Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message| ()  

Executives

Brian Gill - Vice President of Corporate Communications and Senior Director of Public Relation & Investor Relations

Robert Hugin - Chairman, Chief Executive officer, President, Secretary and Chairman of Executive Committee

Jacqualyn Fouse - Chief Financial Officer and Senior Vice President

Analysts

Sapna Srivastava - Goldman Sachs Group Inc.

Ying Huang - Gleacher & Company, Inc.

Gene Mack - Mizuho Securities USA Inc.

Joel Sendek - Lazard Capital Markets LLC

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

Shiv Kapoor - Morgan Joseph TriArtisan LLC

Thomas Wei - Jefferies & Company, Inc.

Brian Abrahams - Wells Fargo Securities, LLC

M. Ian Somaiya - Piper Jaffray Companies

Howard Liang - Leerink Swann LLC

Yaron Werber - Citigroup Inc

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

Michael Yee - RBC Capital Markets, LLC

Bret Holley - Oppenheimer & Co. Inc.

Christopher Raymond - Robert W. Baird & Co. Incorporated

Eric Schmidt - Cowen and Company, LLC

Mark Schoenebaum - ISI Group Inc.

Rachel McMinn - BofA Merrill Lynch

Matthew Roden - UBS Investment Bank

Geoffrey Meacham - JP Morgan Chase & Co

Celgene (CELG) Q2 2011 Earnings Call July 28, 2011 9:00 AM ET

Operator

Good day, ladies and gentlemen, and thank you for standing by. And welcome to the Second Quarter 2011 Celgene Corporation Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. And now I will turn the program over to Brian Gill, Vice President of Corporate Communications for Celgene. Sir, the floor is yours.

Brian Gill

Thank you, and good morning, everyone. I would like to welcome you to Celgene's Second Quarter Conference Call. The press release reporting our second quarter 2011 financial and operating results was issued earlier this morning and is also available on our corporate website. Our conference call webcast will include a presentation, which you can access by going to the Investor Relations section on our website, celgene.com. For today's conference call, we have our Chairman and Chief Executive Officer, Bob Hugin; and our Chief Financial Officer, Jackie Fouse.

Before we start, we want to remind you that our discussions during the conference call will include forward-looking statements, which are generally statements that are not historical facts. Forward-looking statements can be identified by the words expect, anticipate, believe, intend, estimates, plans, will, outlook and similar expressions. Forward-looking statements are based on management's current plans, estimates, assumptions and projections, and speak only as of the date they are made. We undertake no obligation to update any forward-looking statements in light of new information or future events, except as otherwise required by law. Forward-looking statements involve inherent risks and uncertainties, most of which are difficult to predict and are generally beyond our control. Actual results or outcomes may differ materially from those implied by the forward-looking statements as a result of the impact of a number of factors, many of which are discussed in more detail in our annual report on Form 10-K and our other reports filed with the Security Exchange Commission (sic) [Securities and Exchange Commission].

In addition to financial information prepared in accordance with U.S. GAAP, this conference call and presentation also contains non-GAAP financial measures that we believe provide investors and management with supplemental information relating to operating performance and trends that facilitate comparisons between periods and with respect to projected information. These non-GAAP measures should be considered in addition to, but not as a subject for, the information prepared in accordance with U.S. GAAP. We typically exclude certain GAAP items that management does not believe affect our basic operations and that do not meet the GAAP definition of unusual or nonrecurring items. Other companies may define these measures in different ways. Further information relevant to the interpretation of non-GAAP financial measures and reconciliations of these non-GAAP financial measures to the most comparable GAAP measures may be found on Celgene's website at celgene.com in the Investor Relations section.

I will now turn the call over to Bob Hugin.

