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Celgene (NASDAQ:CELG)

Q3 2010 Earnings Call

October 28, 2010 9:00 am ET

Executives

Robert Hugin - Chief Executive Officer, President, Secretary and Director

Tim Smith - Director of Investor Relations

Jacqualyn Fouse - Chief Financial Officer and Senior Vice President

Analysts

Geoffrey Porges - Bernstein Research

Robyn Karnauskas - Deutsche Bank AG

Joel Sendek - Lazard Capital Markets LLC

Howard Liang - Leerink Swann LLC

Yaron Werber - Citigroup Inc

Maged Shenouda - Stifel, Nicolaus & Co., Inc.

Christopher Raymond - Robert W. Baird & Co. Incorporated

Eric Schmidt - Cowen and Company, LLC

Mark Schoenebaum - ISI Group Inc.

Gene Mack - Soleil Securities Group, Inc.

Rachel McMinn - BofA Merrill Lynch

Geoffrey Meacham - JP Morgan Chase & Co

Operator

.

Good day, ladies and gentlemen, and welcome to Celgene's Third Quarter Conference Call. [Operator Instructions] I would now like to introduce your host for today's conference, Tim Smith, Director of Investor Relations.

Tim Smith

Good morning, everyone. I would like to welcome you to Celgene's Third Quarter 2010 Conference Call. The press release reporting our third quarter financial and operating results was issued earlier this morning and is also available on our corporate website. In addition, today's conference call webcast will include a presentation which you can access by going to the Investor Relations section of our website at www.celgene.com.

Joining me are Jackie Fouse, our Chief Financial Officer; Bob Hugin, our Chief Executive Officer; and Dr. Sol Barer, our Executive Chairman.

Before we start, we want to remind you that our discussions during this conference call will include forward-looking statements. All such forward-looking statements include the effects of the acquisition of Abraxis BioScience unless noted. Our actual results, performance or achievements could be materially different from those projected by these forward-looking statements.

The factors that could cause actual results, performance or achievements to differ from our forward-looking statements are discussed in our filings with the Securities and Exchange Commission, such as our Form 10-K, 10-Q, and 8-K reports.

Given these risks and uncertainties, you are cautioned not to place undue reliance on our forward-looking statements.

Also, our discussions during this conference call will include certain non-GAAP financial measures. Non-GAAP financial measures provide investors and management with supplemental measures of operating performance and trends that facilitate comparisons between periods before and after certain items that would not otherwise be apparent on a GAAP basis. Reconciliations of these non-GAAP financial measures to the most comparable GAAP measures are available as part of our earnings releases on Celgene's website at www.celgene.com in the Investor Relations section.

I will now turn the call over to our Chief Executive Officer, Bob Hugin.

Robert Hugin

Thank you, Tim. Good morning, and thank you for joining us this morning as we review our third quarter results and the significant progress that we have made since we last spoke in July. Earlier this morning, we announced record operating and financial results. These results reflect a strong momentum in our businesses and the excellent execution by our teams.

Numerous important developments in the quarter have the potential to further accelerate our growth prospects, delivering both short- and long-term value to our shareholders. Before Jackie and I talk about the specific operating and financial results of the quarter, let me highlight some of these milestones.

On October 15, we closed the Abraxis acquisition, adding ABRAXANE and the proprietary nab technology platform to our portfolio. This acquisition provides Celgene with an immediate commercial presence in solid tumor oncology and substantially expands our solid tumor pipeline. We're off to a good start launching Celgene oncology. I'll talk more about the transaction in a few minutes.

Our confidence to expand our therapeutic focus into oncology is a direct result of the outstanding performance of all functions and geographies in our core Hematology business. In our commercial operations, key business metrics are encouraging across markets, and we continue to expand globally into new territory such as Japan, Russia and China. Our deep and diverse pipeline is a direct result of our sustained R&D investment over the last decade. We now have 25 pivotal trials investigating REVLIMID, VIDAZA, ISTODAX, pomalidomide, apremilast and now ABRAXANE across a number of diseases with high unmet medical needs. With numerous major clinical and regulatory milestones later this year and next, we are beginning to realize the benefits of these investments.

In addition to the strong progress in hematology and oncology, I'm also excited about the significant accomplishments we have made in our inflammation and immunology programs. We now have six compounds and multiple research programs ongoing. This work is highlighted by the initiation this year of four pivotal studies investigating apremilast in psoriasis and psoriatic arthritis.

We're fortunate to be in a position of strength as we seek to maximize our opportunities and effectively manage through the challenges of uncertain economic times and dynamic markets.

