Celgene's CEO Discusses Q1 2011 Results - Earnings Call Transcript

 |  About: Celgene Corporation (CELG)
by: SA Transcripts


Good day, ladies and gentlemen, and welcome to the Celgene 2011 First Quarter Earnings Call. [Operator Instructions] As a reminder, this conference call is being recorded. I will 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 First Quarter 2011 Conference Call. The press release reporting our first quarter 2011 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 in the room today are Jackie Fouse, our Chief Financial Officer; and Bob Hugin, our Chief Executive Officer.

Before we start, we want to remind you that our discussions during this conference call will include forward-looking statements. 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, and thank you, everyone, for joining us this morning. As you saw in our press release this morning, it was an excellent quarter for Celgene. We continued to successfully execute on our global, commercial, clinical, regulatory and research strategies. We are well-positioned to sustain our market-leading growth and profitability. We have unique therapies with exceptional value propositions for patients and payers, a robust pipeline of more than 25 Phase III and pivotal clinical trials with 20 compounds in preclinical and clinical development. We have strong operating momentum.

Our global commercial teams continued to deliver exceptional results. Their ability to build leading global brands is a key competitive advantage. In the first quarter, they again proved their ability to manage through challenging conditions, the tragic events in Japan, the impact of U.S. health care reform and the ongoing fiscal pressures in Europe, to deliver better-than-expected results.

International expansion remains an important component of our growth strategy and will continue to be a revenue driver for several years to come. Over the last decade, we have made focused strategic investments to advance the therapeutic potential of our products and to support our brands with extensive clinical data.

As a direct result of these investments, our medical teams are diligently preparing for a series of upcoming major medical meetings, including the International Myeloma Workshop, the American Society of Clinical Oncology, the European Hematology Association and the MDS Foundation meetings, where nearly 300 abstracts will describe the preclinical and clinical profile of our hematology and oncology portfolio. Importantly, we expect the substantial benefit of early and continuous treatment with REVLIMID for patients with multiple myeloma to be highlighted, and the issue of second primary malignancies to be further clarified.

Our regulatory team is focused on executing our newly diagnosed multiple myeloma filing strategies for REVLIMID and on potential opportunities to file pomalidomide for relapsed and refractory multiple myeloma as soon as possible. These are our top priorities.

Our clinical team is focused on our highest potential programs, and we are making excellent progress advancing key clinical trials for REVLIMID, ABRAXANE, pomalidomide and apremilast. We're also on track to achieve the goal set a year ago to bring 4 new chemical entities into the clinic during 2010 and '11.

Our research in translational medicine strategies continued to gain traction. We have received IND approvals for 3 compounds in the last 12 months, and are on track to file the fourth IND with the FDA in the second half of the year.

It's an exciting time at Celgene. And we're confident that our progress has and will further increase shareholder value. We are committed to driving operational excellence in all aspects of our business, to make continued focused investments in research and development and to appropriately manage our financial resources. We are strategically positioned for sustained high growth and value creation.

Let me now turn the call over to Jackie.

Jacqualyn Fouse

Thank you, Bob. Good morning, everyone, and thank you for joining us on the call today. In Q1, we performed well across all areas and metrics, as we produced strong top and bottom line growth with outstanding operating and net profit margins. Our revenue growth drivers are many, and include geographic expansion, most notably in Japan as we start 2011, as well as market share gains, duration gains, and constant enhancement of market access via new approvals and reimbursements across the globe. In addition, by leveraging our global infrastructure and focusing on operating efficiency, we can deliver strong margins while continuing to invest for the future. We've made progress on multiple fronts in our clinical projects, and Bob will update you on some of those in his comments to follow.

Our Q1 performance is particularly impressive, given that a disproportionate share of the year's impact of items like the donut hole change, patient assistance program funding and Abraxis integration costs were incurred in the first quarter.

Now we'll take you through some details of our financial performance. Starting with the top line, non-GAAP total revenue achieved 40% year-over-year growth to hit $1.11 billion in Q1 of 2011. This was a record revenue quarter for Celgene and our second quarter of revenues above the $1 billion mark. As we will see in a moment in the breakdown of net product sales, our growth was fueled by strong performances from both REVLIMID and VIDAZA and our first full quarter of ABRAXANE sales. Our growth is volume-driven and comes from both share and duration gains as well as geographic expansion.

