GCB, ABC is still a very important way for us to look at differentiated performance of an R2 doublet with or without CHOP included. So much more to come in the CLL and any CHOP programs off of the R2 backbone, and I look forward to talking more about this with you at ASH and even into next year because the data will continue to mature.

Howard Liang - Leerink Swann

Thank you.

Operator

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

Yaron Werber - Citi

Thanks for taking my question. I got a question 020 and a question on POM. A 020 crossover should not be a huge issue right the way that the study was designed, I mean patients want to discontinue right on the subsequent therapies. I am trying to get a sense, do you think you can show survival benefit in fact take survival benefit over time or how should we think about that. And then secondly just on POM how much of the initial kind of $55 million in the U.S. is bonus or pent up demand versus being sustainable demand and growing from there?

Mark J. Alles

Hi, Yaron, it's Mark; thanks for the question. You started with a question on crossover, and these are things we’ll find out over time as the results get analyzed and sensitivity analysis gets done. What we know is that progression-free survival 2 is part of the ongoing analysis so of course that now, and you know that the European guidance for regulatory review now does include a view to PFS 2. This will then provide that calculation of any impact good or bad with respect to progression-free survival. So we will have those data, they’ll probably be part of an ASH presentation and so I think we just have to wait to see what we learn about that specifically. With respect to overall survival and time, I’ll just state you the facts, you’d call that the final PFS is where we un-blinded the study, that’s the end point, interim survival and then other survival analysis will continue with respect to the benefit risk. This all still ties directly to a yearend submission strategy in U.S. Europe followed by the rest of the world. You asked about pomalidomide in the market and the vast majority, I don’t have an exact percentage but it's overwhelming majority is demand based with new patient starts, total prescriptions and then as I mentioned we are seeing early signs that a high percentage of those new prescriptions are being repeated, so cycle 2 a little bit of cycle 3 already. I think that’s something we’ll be able to update you more about again when we get a little bit further into the launch.

Robert J. Hugin

But I just want to add a little something to that obviously early in the launch it's -- you have to be a little bit cautious and clearly the expectations – our expectations have been exceeded by the start of it. But I also do want to point out that we did not have as with other compounds on occasions, a very heavy number of – large number of patients that were in a compassionate use program that rolled over into an early access, compassionate access program, so we did not have that phenomenon here. That being said it's still early and we’re encouraged and it exceed our expectations and we’re going to keep pushing.

Operator

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

Michael Yee - RBC Capital Markets

Thanks, congrats on the quarter and on MM-020. I had a follow on question on survival, I know you’ve sort of addressed this in a couple of ways, but when people get to ASH and there’ll be an expectation and people are really focused on looking at the survival curves. Should one expect even trends this early or is it just simply too early to even see trends. How should we think about that as we go to ASH? And then secondly for Mark, in CLL that’s a very fast moving field, a lot of things were presented both in ASCO and ASH and for orals in CLL; do you guys have the assets in-house to de-bulk the tumor, how do you think about your position in CLL?

Mark J. Alles

Yeah, so at ASH the data set will of course focus on the primary efficacy endpoint; that is PFS. All of the secondary end points would have data. Sitting here today it’s not exactly clear what those data sets would be. But we would expect, that they would include the hazard ratio and an estimate of overall survival, that’s an expectation whether that’s ready or not is to be determined. With respect to CLL, I think your question is important in terms of about acute treatment of CLL and I’ll just remind you again this is where follicular and then aggressive Diffuse Large B-Cell Lymphoma we really like how REVLIMID plus rituximab is creating a different way of thinking about the acute treatment of the disease. And so yes the answer is, REVLIMID used in certain way is very effective at treating CLL in an acute stage. As a single agent we think it maybe more effective maintaining the benefit over time. That said, as I mentioned CC-292 is moving very nicely into a more mature Phase I study in hematology so we think CC-292 has made good progress and we look forward to seeing how that asset plays out more data coming at ASH, more development outlines coming then as well.

Michael Yee - RBC Capital Markets

Okay, great. Thanks.