Before I turn the call over to Jackie, I would like to thank her and her team for their leadership and superb execution of our recent $1.25 billion debut debt offering. Thank you.

Let me now turn the call over to Jackie.

Jacqualyn Fouse

Thank you, Bob. Good morning, everyone. And thank you for joining us on our call this morning. It's a pleasure to be here on my first earnings call with Celgene, and I'm happy to begin my comments today with some highlights of our income statement results for what was a record quarter for the company.

Starting with the top line. Non-GAAP total revenue for the third quarter was $908 million, a 31% increase over the third quarter of 2009. This contributed to year-to-date non-GAAP revenue growth of 33%. The strong growth was driven by global unit sales growth in our key products REVLIMID and VIDAZA.

Within total non-GAAP revenues, total non-GAAP net product sales increased to $884 million for the third quarter, up 33% versus the year-ago quarter and bringing year-to-date growth to 34%.

Furthermore, sequential quarter-to-quarter growth in non-GAAP net product sales was 8%.

Driven by that revenue growth, non-GAAP net income for the third quarter rose to $350 million, an increase of 35% over the third quarter of 2009. This translates to non-GAAP diluted earnings per share of $0.75, up 34% versus the third quarter of 2009.

As you can see from these results, we are leveraging our operating model to produce strong EPS growth at the same time as we invest in a robust R&D pipeline and the ramp-up of our global commercialization infrastructure.

Turning to individual product results. Third quarter REVLIMID net product sales were $641 million, an increase of 43% over the third quarter of 2009. This growth was driven by share and duration gains, as well as continued geographic expansion. Global REVLIMID sequential quarter growth was 9%.

VIDAZA net product sales for the quarter were $141 million, an increase of 37% from the year-ago quarter, and global VIDAZA sequential quarter growth was 7%.

THALOMID net sales were $94 million for the quarter, down 14% as compared to the year-ago period.

Moving on to the geographic breakdown of REVLIMID sales for the third quarter. Sales of REVLIMID in the U.S. were $374 million, representing an increase of 7% on a sequential quarter basis and a 37% increase when compared to the third quarter of 2009. International sales were $267 million, representing an increase of 13% on a sequential quarter basis and a 51% increase when compared to the third quarter of 2009. The international expansion of REVLIMID continues to progress well, and the launch of the product in Japan is on track.

Our non-GAAP product gross profit margin for the third quarter of 2010 was 92.9%, an improvement of 50 basis points over the second quarter of 2010 and about 40 basis points over Q3 of 2009, as REVLIMID contributes positively to our sales mix. We expect the gross margins to come in at about 93% for the full year 2010 for Celgene before including ABRAXANE. ABRAXANE sales in Q4 will somewhat negatively impact Q4 gross margin with a modest effect on the full year.

With respect to expenses, non-GAAP R&D expense during the third quarter was $232 million, a sequential increase of 15% over the second quarter. And this quarter, we saw the continuing ramp-up of patient enrollment in our many clinical trials. Versus 2009, for the quarter, we grew R&D by 30%, and for the year-to-date, we have grown R&D expense by 21% as we continue to strategically invest in developing new products that will enhance our long-term growth profile.

Our development efforts cover multiple compounds in more than 25 pivotal and Phase III clinical trials. Our key programs include evaluating REVLIMID in all stages of multiple myeloma, as well as pivotal Phase III trials in NHL and CLL.

We are also conducting late-stage trials for apremilast, pomalidomide, Amrubicin, VIDAZA and ISTODAX.

In addition, we have more than 20 promising compounds in preclinical and early-stage development.

We now expect non-GAAP R&D expense for the full year to be in a range of $890 million to $900 million, including Abraxis.

Taking a look at SG&A. Non-GAAP SG&A expenses were $204 million for the third quarter, a sequential increase of approximately 4% from the second quarter. Compared to 2009, SG&A grew 18% for the third quarter and 21% for the nine months year-to-date.

We now expect full year non-GAAP SG&A expenses to be in a range of $830 million to $840 million, as we continue our international commercialization of REVLIMID and VIDAZA, and including estimated integration costs for Abraxis. The current rate of spending in SG&A was driven by investments we are making in our global commercialization infrastructure, and we expect to be able to leverage this spend in future years.

Turning to taxes. Our non-GAAP effective tax rate for the year-to-date through September 30 was 19.4%, and we expect the 2010 non-GAAP effective tax rate to be about 19% for the full year. For just the third quarter, the rate was 18.5%.

With respect to foreign currency hedging, as you are aware, we hedged our currency exposures, which include balance sheet and transactional exposures as well as non-U.S. dollar exposures related to revenues and expenses.