Last quarter, we gave you some perspective on our past 3 years' quarterly revenue trends, and I would like to say a word about that as we start the year. In 2011, we are setting a new baseline, as it will include our first full year of revenues for both ABRAXANE and Japan, and as we will experience loss of exclusivity for VIDAZA in the U.S. in May. All of these items will impact our quarterly patterns this year.

As you can see from this slide, we produced solid sequential growth in Q1 on the back of a strong Q4 of 2010. Despite the fact that we are now growing off a much larger base, we expect to deliver solid growth throughout the year, and you see that reflected in our updated revenue guidance. At any given point in time, our sequential quarterly growth could be impacted by the entry of a U.S. generic competitor to VIDAZA. That impact is already built into our full year guidance.

Our record revenue growth led to record profits and earnings per share in Q1, and we produced $393 million of net profit and $0.83 of EPS. We start to see the operating leverage our business model is capable of producing, and this allows us to deliver industry-leading bottom line growth while investing appropriately for the future. I will speak more about some of the expense items in our P&L in just a moment.

With respect to the key individual product results, REVLIMID had a very strong quarter and achieved $738 million, a year-over-year increase of 39%, and a sequential increase of 4% off of a strong Q4 of 2010. This growth includes the negative impact of the donut hole change that took effect as of January 1 of this year. The impact of that in the quarter on REVLIMID net sales was about $15 million. REVLIMID continues to see increased share and duration in multiple geographies, as its benefit-risk profile is well-appreciated in the marketplace.

VIDAZA net product sales were 36% on a year-over-year basis, and 16% sequentially, as the product expands rapidly outside the U.S. ABRAXANE sales for the quarter were a solid $74 million.

With respect to the geographic breakdown of REVLIMID, U.S. sales grew 37% year-over-year and 4% sequentially, and international sales grew 42% year-over-year and 4% sequentially.

Just as a reminder, we continue to forecast the total impact on 2011 revenues of all aspects of health care reform in the U.S., including the donut hole change, to fall in the range of $80 million to $90 million. Particularly driven by the donut hole, a larger share of this impact was incurred in the first quarter. The growth in this impact from $36 million in 2010 to the $80 million to $90 million range in 2011 stems from the donut hole change, which represents about $30 million to $35 million of the growth, as well as the full year impact of the other aspects of health care reform, the full year impact of ABRAXANE and growth off of the 2010 base.

Now I would like to briefly touch on some key line items within our P&L. Our non-GAAP product gross margin was 93.2% for the quarter and is in line with our original full year guidance. On a year-over-year basis, the margin improved by 60 basis points, reflecting product mix. On the expense side, R&D came down as a percentage of revenues, largely due to a milestone payment incurred in Q4 of 2010, as well as higher study drug costs in that quarter. Though we do not manage our R&D investment decisions based on percentage of expense to revenue, we do track that metric, and expect for the full year to be in line with the percentage you will see in our updated guidance.

For SG&A expense, we had sequential growth of 7% over Q4 of 2010. Q1 expense includes costs associated with the ongoing integration of Abraxis and contributions to third-party patient assistance programs that were more heavily weighted to Q1 than future quarters. We expect SG&A expenses to come in for the full year in line with the percentage of revenue we provide in our updated guidance.

Our effective tax rate for the quarter was 19.3%, a reduction of 270 basis points versus the comparable period one year ago. We expect to trend to our full year guidance of 18.5% over the course of the year.

Our exceptional revenue and profit growth drove strong cash generation from our operations of $275 million. And during the quarter, we deployed approximately $450 million of capital to share repurchases and the repurchase of about 8.5 million shares as reflected in our weighted average share count.

We are updating our full year guidance to reflect our expectations for continued strong growth from our hematology franchise, as the drivers of share and duration gains, as well as geographic expansion continue to perform. We expect to continue leveraging our global infrastructure and business model as our revenue base grows. Though we expect the sales of VIDAZA in the U.S. to be negatively impacted upon entry of a generic competitor, we believe we are prepared for that event and that we have appropriately reflected its impact in our guidance.