Operator

Thank you. Our next question comes from Brian Abrahams from Wells Fargo Securities.

Brian Abrahams - Wells Fargo Securities

Thanks for taking my question and my congrats on a good quarter as well. Another question for Jackie, your R&D data initially you gave guidance for 2015 REVLIMID sales that I think may have been a little bit below peoples expectations. Now say you’ve increased your 2013 REVLIMID sales guidance, I was wondering actually maybe just talk through the dynamics that might be shaping this. Did you see a reacceleration in uptakes since May, is $4.7 billion to $4.8 billion still the number we should be thinking about for 2015 or do you have expectations maybe for growth slowing down in the near term and the medium term was a bit more perhaps than that we’ve been expecting? Thanks.

Jacqualyn A. Fouse

Yeah, thanks for the question, Brian. I mean, with respect to updates of the longer term guidance we do that from time-to-time where we’ve got clear trends that we see. As opposed to where we were back in May with the R&D data, I think where we sit today we have got the evidence of the momentum that we saw across the world in demand for REVLIMID and we feel very good about what that looks like. We’re also sitting here today with the benefit of the positive outcome on the primary endpoint for the MM-020 trial. So I think that where we sit today we feel quite good about where we are with REVLIMID and the future for REVLIMID and even greater clarity on the regulatory pathways and the way it forwards for the submission on newly diagnosed. So, I think we can continue to reiterate our confidence in our longer term targets and you’ve seen how we feel about the shorter term with 2013, and the visibility that we have there to increase the guidance on REVLIMID revenues for this year. So, continue to watch for more to come on that with respect to the future updates on the longer term guidance and we feel very good about where we are.

Brian Abrahams - Wells Fargo Securities

Thanks very much.

Operator

Thank you. Our next question comes from Ying Huang from Barclays.

Ying Huang – Barclays Capital

Thanks for taking my question. So I have a question on apremilast NDA, I know we saw the 52 week data from PALACE 1 and EULAR last month. Did you include that data in the NDA, and would that be included in the label when FDA approves the drug. And then secondly you guys already saw some extension data from PALACE 2 and 3. Do you also see the similar trend to what we saw in PALACE 1 that is overtime you actually increase the efficacy?

Mark J. Alles

So in terms of the NDA the 52 week data is not in the NDA. We would hope to submit that data at some point after the initial approval and get that in the label, there’s often longer term observed data in competitors labels of this type. Your second question was relative to; do we see more things with PALACE 2 and 3? We see very similar trends in the long-term data when you take a look at the observed data in these trials for all the trials very, very -- one thing that’s striking and we’ll get all the data out in the second half of the year longer term data for PALACE 2 and 3, very consistent and it gets even more consistent when you take a look at the longer term endpoint. So yes, they’re very consistent with the program.

Ying Huang – Barclays Capital

And what about the publication strategies, Scott in terms of all the data; how are we doing with that?

Scott Smith

Yeah, so we’re moving forward, the first we would look to get the first PALACE 1 published. That is close to being submitted, there’s a lot of data there, and we would publish the full 52 week and then we will work to publish PALACE 2, PALACE 3. And then there’s a lot of sub-publications which would come from each of those, each of those pending that there is lots of subsets of that data that you can take and look and emphasize and tacticalize, but its by far the PALACE 1 through 4 program by far the largest PsA program ever initiated globally by any molecule and there is a lot of data, and there is going to be a lot of – there is a lot of good data that exist there, there’s going to be a lot more over the next couple of years. Thanks for asking that question.

Ying Huang – Barclays Capital

If I can slip another one, can you guys provide an update on the patent challenge by Actavis?

Jacqualyn A. Fouse

This is Jackie. Hi. So, there is not a lot news has happened, I mean, we speak about this fairly off and where we’re still in the discovery phase on the new patents, so we had to go through the process again. As we know the timeline has got extended once, our estimate at the current time, I guess, if we have a view on timing would be that there is no (indiscernible) hearing scheduled for the moment. It could come sometime next year, but we still go through discovery and we’d expect that to continue over the course of the year right now. It’s not really anything new since the last time we talked about it. Thanks.