This quarter, the impact of foreign currency, including hedging results, on top line revenue on a sequential quarter basis was immaterial. During the third quarter, in other income, we realized approximately $6 million in hedging and revaluation gains.

Our hedging objective is to reduce volatility in both cash flow and EPS. Though our single largest exposure continues to be the euro, our currency mix is becoming more diversified as we continue our international expansion.

This was an exceptional quarter with record revenue, earnings and cash flow, and we ended the quarter with cash and marketable securities of approximately $3.5 billion. After considering the cash required to complete the Abraxis acquisition and the cash received from the recently completed debt offering, we expect to end 2010 with approximately $2.7 billion in cash and marketable securities.

Now I'm pleased to provide you with an update on our 2010 full year outlook. Global REVLIMID net product sales are anticipated to come in at about $2.45 billion, up from our previous guidance range for REVLIMID of $2.3 billion to $2.35 billion. Total global revenue, including Abraxis, is now expected to be approximately $3.6 billion, up from our previous range of $3.4 billion to $3.45 billion. And non-GAAP diluted earnings per share are expected to be in a range of $2.78 to $2.80. This compares to a previous range of $2.65 to $2.70. This updated non-GAAP EPS guidance includes dilution from the acquisition of Abraxis.

And now to conclude my remarks for today, let me reiterate that the global expansion of all of our franchises continues to progress extremely well. We are producing strong financial performance as a result of excellent operating efficiency and leverage. We are well-positioned to deliver a strong finish to 2010 and are well-prepared to deliver for 2011 and beyond. Investments we are making in both R&D and our global infrastructure today allow us to remain an industry leader with respect to future growth and profitability.

In order to strengthen our financial flexibility so we can continue to grow via both internal development projects as well as the appropriate external opportunity, in October, we diversified our capital base by executing our first ever public market debt issuance. That issuance went very well and 16-some investors recognized the value of the Celgene model and our prospects for the future. We are quite pleased with the reception we received in the debt markets and can look to the future with a strong balance sheet and access to capital.

Now I'll turn the call back over to Bob who will elaborate on the activities driving our numbers.

Robert Hugin

Thanks, Jackie. Quite a quarter. Excellent results across the globe and across functions. The third quarter was once again an outstanding quarter for REVLIMID. Sales were up 44% year-over-year, with international sales increasing 13% over last quarter.

VIDAZA also continued its positive trajectory in the third quarter. Total global sales grew 7% quarter-over-quarter to $141 million with international markets contributing 52% of total sales. Strong operating performance across the board.

Importantly, substantial advancements were also achieved in our pipeline of late-stage assets. Key regulatory trials studying REVLIMID, pomalidomide, apremilast and our proprietary cellular therapy, PDA-001, progressed meaningfully in the quarter. These trials will lead to important near-term new data and ultimately to regulatory filings.

In addition to the outstanding operational and financial results and the advancement of key late-stage programs, several significant key corporate priorities were achieved, including the Abraxis transaction and the recent balance sheet strengthening of initial debt offering. Overall, great progress in our businesses during the quarter.

REVLIMID continued its impressive performance in the third quarter. Growth was strong in all major markets. In the United States, REVLIMID gained market share and now has a 42% share of the overall myeloma market. Increasing duration also remains a key growth driver.

The data from three Phase III trials supporting continuous therapy with REVLIMID has impacted uptake in duration of treatment in the United States. In MDS, our market position in deletion 5Q remains strong. New patient starts were up in the third quarter, and REVLIMID continues to hold an approximately 64% market share in this patient segment.

Similar to the U.S., increases in share and duration drove performance in Europe. In the four major European countries where REVLIMID is reimbursed second line, market share is now approximately 45%. Line 3 share in the five major European markets has also reached 45%.

During our last call, I spoke of the imminent launch of REVLIMID in myeloma in Japan. I'm pleased to say that our team in Japan is making substantial progress. We have almost 2,000 physicians registered in REVLIMID, our proprietary risk-management system and early customer experiences have been positive.

We continue to expand access to REVLIMID around the world. We now expect reimbursement in Russia in the first half of 2011. In August, we achieved reimbursement approval in Turkey and during the third quarter, we received regulatory approvals in several countries in Asia and Latin America. REVLIMID is now approved in over 60 countries around the globe.

VIDAZA also had a strong quarter with 37% year-over-year growth. VIDAZA is the only agent to show a survival benefit in MDS and AML patients, and as such, has a very strong position in the market. In the U.S., VIDAZA has a greater than 80% share of newly diagnosed MDS patients who are treated with a hypomethylator.