We now expect full year REVLIMID net product sales to reach $3.05 billion to $3.15 billion, and total non-GAAP revenue to be in a range of $4.45 billion to $4.55 billion. This change in revenue drives an increase of $0.05 in our expected 2011 earnings per share range to $3.35 to $3.40. Our dollar guidance for non-GAAP expenses has not changed, though the percentage of revenues falls slightly as a result of the increase in revenue guidance. Our tax rate guidance remains unchanged.

So to summarize, the Celgene business model delivered outstanding results during the first quarter, fueled by multiple value drivers. We are performing well across a broad array of metrics and are consequently operating from a position of financial strength and flexibility. This strength and flexibility allows us to continue delivering excellent performance for all of our stakeholders while we further develop the platform that will allow us to sustain a strong trajectory of industry-leading profitable growth well into the future.

For more on our strategy and overall accomplishments, I now turn the call over to Bob. Thank you.

Robert Hugin

Thanks very much, Jackie. Let me share my perspective on our operating performance during the quarter. As you can see on the slide, REVLIMID continues excellent growth trajectory. Sales rose 39% year-over-year and 4% quarter-over-quarter. Fundamentals remain strong in the United States. REVLIMID now has approximately 48% share of the overall myeloma market and 50% share in second line. Lengthening duration remains a valuable growth driver. U.S. sales grew 37% year-over-year and 4% quarter-over-quarter despite the impact of health care reform.

International sales were up 42% year-over-year and 4% over the last quarter. Europe was a key driver for international in the quarter. Unit growth was strong and broad-based, led by gains in Italy, the United Kingdom, Germany and several other markets. This growth is all the more impressive when considering the budget pressures and previously announced 2010 price decreases.

REVLIMID continues to strengthen its market position in Europe. At last report, line 2 share in the 4 major European countries, where second line is reimbursed, is approximately 46%. Line 3 share in the 5 major European markets is about 45%.

We're encouraged by the early performance in Japan. Reports from initial physician experiences with REVLIMID continue to be positive. We're making excellent progress as we navigate the logistical and regulatory requirements that are normal in a launch year. I want to thank our team in Japan for their perseverance in the face of the March events. The courage and tenacity of the Japanese people in recovering after the earthquake and tsunami has been an inspiration to all of us. There will continue to be challenges to navigate, but as of now, our plans are on track in Japan.

Turkey is performing well in its second full quarter of launch and was a solid contributor to growth in the first quarter, another part of our emerging market strategy. All in all, REVLIMID had an excellent quarter, and our full year outlook is very positive.

As you can see from this slide, investigators submitted nearly 30 abstracts on Celgene products to the International Myeloma Workshop to be held next week in Paris. These abstracts highlight the compelling benefit-risk profile of Celgene products in nearly all patient treatment settings in multiple myeloma, including data on new combinations and emerging treatment strategies.

Importantly, we expect updated data from the CALGB and IFM trials of continuous REVLIMID in the post transplant setting to be presented. We're looking forward to the CALGB updated survival data outlined in the abstract, which is especially impressive with a large number of patients in the placebo arm crossing over to REVLIMID treatment.

At IMW, additional analyses on the reported cases of second primary malignancies from MM-015, IFM, CALGB and MM-009 and 10 [MM-010] studies will be presented. We expect these presentations to continue to support the strong benefit-risk profile of continuous REVLIMID therapy and to provide significant context on the second primary malignancy issue.

We also expect to see pomalidomide Phase II data in 2 oral presentations. We continue to be encouraged by the clinical profile of pomalidomide in myeloma and are confident this novel agent is uniquely positioned to provide benefit to heavily pretreated patients.

Let me now briefly share my perspective on our MDS franchise. It was an excellent quarter for VIDAZA. Sales grew 36% year-over-year and 16% quarter-over-quarter. Though we continue to prepare for the loss of market exclusivity in the United States, VIDAZA remains the overwhelming market leader in higher-risk MDS.

International markets contributed more than half of all of VIDAZA sales in the quarter. International sales grew 55% year-over-year, driven by strong market demand in multiple European and Asia-Pacific markets and the launch of VIDAZA in Japan by our partner, Nippon Shinyaku.