Operator

Thank you. Our next question comes from Ian Somaiya from Piper Jaffray.

Ian Somaiya - Piper Jaffray

Hi. Just a question on the following for REVLIMID for newly diagnosed maintenance. Can you just may be speak to the strategy to get an overall survival claim whether its in Europe or in the U.S., which trial do you think it will be based on and maybe give us a sense of the timing. Since – as I look at the slide deck, you’re pointing to a Q4 ’13 filing based on 015 and 012. If you’re confident on 015, would you wait for the overall survival benefit to be confirmed before submitting that data?

Mark J. Alles

Ian thanks. It’s Mark. I appreciate the question. Just a clarification, the use of the word maintenance gets mixed up a little bit and how we talk about newly diagnosed myeloma, I understand why. I want to make you clear that in 012 patients are treated from diagnosis of myeloma continuously or for fixed course and that was a clinical strategy built into the trial. So there is no -- technically there is a maintenance effect other than continuous treatment. That said, I think it’s very important that we focus on that we have four studies with progression free survival advantages that are quite robust. This is the clinical benefit endpoint that regulators are recognized in cancer for very long time. All other data will be part of the regulatory review including benefit risk assessments with respect to updated incidence rates for SPMs, how that does or doesn’t play out, survival trends etcetera. So there is not an either or this will are we based on the overwhelming efficacy of the drug with respect to progression free survival and then we will based on the comprehensive data package we have submit in the U.S., submit in Europe and follow those submissions around the world as rapidly as possible.

Operator

Thank you. Our next question comes from Joel Sendek from Stifel.

Joel Sendek - Stifel Nicolaus

Hi. Thanks a lot. I have a question on apremilast too, and maybe might be individual but too closely here, but if you look at slide 36, the box on the submission was raised in the third quarter, is that – should I read into that at all and I’m also wondering if you can give us 53 week data on PALACE, where you have at some point 52 week data on ESTEEM and if so that will be part of the – while you submit that at some point maybe in a hope to getting possibly maintenance use of the apremilast in psoriasis? Thanks.

Robert J. Hugin

So let me – sorry about that, let me answer the second question first and we do look at longer term data for ESTEEM and see increasing response, we will take a look at the observed data etcetera in the ESTEEM program. Where 52 week data we don’t necessarily have in ESTEEM because the studies as on it’s a little bit confounded. Regulatory authorities wanted to see in the context of the psoriasis study randomized withdrawal after week 32 for some of the subset of patients who have had response, how long did it take for disease come back and some of those things. So, we don’t have straight line patients on drug for 52 weeks, non-uninterrupted like we did with the PALACE program. But we will in the second half of the year hopefully have some presentations of the longer term ESTEEM data it’s a little more confounded I think than you will see with PsA, same trends that you see in PsA just to say design create some differences. The first question was relative to submission in the third quarter of which particular submission?

Joel Sendek - Stifel Nicolaus

The psoriasis U.S. companies.

Robert J. Hugin

The Psoriasis U.S. NDA will be in the second half of the year. It’s not a Q3 or Q4 we purposely put that second half there.

Mark J. Alles

So, as soon as possible.

Robert J. Hugin

As soon as possible.

Jacqualyn A. Fouse

Yeah, I mean, its -- we’ve shown it on the slides just as -- it could fall right at the end of Q3 or beginning of Q4 and maybe just a little bit ahead of the other. So, it’s optically it looks like that.

Joel Sendek - Stifel Nicolaus

Got it.

Robert J. Hugin

No change to our plan.

Jacqualyn A. Fouse

No change to the plan at all.

Robert J. Hugin

It will be the next submission might be.

Jacqualyn A. Fouse

I think we got five people in the queue, we may not get to all of you, so it depends on how long the questions are, we’re going to take at least two more – next question.