In Europe, solid performance in our core markets led to a very positive quarter. VIDAZA continued to gain share and duration of treatment lengthened. As we look ahead, our commercial teams across markets are focused on highlighting the benefits of active therapy for MDS patients, as well as increasing the duration of treatment.

We recently initiated a Phase III study of VIDAZA in elderly patients with AML, and are also exploring multiple combinations with VIDAZA, REVLIMID and other agents across MDS and AML.

In addition, we have seen positive early results from studies testing oral azacitidine, and we're initiating a clinical development plan to bring this differentiated agent to patients.

Our commercial portfolio has been enhanced by the Abraxis acquisition. The addition of ABRAXANE increases our revenue growth potential and together with the other nab technology products enhances our pipeline. In the near term, our goal is to leverage the strength of our commercial organization and improve the performance of ABRAXANE in metastatic breast cancer. We are integrating sales forces and optimizing marketing campaigns. These activities will continue through the fourth quarter and our plan is to accelerate sales in breast cancer in 2011.

In non-small cell lung cancer, our focus is on filing a quality dossier with the FDA in the first half of next year. We anticipate having top line progression-free survival data by the end of the year or early next year. As you may know, the Phase III study is a double-blind control trial of 1,050 patients with Stage IIIB and Stage IV non-small cell lung cancer. Response rate is that FDA-approved primary endpoint of the study, while progression-free survival and overall survival are important secondary endpoints. The trial has already met its primary endpoint and as I mentioned, we're awaiting the actual PFS and overall survival data.

We're also very encouraged by the impressive response rate and survival data seen in a Phase II trial evaluating ABRAXANE in combination with gemcitabine in pancreatic cancer. We are increasing the patient size of the Phase III pivotal study from 630 patients to approximately 840 patients to improve the power of the trial. This Phase III trial continues to enrol very well, and expected enrollment will be complete towards the end of 2011.

In addition to breast, lung and pancreatic cancers, ABRAXANE has shown potential in multiple other solid tumors. In the third quarter, ABRAXANE received compendia listing for relapsed/refractory ovarian cancer and has also shown promise in melanoma and bladder cancer. We expect multiple peer-reviewed publications throughout 2011 from these programs.

The Abraxis acquisition was a major strategic transaction, and we're working hard to expeditiously integrate our companies and accelerate key programs and initiatives.

As you can see from the slide, with the addition of Abraxis, we have a meaningful oncology pipeline with multiple compounds, an asset in numerous late-stage trials and a technology platform that enables us to innovate and create potential new therapies.

The trials at our late-stage pipeline have a potential to lead to five additional indications in the next five years. In addition, we're advancing a number of early-stage programs including our torque inhibitor, multiple other research programs from our teams in California and New Jersey, as well as our new nab technology programs from Abraxis.

Our late-stage hematology pipeline is also advancing, and we now have 15 pivotal trials ongoing or planned in hematology. We initiated a Phase III study of pomalidomide and myelofibrosis during the quarter and will soon begin a Phase III international study investigating pomalidomide in relapsed/refractory myeloma.

Promising REVLIMID programs in lymphoma and CLL continued to enroll, and MM-020, the largest myeloma study ever conducted is expected to complete accruing patients by the end of this year.

Based on our ongoing clinical programs, there is a potential for five to 10 additional approvals in distinct hematological indications by 2015.

Many of our hematology programs will be highlighted at the upcoming American Society of Hematology meeting in December in Orlando. We're currently aware of more than 140 submitted abstracts on Celgene products in numerous disease settings.

At this year's ASH, data will be presented that supports REVLIMID's usage in myeloma, MDS, CLL and lymphoma.

Data from a pivotal study evaluating ISTODAX in peripheral T-cell lymphoma will be presented at an oral session. Additionally, new and updated data on pomalidomide and VIDAZA will also be presented. Compelling clinical data is the most important driver of our Hematology/Oncology business. Improved patient outcomes lead to regulatory approvals and ultimately to changes in medical practice.

These [ph] (29:48) ASH abstracts will become available in November. We look forward to sharing data with you at ASH in December.

As you can see from this slide, there's an incredible amount of activity across our pipeline in the next 15 months. We'll be completing enrollment in many key trials across all three of our franchises. At upcoming major medical meetings there will be extensive clinical data examining the usage of our drugs in numerous disease settings. We expect data from these meetings to support an array of regulatory filings, including submissions for REVLIMID in newly diagnosed myeloma, for REVLIMID and MDS deletion 5q, ISTODAX and PTCL, and ABRAXANE in non-small cell lung cancer.