Our teams continue to demonstrate their expertise in achieving increased market access in even the most difficult markets. In the first quarter, the U.K. health technology assessment agency, NICE, issued a positive final appraisal for VIDAZA. And our team in Australia is launching VIDAZA for patients with intermediate-2 and high-risk MDS. In the EU-5, the VIDAZA share of the intermediate-2 and high-risk MDS segments was approximately 45% at year end. We will seek additional market share gains as we execute our marketing campaigns, and expect to benefit from greater uptake in the United Kingdom following this positive NICE appraisal. Our commercial campaigns focused on disease education, the need for active therapy and optimized dosing and extended duration are making a difference.

ABRAXANE sales were $74 million in the first quarter. During the quarter, we completed the commercial integration of the Abraxis team into our oncology-focused sales organization. Our U.S. field force is now fully trained and deployed. In the first quarter, we also held our national sales meeting, where training focused on repositioning ABRAXANE, brand strategy and core messaging. With our commercial integration complete, we expect growth in the United States to accelerate in the second half of the year, especially as the short-term impact of generic Taxotere should diminish over time.

In Europe, we're investing in a targeted commercial field force, consistent with our business model, to realize the opportunity in breast cancer now and to further evaluate market opportunities in other solid tumors. We plan to launch ABRAXANE on a country-by-country basis throughout the second half of 2011 and into 2012.

I should also mention that we expect to complete the divestiture of certain non-core assets from the Abraxis acquisition shortly. This transaction will not impact our non-GAAP financial results.

Now to ASCO. Nearly 60 abstracts were submitted to this important medical meeting across multiple Celgene products. The full data analysis from our ABRAXANE Phase III trial in non-small cell lung cancer will be presented at ASCO in June, and at the International Association for the Study of Lung Cancer meeting in July. We're also looking forward to the presentation of randomized Phase II data evaluating the combination of ABRAXANE, Avastin and Carboplatin in melanoma at ASCO. And there will also be data on the combination of REVLIMID, Avastin and docetaxel in first-line castrate-resistant prostate cancer.

We're moving forward in parallel on multiple regulatory strategies. These are all growth catalysts for 2011, '12 and beyond. Let me highlight our top priorities: We're working expeditiously to support and complete the Article 20 process in Europe. The process requires extensive data collection and analysis, which we have now virtually completed. When the process is concluded, we'll have extensive subset and prior-therapy analyses, allowing us to continue to most effectively develop and commercialize REVLIMID. Having nearly completed our analyses of the updated data, we remain highly confident in the profile of REVLIMID in it's global-approved indication in previously treated myeloma and in our ongoing myeloma development and regulatory plans. It is important to successfully navigate the Article 20 process to ensure that parallel regulatory reviews maintain their targeted timelines.

We're also discussing our newly diagnosed myeloma filing strategies with regulators in all other major markets. We are phasing the timing of our EU submission for REVLIMID MDS deletion 5q to align with the completion of the Article 20 process. The regulatory dossier is ready to be submitted.

Switching to lymphoma. In February, the FDA granted priority review for ISTODAX in relapsed and refractory peripheral T-cell lymphoma with a June 17 PDUFA date. We're in advanced planning to optimize its full commercial potential. We also submitted our EU filing for ISTODAX in March as planned.

In non-small cell lung cancer, we plan to file for ABRAXANE in the United States on the basis of a Special Protocol Assessment Phase III trial in the second half of this year. We expect this highly effective regimen to address a meaningful patient population and significant unmet clinical need.

As you can see from this slide, we're advancing multiple high-potential clinical programs. Our Phase III solid tumor cancer trials, REVLIMID in prostate cancer and ABRAXANE in pancreatic cancer, are accruing rapidly, with enrollment targeted to be completed by year end. We're moving our pomalidomide development program forward as rapidly as possible. We continue to accrue our Phase III myelofibrosis trial, and the first patients have been enrolled in our international phase III myeloma trial during the quarter. We expect to complete accrual in our REVLIMID mantle cell pivotal trial in the third quarter and are moving our CLL and lymphoma programs forward expeditiously. At the same time, we're also advancing 4 proof-of-concept studies for PDA-001, our proprietary cellular therapy.

We're making excellent progress with our apremilast program. Six Phase III trials are studying the efficacy and safety of apremilast in psoriasis and psoriatic arthritis and are accruing ahead of schedule. We also expect Phase II data in at least one additional indication to be available later this year. Though we have much work to do, a great market opportunity exists for an oral product with apremilast's profile. I personally believe apremilast is a significantly undervalued asset.