Operator

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

Thomas Wei - Jefferies & Company

Hi. Thanks for taking the question. I wanted to ask just a housekeeping thing on the contribution, also inventory stocking for the POMALYST sales during the quarter? And then also a question on REVLIMID market share, which has been pretty stable now in the mid 50s for a while and I’m curious where you see that going over time and if you think that MM-020 can kind of restart share gains in the U.S. or is it something else that you think could be the driver of share gains higher than mid 50?

Mark J. Alles

Thanks Thomas. This is Mark. On inventory we’ve seen as expected weeks on hand for pomalidomide come down as demand has grown. So inventory is moving exactly as we expected. With respect to MM-020 and what’s happening in the myeloma share circumstance, very interesting because data subset of course do move share, but the other thing that is part of our program that we think over the next year to three that with the important are the combined studies looking for example at Bristol-Myers Squibb ipilimumab in combination with REV/Dex, looking at the Kyprolis development in combination with REV/Dex. So we’ve multiple, multiple market shaping event that will move share from where it is today. What we control directly is submitting to the U.S. regulatory authority I took your question to mean U.S. alone, so FDA are newly diagnosed application and then finally being able to assuming that we get a positive outcome being able to directly promote REVLIMID dexamethasone for a combination that will be in the label for newly diagnosed myeloma that we definitely believe will reaccelerate adoption of REVLIMID and share in newly diagnosed patients.

Jacqualyn A. Fouse

We are going to try and take two more questions. So …

Operator

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

Josh Schimmer - Lazard Capital Markets

Yes, thanks for squeezing me in. Have you started to see any meaningful inflexion in the use of the R2 regimen in the U.S. with the approval of the 20 milligram dose or one might may – we see that and do you have any plans of study in your apremilast that on the biologics and that sort one might expect? Thanks.

Robert J. Hugin

Thanks for the question. On the R2 regimen and the introduction of the 20 milligram dose for the – for more specifically its early, we don’t see a lot of adoption in the market for the combination, but we do see tremendous investigator interest. So I think we’re on the leading edge of being able to establish that regimen.

The focus of our future clinical development is not likely on add on to biologics, certainly it will be some exploration of that for safety reasons and some utilization. We see the primary positioning for apremilast being used before biologics and it can be in some cases after biologics and failures but the primary position being for that in the pre-biologic space, early in the biologics and we see a very different risk benefit profile emerging from the Phase III data which would support that use early.

Jacqualyn A. Fouse

I think operator, we have time for one last question please.

Operator

Thank you. Your final question for today comes from Matthew Roden from UBS Securities.

Matthew Roden - UBS Securities

Great. Thanks for taking my question. So, assuming MM-015 and 020 are supportive of label expansion REVLIMID in Europe. Should we modeling uptake in the transplant setting as well as the non-transplant setting, the later being where those trials were conducted, realizing you’ve other data sets like ECOG that could be supportive here, but I just want to clarify this issue because, I know that you tends to be very specific in this labeling and I just don’t know to what extent that applies to here. So, it would be helpful if you could walk us through what settings and combinations you think your filings will be supportive of outside the U.S.?

Robert J. Hugin

Matt, thanks for the question. So in the end we would want to have as many segments in newly diagnosed myeloma represented in our label in Europe and around the world as possible. This is my point about combination therapies. So nPR RV – these are regimes as you all know that could be approved for elderly or younger patients. So right now our models include all patient populations. I think the only category where we discount rapid adoption or major adoption is in the higher risk group, because that’s still an open ended question about slightly genetics and some of the things that are in development, that might be specific to higher risks. That said, these combinations with REVLIMID are as effective as all other existing regimens for high risk patients.

Jacqualyn A. Fouse

And just to make sure that you’re alarmed with our model assumptions, we have pushed the transplant setting revenues out to close to two years later than the non-transplant faring just from the standpoint of when we actually start to see material revenues, we may start to ramp up. So it is we lay outside the U.S., so it is layered into the model that way.

With that, thank you very much for being on the call with us today. We appreciate it and we look forward to seeing you and speaking with you soon.

Robert J. Hugin

Thank you.

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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