The Abraxis acquisition represents a major strategic initiative as we expand our therapeutic focus to include solid tumor oncology. Our emerging immune-inflammatory programs represent another high potential therapeutic franchise expansion for Celgene.

During the last two quarters, we have initiated four out of our six pivotal studies in psoriasis and psoriatic arthritis with apremilast. Our Phase III program encompasses approximately 3,500 patients at 450 sites worldwide. Our ambitious but obtainable corporate objective is to have all patients that are pivotal studies enroll by the end of 2011, with data available as early as mid-2012.

Our proprietary cellular therapies represent an important part of our immune-inflammatory pipeline. We recently initiated a Phase II study of PDA-001 in Crohn's Disease following encouraging data from our Phase I Crohn's study. We're also planning to initiate additional proof of concept studies in a variety of indications later this year and early next year, including multiple sclerosis, stroke and rheumatoid arthritis.

We believe that our products have great potential on immune-inflammatory conditions. We've made a significant investment in this franchise and are building a deep and diverse pipeline that includes CC-930, our JNK inhibitor, CC-11050, pomalidomide in scleroderma, H11 and PDA-001, a combination of internally discovered and a partner-generated compounds. We feel that inflammation immunology holds great promise for Celgene. By 2015, our goal is to achieve a number of approvals for apremilast while continuing to accelerate the development of this pipeline.

Tremendous progress has been achieved across all three of our major therapeutic franchises. We're committed to building a preeminent, fully integrated market-leading global biopharmaceutical company focused on the discovery, development and commercialization of innovative therapies for patients with unmet medical needs in cancer and immune-inflammatory disease. This mission unifies and focuses us on the urgency of what we do. We have made considerable progress toward the accomplishment of this ambitious goal, and we're committed to accelerating this progress.

Our businesses have exceptional momentum and are poised to capitalize on the significant R&D investment of the past decade. We now have more than 25 Phase III and pivotal trials that have the potential to produce transformational new data on our products and program in the coming years.

We're expanding our therapeutic franchise with an increasing investment in high-potential internal and external research and development program to sustain long-term growth. It is our responsibility and objective to maximize this opportunity, to leverage our operating momentum and our financial and strategic assets to fully capitalize on the global potential of Celgene.

Thank you for your attention on the call. We look forward to answering your questions.

Operator, please open the call to questions.

Question-and-Answer Session

Operator

[Operator Instructions] And our first question comes from Joel Sendek from Lazard.

Joel Sendek - Lazard Capital Markets LLC

I have a question about REVLIMID. Obviously, the growth continues here on all fronts with regard to increasing share, duration of use and new markets. I'm wondering, which of those three has driven the growth the most recently, and which one is going to be the primary driver for the future?

Robert Hugin

Important question. REVLIMID growth was very strong in the quarter and it was balanced geographically. It was strong in unit growth across markets and obviously, duration gains contributed. Clearly, in certain markets, the growth parameters will be different. We have market share opportunities across markets. We have more opportunities in terms of market share in some markets, where regulatory approvals are critical to access to newly diagnosed markets. And ultimately, duration gains will be important across all markets, so very much depending on the stage of -- we're talking specifically about myeloma here, we're talking about the market share depending on where we are in terms of development, where we are in terms of duration and regulatory approvals and reimbursement access. And what is also incredibly exciting about REVLIMID is that we expect to see regulatory filings in both the newly diagnosed myeloma in Europe, but also the rest, the deletion 5q MDS in Europe and in other markets, and we're accelerating our development of the follicular lymphoma space and the diffuse large B-cell lymphoma and we're looking to continue to accelerate our CLL program. So we've got significant growth and opportunities in myeloma in different regions, with different impacts, depending on where the stage of development is, and also in other indications. So we think we're still not near the end of the REVLIMID growth story.

Operator

.

Our next question will come from Geoff Meacham with JPMorgan.

Geoffrey Meacham - JP Morgan Chase & Co

I want to ask about Europe. What's the gating factor for the first line myeloma filing? Are you guys waiting for more mature IFM, CALGB data? And then the follow-up to that is where are you in first line share for REV in Europe in myeloma, and how do you do this opportunity over the intermediate to longer term?