All of these development programs are the lifeblood of our company. We have a unifying vision at Celgene to make a meaningful difference in the lives of patients. We're well-positioned to do so, and to sustain our high growth and profitability over the long term for our shareholders. Our strategy is clear and our business model is sound. We are driving operational excellence in all functions. We're making important investments in our core areas of expertise to move our clinical programs forward and to advance our research projects while managing our resources effectively. And we are committed to maintaining our unique culture, which values entrepreneurial leadership, innovation and results. We look forward to seeing many of you at the upcoming international medical meetings, as well as to reporting on our second quarter financial and operational results late in July.

Thank you for joining us today. And operator, please open the line for questions.

Question-and-Answer Session


[Operator Instructions] And our first question comes from Matt Roden with UBS.

Matthew Roden - UBS Investment Bank

Thanks for taking the question. In terms of the regulatory process going on for REVLIMID in Europe, can you confirm that the agencies are aware of the survival updates, particularly from CALGB? And based on your discussions with them, do you have a sense for whether or not the early cut of survival data impacts how the EMEA assesses the risk benefit of REVLIMID in maintenance and transplant?

Robert Hugin

Yes, I think it's certainly important that -- and it's part of our process of ensuring that regulators across the world are aware of the latest data on all of the products that are involved in regulatory review. And certainly, we will -- as the data is finalized and available to us, we will ensure it's incorporated into all of our regulatory filings. But until -- that's an ongoing process, but I can assure you that every piece of data is always going to be a part of -- an important part of regulatory packages.


And our next question comes from Mark Schoenebaum with ISI group.

Mark Schoenebaum - ISI Group Inc.

Thanks very much for taking my question. Bob, I was just wondering, is there anything that we can learn from the EMEA's relatively recent approval of maintenance for Tuxan [Rituxan] in the lymphoma setting? And then, Jackie, I was just wondering, is it possible to provide quarter-on-quarter volume growth for REVLIMID, U.S. and rest-of-world?

Robert Hugin

Specifically, first to the Rituxan example. I do think in some ways Rituxan is a good example, because it is important when you have a drug that keeps people alive for a longer period of time, the experience in how to manage the developments that occur with a patient population that historically didn't live that long is a very valuable information for us. And I think that the end points that are used for approval also give us some comfort. But I do think we have to be clear that every regulatory application is going to be decided on the merits of that disease and that data. And we feel very good, as the data matures, that we have a very, very strong package. So as we move forward, we're just going to have to make sure that everybody understands the full value of that data package.

Jacqualyn Fouse

Yes, Mark. With respect to your other question, I think if you look on a volume basis, that yes, we will be able to continue to drive growth. And the growth outside the U.S. is probably even going to accelerate. So we're coming off of a very strong base, so we should see nice sequential growth, as well as very good year-over-year growth on a go-forward basis.


Our next question comes from Robyn Karnauskas with Deutsche Bank.

Robyn Karnauskas - Deutsche Bank AG

Thanks for taking my question. I guess I have 2 quick questions. So first of all, regarding your maintenance non-Hodgkin lymphoma trials in DLBCL, has there been any safety looks, and is there anything in place to look at any new lymphoid malignancies developing in those trials in the maintenance setting? And the second question is just can you give us an update regarding the safety review dialogue that you're having with the EU?

Robert Hugin

Yes, I mean, I think first of all, the whole process -- I can assure you that we have taken a very rigorous and intensive review of all clinical trials, all data that we have. And in any of the studies we've seen, and the data safety monitoring committees, have not given us guidance that there's any issue in terms of not fully continuing the development programs that are ongoing and the opportunity to commence any new programs that we think are useful to study today. So we are very well-informed of what's out there, and we feel very good that there's not something that hasn't been disclosed probably that would have any negative impact on our development strategies whatsoever. And we're in the middle of ensuring that regulators across the world are fully informed of all the analysis that we have done, of which you will hear about in medical meetings in the coming months. So it's a very rigorous, and it's going to be a very transparent process. And we're confident in the outcome is going to be very positive for the existing commercialization of REVLIMID at its full clinical and regulatory development.


Our next question comes from Geoff Porges with Bernstein.