Robert Hugin

The filing in Europe is just dependent on pulling all the data, getting all the data together from the filings that are going to be part of the application. So that's the work that's going on, and we'll continue to do that as expeditiously as we can. The actual market share in line one in Europe remains in the -- I would characterize it as the middle single-digits in some markets, maybe slightly higher, but we're not talking double-digits in some markets, virtually zero. So that market segment, over time, assuming a regulatory approval and also we had -- and reimbursement discussions. So there's considerable work to be done. Even with a regulatory approval, we need to make sure that the value proposition will continue to be sustained, because one of the great accomplishments of REVLIMID has been that strong value proposition, the nice endorsement, the regulatory and reimbursement across the globe in terms of Japan, Australia, Canada, Germany, Sweden, et cetera. So it's very important that as we get regulatory approvals, as we broaden the label, we've got to, at the same time, make sure that value proposition is sustained by the data to ensure that we get the same kind of broad reimbursement access that we have in the existing label as we go forward.

Operator

.

Our next question comes from the line of Yaron Werber with Citigroup.

Yaron Werber - Citigroup Inc

First question, and I have just a follow-up. Bob, I'm not sure if you can, but can you give us a sense in treatment duration for REVLIMID right now in the U.S. and Europe? And then as a follow-up, any way you can quantify to us roughly what was REVLIMID's sales in Japan were in Q3?

Robert Hugin

The duration trends were positive across the markets, but we're not, as we mentioned, for different competitive reasons, not going to give specific details. But the trends continue to be positive. And some faster in some markets, and some slower, but it is an important revenue driver for us. And in terms of growth in the quarter, it was as you'd expect. The U.S, being the largest individual market for us, had the largest in terms of dollar growth for the quarter. Europe was the second largest dollar growth for us. Japan went from zero to what it achieved. But again, as I mentioned last call, we're building Japan with a quality organization. It's done a great job in terms of approval and reimbursements and making sure that the drug is early, so it had not a major impact on the growth for the third quarter or the second quarter. And though every sale in Japan in the third quarter goes to growth, and there was zero sales in the second quarter, but it was not a meaningful driver of the revenue growth in the quarter.

Operator

.

Our next question comes from the line of Mark Schoenebaum with ISI Group.

Mark Schoenebaum - ISI Group Inc.

I was wondering if I could ask a pomalidomide question. What are your current plans, you current regulatory plans on pomalidomide? Is it possible that you could file on Phase II data? And if that were possible, when would that occur?

Robert Hugin

On pomalidomide, we are -- we've initiated the myelofibrosis pivotal trial that we believe, assuming the data would be positive, that would be useful for regulatory filings across the globe. On the myeloma front, it is our intention, it is the base case of our planning, that we will do Phase III trials on relapsed/refractory myeloma to secure pomalidomide approval. And that is the base case and that is our position on it. On the other hand, it is our responsibility to bring pomalidomide as expeditiously as possible, make it accessible to patients. And so, we will be reviewing, in the next month or so, all of the existing data on pomalidomide. And if there is a route for an expedited approval before we complete the Phase III trial, that would be clear in the next four to six months. But again, our base case position is that we will do Phase III trials in relapsed/refractory myeloma and myelofibrosis to get pomalidomide across the globe, with the caveat that it is our responsibility to pursue every expeditious channel, if it's available to us. And if they are available to us, it would be clear within the next six months.

Operator

.

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

Rachel McMinn - BofA Merrill Lynch

In terms of the feedback that you've gotten from regulators, should we expect this to be strictly front-line or maintenance filing or both? I guess where I'm going is, this REVLIMID plus melphalan combination isn't necessary optimal, so are regulators comfortable with that combination?

Robert Hugin

It's an important question, and we're pursuing a regulatory strategy for both newly diagnosed myeloma and for continuous therapy post-stem cell transplant, and maintenance approval. Obviously, a regulatory process is one that goes on for a period of time, and there's the review process, though we have very constructive discussions. Now, there could always be review issues that come up with any application. I can't predict the future, but our goal with REVLIMID is to get a broad front-line approval and broad maintenance claims. Obviously, we're doing many trials. MM-020, which is the R&D trial, we really agree melphalan is not a great agent, and it is one that is problematic. It's not widely prescribed in the United States at all. So it is important, if we're going to fully penetrate newly diagnosed myeloma over time, we would want R&D as a newly diagnosed therapy eventually included in the label. But hopefully, our steps will be get the existing data from MM-015 [ph] (44:02) and IFM and CALGB, get the label expanded to newly diagnosed and maintenance and then continue to broaden it as the additional MM-020 data comes out. So it is actually important that the label reflect the best therapies available but -- in summary, we're committed, as soon as possible, to get newly diagnosed and maintenance label claims in the global label around the world and the United States.

Operator

.

Our next question comes from Geoff Porges from Berstein.

Geoffrey Porges - Bernstein Research

Could you answer the following. If in comparable second and third line settings in Europe, is your realized duration with REVLIMID greater than, equal to or less than it is in the U.S in the similar populations? Something a better sense of what the potential is. And then could you just talk about the ABRAXANE opportunity in Europe, and your strategy there? You haven't mentioned that.

Robert Hugin

Geoff, the beginning of your question was a little bit unclear on the phone to us, because I guess maybe they both were in Europe. The question was about in the similar stage of commercialization of REVLIMID in Europe versus United States, is the duration about the same? Was that the question? I will answer that question anyway. I think, generally, we have seen slightly slower duration gains at the same stage of development in Europe, United States. I think there's a couple of reasons. One, there has been a bit of a more historic focus on treat to best response in Europe, at least that's what we've seen in our commercial efforts so far, and we've made good progress on that front. Additionally, country by country reimbursement, we've had to continue to have to prove the value of extended therapy. And we have been unbelievably successful. I'll give you some example, I don't want to name the country, but there was one country that said you can only have eight months of therapy, max. It took us about 12 months and we got that lifted unlimited. We had other ones that said 10 months or 11 months, so I think initially, it is a more complex payer environment. There were more standards set that we have had to overcome. But in the scheme of things, though we started later in Europe, I think we're taking the experience of understanding how to communicate our messages effectively. And I believe that over time, we're going to see a relatively close duration in Europe versus United States. Certainly, in the major markets of Europe.

Operator

.

Our next question comes from Eric Schmidt with Cowen and Company.

Eric Schmidt - Cowen and Company, LLC

Question on the fiscal 2010 guidance. If I take the top end of your annual range, $1.315 billion and factor in what that means for Q4, it looks like you're expecting flat non-GAAP net income in Q4. And I think I've got my debt expense right. I guess I'm just trying to reconcile a flat quarter with the very strong net income growth you've been posting throughout the year.

Jacqualyn Fouse

It's Jackie. Thanks for the question. Remember that the guidance includes the impact from Abraxis, and so we actually expect the underlying growth in the fourth quarter when we take into consideration the dilution impact form Abraxis and back that out. And just on the interest expense number, if you take the $1.25 billion proceeds at an average all-in cost of about $3.73 billion, I think you get interest of $46 million or $47 million, so you can check your number that way.

Robert Hugin

And let me just add one thing to the earlier question about ABRAXANE in Europe. We are, now that we are responsible for the product, we are evaluating country by country the opportunity for ABRAXANE, both within the existing metastatic breast cancer label and then also importantly, country by country, if there is not a great opportunity in metastatic -- some countries have maybe an opportunity in metastatic breast, in some countries there may not be an opportunity in metastatic breast, as much as for the investment that we require to have significant growth. But certainly, we'll be looking to -- as we get additional data, we'll make decisions country by country. So there maybe some countries that we expand ABRAXANE in extensively in Europe and others that we may wait for future data.

Operator

.

Our next question comes from Chris Raymond from Robert Baird.

Christopher Raymond - Robert W. Baird & Co. Incorporated

But in your written statements, you talked about ABRAXANE. IP, looks like a couple of days ago, you had an extension to 2024. I didn't really hear any color on that in terms of what that means, but when you first talked about this deal, I think you mentioned that you were hoping to have it extended out to 2023. Then the written comments, it says 2024. Is there a difference there, something that I missed? And can you maybe also give a little more color on exactly the vehicle here for extending the protection.

Robert Hugin

I think it's always good to close the loop and be accurate, and you're absolutely right on. In the transaction and in the conference calls that we've had regarding Abraxis, we did mention that there was additional influx of property that had been allowed with the expectation of a 2023. And I don't have an industrial property lawyer in the room with me, but my understanding of the patent that was issued on Tuesday is that one of the patents that we were expecting is pending. And there were others that have continued to build that -- pad the state around ABRAXANE, et cetera. I believe the patent runs to December 2023 plus 85 days, so there was some additional extensions of it, granted so that -- I think the patent they've made say 2023, but it is early in 2024 that it would expire. But thank you for closing that loop and clarifying. It is the same intellectual property that we discussed early that is a part of the sense around protecting ABRAXANE.

Operator

.

Our next question comes from Robyn Karnauskas from Deutsche Bank.

Robyn Karnauskas - Deutsche Bank AG

I just had a follow-up, I guess, regarding your filing for Europe for REVLIMID. So where are you in the process? Are you collecting more data? I was just wondering if you'd had the pre-MAA meeting, and what kind of discussions you're having with the individual countries there? And finally, is there any risk that you have to supply some data from the 20 trial for approval?