Geoffrey Porges - Sanford C. Bernstein & Co., Inc.

Thanks very much for taking the question. Jackie, a couple of questions to you, and they're related. The first is on margins. The last couple of quarters, your operating and net margins have actually trended down a little bit, having steadily increased at the company over the preceding 5 years. Without asking for long-term guidance, should we expect sort of flattening at this level? Or do you think that there's likely to be a continuation of that trend? And then related to that, you just completed an acquisition. It's probably fair to say the reception has been mixed and the return is still to be determined. Where do you stand on further M&A? Are you looking to add on more products or are we at a sort of plateau for a while?

Jacqualyn Fouse

Thanks for the questions. So over the course of the last couple of quarters, you get a little bit of noise in the margins just around the acquisition and the various integration costs and things like that. As we go into 2011, you will see what we can categorize as "restructuring costs" and the "taken out of the non-GAAP number," so that's pretty clear for you. But we have other integration costs that are just part of the pool of SG&A, and so some of that will take place early this year. And we won't really see cost synergies from that acquisition until we get late in the year and really the full year of 2012. So just a general comment on margins. I think you -- what you saw was a sequential improvement in Q1 over Q4. At the operating margin level, though, it was a little bit lower than Q1 of 2010, but again, because of some of these things that we have going on there. So the broader trend on a go-forward basis at both the operating and net margin level is up. As I have mentioned, I think, on numerous occasions regarding the leverage that we have in the business model, and when you look at that longer-term guidance, you see that we get to very healthy margins. So again, I think a little bit of choppiness over the last couple quarters, but we'll be on an upward trend for margins throughout the rest of the year and beyond.

Robert Hugin

Let me add a comment on the M&A issue. And, Jackie, please add in. We've made 2 meaningful acquisitions over the last 5 or 6 years, the Pharmion acquisition. And through all these, any acquisition we do, we obviously have a rigorous financial analysis, along with the strategic analysis, to ensure that it would make sense for us to do it. And when we look back at the Pharmion acquisition, it turned out to be a very, very positive strategic acquisition and, from a financial one, that was a very significant return from us. So we do have metrics to do that. And we'll certainly do the same analysis for Abraxis, which was a very strong strategic acquisition, and we're very committed to ensuring that it turns out to be a spectacular financial acquisition also. In terms of future M&A, we think we're well-positioned with the portfolio that we have, that we don't need to do anything. We're well-positioned. And it's only if we do believe that we can enhance long-term growth and increase shareholder value, would we do something. So there's not a need to do something, but if the right thing is there, we will do it. But absolutely no need to do anything at this point.


Our next question comes from the line of Rachel McMinn with Bank of America Merrill Lynch.

Rachel McMinn - BofA Merrill Lynch

Thanks for the question. Just 2 quick ones. Can you quantify the impact of the donut hole on REVLIMID this quarter so we have a sense of the true underlying demand in the U.S. for the quarter? And then secondly, on the ABRAXANE launch, Bob, just picking up on your last comment. I certainly understand generic Taxotere is a big headwind in the first half, but I guess, what are you saying, marketing wise, to get physicians to kind of reorient themselves that this is not just an expensive version of paclitaxel?

Jacqualyn Fouse

Rachel, the donut hole impact on REVLIMID in Q1 was about $15 million, 1 5.

Robert Hugin

And then on ABRAXANE, we're actually encouraged by what we're seeing in the marketplace, that there is a great receptivity to really bring back the core messaging. And thought leaders across the country have been very helpful to help us design the kind of appropriate marketing strategy that highlight the differential advantage, and then when you look at the clinical benefit, you look at the European label where there's a survival advantage. So we think -- and in fact, the underlying trend that we're seeing in terms of the receptivity to the rebranding and the messaging are positive. So I think we have some headwinds from the generic Taxotere, but there isn't something we're seeing in the underlying business that is inconsistent with our expectations as to how, over time, we're going to grow the brand in metastatic breast, how once we get the lung cancer approval, we have that submitted this year, we think that is going to be an attractive marketplace with a broad applicability to lung cancer patients, obviously non-small cell, and then other indications over time as we see new data. So there isn't anything we're seeing in the marketplace that makes us feel we've got to reexamine. We're very positive about what's happening out there. And we think, if anything, since we've bought Abraxis, we've raised our expectations of what peak sales are, and we're very much in line towards achieving that.


Our next question comes from Geoff Meacham with JPMorgan.

Geoffrey Meacham - JP Morgan Chase & Co

Thanks for taking the question. Question for on Europe first line. Generally, can you talk to share and duration going into what's expected of be approval? And any thoughts of pricing strategy in Europe, just given long-duration with REVLIMID maintenance?

Robert Hugin

Yes, I mean, in general, in the frontline myeloma in Europe, there is a strong connection between revenue and labeled indication and reimbursement. So we have modest share in either frontline or in maintenance post stem cell transplant. So there is great upside for us when we get the regulatory and reimbursement approval. And specifically on reimbursement, reimbursement is a case-by-case, country-by-country, payer-by-payer discussion. And we'll have various proactive strategies to ensure that we make the value proposition of REVLIMID clear to patients, physicians and payers. It won't be one general strategy, it's one that we'll very proactively negotiate with payers across the continent once we have approval and begin the reimbursement process. So it's a big opportunity for us. Limited impact -- limited upside today in the sense that we don't have an impact benefit of the revenues today, but the long-term value is very high for us. And we think we'll be able to demonstrate a very strong value proposition.


Our next question comes from Yaron Werber with Citi.

Yaron Werber - Citigroup Inc

Thanks for taking my question as well. Two questions. One, for Bob, help us understand a little bit, have you actually met with FDA yet regarding the pomalidomide filing in the U.S., based on the Phase II data? I mean we understand that, that study is now done. And also exactly, just maybe a little bit more clarity, what are you waiting for, then, to file REVLIMID in first line? And then a question for Jackie, the O-U.S. markets, outside of Europe, are really growing very rapidly. And of the 3 19, we're estimating around $29 million or so in Japan. Is that sort of in the ballpark? And what are you doing in generally outside of the U.S. and outside of Europe per quarter now? Because that's really growing quickly.

Robert Hugin

Just to the pomalidomide. I mean, we don't comment on specific discussions. And we always talk about our baseline strategy is we think the data of pomalidomide is very strong. It is maturing. We'll continue to have updated data over the coming months. And if and when we're successful with having clarity that we can talk about our strategy, we'll make that transparent. But we're very encouraged by what we're seeing in the data, and we will aggressively pursue the most expeditious regulatory strategy we can for pomalidomide. And with REVLIMID in the United States, in newly diagnosed, we had already mentioned that we're pursuing the analysis of the more mature MM-015 data. And with all our filings, we want to have all the data that we've produced from this Article 20 process, so it's included so that everybody is clear, that there is complete global transparency about the analysis of that. And that would ensure a very expeditious review, so there's nothing that would hold up any filings once we have all that data in the hands of all the regulators around the world.

Jacqualyn Fouse

Yaron, just with respect to your O-U.S. question on REVLIMID. We haven't broken out Japan yet. Europe number's not too far off, $2 million here or there. But there's real strength in REVLIMID in Europe. So as you know, we still have room to take share in Europe. We still have room to see duration gains ramp-up nicely there. And I think that we've all been very pleased with the performance in Europe in the quarter, and all of the countries there are doing well. You did some relatively modest incremental impact now of countries like Turkey, and we'll see more of that on a go-forward basis. But we feel quite good about the overall O-U.S. growth for the product. And as we make our way through the year with Japan, we'll see a little bit more about geographic disclosures of specific numbers as we get there.


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

Eric Schmidt - Cowen and Company, LLC

[Audio Gap] it's on the FDA safety review that was announced earlier this month. Can you just talk about when we might hear something from that review, whether it will, in any way, shape or form, interfere with your ability to file? Also whether you expect a label change to come out of that analysis?

Robert Hugin

Yes, Eric, there is -- I don't think there's anything unusual going on at the FDA review. It's just the normal safety alert that happens with many drugs. We've had it before for -- when there are reports, whether they're drug-related or not, the FDA does communicate on the safety alert notice to make sure that people are aware of any disclosures. As I mentioned in the script, it's important that we have all the data from the Article 20 process, which is a rigorous review of all of the data available on REVLIMID. And that data will be made available to all regulatory agencies around the world. And I think that will help us accelerate and have an expedited review in terms of the discussion with regulatory agencies across the world. Because it is our clear corporate objective to ensure that REVLIMID is approved in newly diagnosed myeloma and maintenance therapy post stem cell transplant across the world. So that commitment is there, and this process is going to help that review go quicker, once we finish it. And that's why we're working so hard to ensure that we get this through quickly. So there isn't anything unusual but a standard review going on, as we do with all regulators, to assure they're aware of all data across the globe.