Robert Hugin

Obviously it's an iterative process, and we're moving forward, and we've had good constructive discussions on multiple occasions. And we're not waiting for any new data, we're just trying to put things together to make sure we have the complete package from all the trials that are going to be included. We do not anticipate any data from MM-020 to be included in this filing. Though we are optimistic that the results from MM-020 that we could receive, hopefully, as early as late next year or sometime in 2012, again at the earliest, would ultimately be positive. So we would include to expand the label but there is no plan to have MM-020 in a European or any U.S. or any filing in the initial newly diagnosed filing.

Operator

.

Our next question comes from Maged Shenouda with Stifel, Nicolaus.

Maged Shenouda - Stifel, Nicolaus & Co., Inc.

Could you update us on your current thinking on dilution and subsequent accretion or synergy realization from the Abraxis deal? Also, should we be thinking that synergies are largely going to come from the R&D line?

Jacqualyn Fouse

Let me start and then if Bob wants to add to this, and he can do that. So we just closed on the deal about 13 days ago or something like that. So we're still having a look at it. How would they expect to, over time, that we will fund opportunities for synergies mostly in the G&A areas. That as we get into the details of the things, you can rest assured that we'll exploit all of those opportunities appropriately. We've got a fair amount of work to do to make sure that we do a great job of transferring over things like data on the clinical trials and make sure that process goes impeccably well. And then run through the purchase accounting and actually integrating the back office functions and those sorts of things. With respect to the U.S. sales organization, they'll be fully up and running for a great year in 2011, starting first thing in January there. So everything is on track. And we'll give you an update with the specifics of the details on the dilution estimates when we get to January and give you our guidance for 2011.

Robert Hugin

The only thing I would add to that is that as we announced throughout the process of announcing the transaction, and since then, that our primary objective for the transaction was to acquire ABRAXANE and the nab technology platform. And it has always been our intention of divesting non-core assets. Obviously, the closing was less than two weeks ago, so we're just beginning that process, but we are looking at the right process of doing that. And we hope to do that expeditiously, so that would also have a financial impact over time. So as that becomes clearer, we'll provide you an update, but I think Jackie really covered most of it.

Operator

.

Our next question comes from Gene Mack with Soleil Securities.

Gene Mack - Soleil Securities Group, Inc.

First, on MM-020, can you give us an idea of enrolment is there? And will you be able to complete it by year-end? And then just on ABRAXANE. I just want to confirm that you will be showing or be able to show from the trial, separately the results in PFS between the squams [ph] (55:14) and the non-squams team, patient population?

Robert Hugin

The first question on MM-020 enrollment, that has continued to move along extremely well, and we are very confident that it will be completed by the end of 2010. And so then we'll begin for follow-up. So that's on track, and I wouldn't anticipate any change to that. On the ABRAXANE data in non-small cell lung cancer, we do expect top line datas to presented. Exactly what is, until we see the data, I can't specifically tell you. But I would expect that at either medical meetings or through other really just -- there will be a very complete review of subset analyses, and all kinds of analysis that will be very important to both the reimbursement of the drug and usage of the drug hopefully following approval and non-small cell lung cancer. So I am optimistic that we'll see a good complete review of the data as quickly possible, and we'll have to determine what the right setting is for that data to be disseminated. But certainly, you'd expect to see good complete data.

Operator

.

Our final question comes from Howard Liang from Leerink Swan.

Howard Liang - Leerink Swann LLC

Regarding REVLIMID for lymphoma, I think there was some thought of starting an investigation trial of the REVLIMID and Rituxan combination. Can you talk about if that's still the plan? And what are the thoughts of the study and where this might be tested?

Robert Hugin

Yes. I think that there is increasing data being demonstrated -- that the potential synergies of REVLIMID and Rituxan in a number of settings, and specifically one that we aggressively exploring with both investigators and the regulatory agencies around the world, is the REVLIMID Rituxan combination of follicular lymphoma. And obviously, there's some -- as you bring these combinations together, and we want to move this early in treatment as possible to have the maximum new type of patients, we are discussing the exact endpoints and the trial designs. So it is the key corporate goal to have that trial underway as soon as possible. It's not going to be this year, but we're certainly optimistic that it will certainly be in the first half of next year. And we are looking at other uses of that combination, in other leukemias and other other subsets of lymphoma. Thank you very much for your participation and interest, and we look forward to updating you as developments occur, and speaking to you in January. Thank you very much.

Operator

.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may all disconnect. Everyone have a great day.

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