Our next question comes from Chris Raymond with Robert W. Baird.

Christopher Raymond - Robert W. Baird & Co. Incorporated

Maybe a two-part question regarding Abraxis and ABRAXANE integration. Could you just confirm, I think Jackie said integration expenses are fully reflected in the first quarter number. Is it safe to say that you've kind of -- you are at a high-water mark in terms of those integration expenses, and specifically related to Abraxis? And then also, can you just remind us, you've mentioned, obviously, the Taxotere genetic impact. As I calculate it, at least in terms of the way that the CMS rules are, your impact from this should last through Q3, correct? Or could you maybe give me a little bit more color as to where I might be wrong if it's not through Q3?

Jacqualyn Fouse

Let me take the first part of the question. So we have relatively more of our forecasted 2011 Abraxis-related integration expenses in Q1, and that number will trend down over the course of the year. But it does move with the actual separation of people and things like that, termination of people, which is happening on a staged basis. So we will have more of those in Q1. It will come down. By the time we get to Q3 and 4, those numbers are relative -- I'll call them immaterial, so you can think about it that way. But we did not have 100% of those expected costs for the full year in Q1. Probably 40% of them or something like that.

Robert Hugin

And Chris, I don't think, regarding ABRAXANE and a generic Taxotere, there's anything unique about this situation. It's in line with the normal ASP process of when a generic comes in. So I don't think your time line is considerably off. It's just a question of "do you have multiple generics," "what happens with pricing," and the specifics of each individual case. But I think it's a standard impact, and I don't think your time line is inconsistent with our expectations.


Our next question comes from Thomas Wei with Jefferies & Company.

Thomas Wei - Jefferies & Company, Inc.

Just wanted to ask a question on the U.S. commentary that you made. Was I hearing correctly that you're still seeing overall increases in duration therapy with REVLIMID in the U.S. market? And maybe can you help us understand whether or not that's true if you look at it by line of therapy and frontline? And any sort of color that you can provide on the effective -- all of this secondary malignancy noise on U.S. treatment practices would be helpful.

Robert Hugin

Yes, again, we only know what myeloma is specifically from our own data, and we didn't see anything in the first quarter that would give us any pause about the lengthening of duration. It continues to be an important market driver in the United States and all around the world. So there wasn't any information that we're in possession of that would lead us to draw any conclusion in any negative way whatsoever.


Our next question comes from Joel Sendek with Lazard Capital.

Joel Sendek - Lazard Capital Markets LLC

Just looking at the revenue build over the last couple of years. Typically, the first quarter is by far the lowest quarter, and I'm wondering why you couldn't potentially increase your revenue guidance for the full year more than you did.

Jacqualyn Fouse

Thank you for the question, Joel. We are going through a year where we've got this VIDAZA Altive [ph] exclusivity in May that we are being prudent about in terms of how we think about that and the just impact, overall, on the numbers. We see very, very solid, strong momentum in the other products in the overall portfolio. So that, coupled with the evolution on Abraxis post the full integration of the commercial operations, and getting that ramped up the way that we want it to, just makes us plan prudently.


Our final question comes from Ying Huang with Gleacher & Company.

Ying Huang - Gleacher & Company, Inc.

Thanks for taking my question. To follow up on Thomas's question, maybe. Can you tell us whether you have an insight in terms of the trend in maintenance therapy in the U.S., considering that actually you are hearing about a secondary malignancy here?

Robert Hugin

The trends that we have seen in the U.S. business in the first quarter are consistent with the trends that we've seen over a longer period of time. We feel very good about those trends, and there isn't anything we've seen in the first quarter that would change our outlook going forward based on what we saw in the first quarter. So we're very encouraged by what we've seen in the first quarter.

And we thank everybody for your interest in joining us today, and we very much look forward to updating you throughout the course of the quarter and when we complete the second quarter and have our conference call in later July. Thank you very much.


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

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