Robert Hugin

Thank you, Brian, and thank you, everyone, for joining us this morning. It was an exceptional quarter for Celgene, our teams continue to deliver excellent commercial and financial results for advancing our regulatory, clinical and research programs, all designed to produce sustained long-term growth and value creation. During the quarter, we made important progress on all of our key strategic initiatives. Jackie will outline our financial and operating results. As you'll see, we're performing well in all major metrics. In the second quarter, we strengthened and expanded the global reach of our hematology and oncology franchises, advanced our development pipeline of 25 Phase III and pivotal clinical trials and progress our robust early pipeline of nearly 20 compounds in pre-clinical and clinical development. All of these are designed to sustain industry-leading growth well into the future. Our operating momentum is strong.

Both our hematology and oncology franchises produced excellent commercial results in the quarter. Our cancer therapies were further enhanced by the data from more than 300 abstracts presented at major medical meetings over the past few months. Specific to REVLIMID, new clinical results in lymphoma and prostate cancer will help us accelerate our development programs. In myeloma, multiple studies demonstrate the exceptional benefit risk value proposition of REVLIMID, highlighted by the overall survival data from the CALGB study presented at the International Myeloma Workshop in Paris. Based on these significant results and comprehensive safety analyses specific to the low reported incidence of second primary malignancies, our clinical and regulatory teams have made significant progress towards bringing the Article 20 procedure to resolution and on executing our newly diagnosed multiple myeloma filing strategy.

We're also working hard to further increase the value of our myeloma franchise by accelerating our clinical program and regulatory strategy for pomalidomide. Significant progress was achieved in our oncology franchise during the quarter, with growing ABRAXANE revenue and important new data at ASCO and other major medical meetings, we're creating commercial momentum in metastatic breast cancer and are generating data that will help drive this indication in the future. New and promising data has also been presented in both melanoma and pancreatic cancer. Importantly, our near-term drivers are planned filing for non-small cell lung cancer in the U.S. later this year. We're also making excellent progress in our inflammation and immunology franchise, highlighted by the rapid accrual of our pivotal apremilast trials in psoriatic arthritis and psoriasis. These trials are now more than 50% accrued, with completion anticipated before year end. With pivotal data likely to be presented beginning in less than a year, 2012 will be an exciting year for apremilast.

Our research and translational medicine strategies continue to progress and are focused on long-term value creation. In just the past few months, we initiated our first clinical study with CC-115 and submitted the IND for CC-122, 2 promising novel anticancer agents discovered in our labs in San Diego. At Celgene, we remain focused on our objective of delivering value to our shareholders through operational excellence in all aspects of our business and delivering on our goal of addressing the unmet medical needs of patients through innovative research. We're strategically positioned for sustained high growth and value creation in the months and years to come.

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

Jacqualyn Fouse

Thanks, Bob. Good morning, everyone, and thank you for joining us on the call today. Momentum continues to be strong for Celgene in 2011 and the team delivered an outstanding second quarter in all aspects. Second quarter revenue growth was excellent on a year-over-year basis, up 38%, as well as sequentially, up 6%. As we will see in a moment, year-over-year product revenue growth was even stronger at 40%. This growth drove non-GAAP operating profit that rose 33% and earnings per share that rose 29%. Excellent performance was achieved on all of our commercial metrics, including share and duration gains in all regions, continued expansion of market access and efficiency in operating expenses.

I will cover our revenues by products and give you more color on expenses in a moment. We generated a strong performance while continuing our commitment to invest for the future and while maintaining a strong balance sheet, even as we return funds to shareholders via share buyback. Bob will cover more about our progress on the clinical and regulatory front in his coming remarks.

Turning to our income statement. Second quarter non-GAAP revenues grew 38% year-over-year fueled by an excellent result from REVLIMID. The product continues to gain share in regions around the world and duration of treatment trends remain on an upward trajectory. VIDAZA revenues are increasing rapidly outside the U.S. And in the U.S., we have not yet seen a generic azacitidine entrant. Momentum in ABRAXANE was outstanding in the quarter as our commercial efforts in the U.S. has started to bear fruit and as launches of the product are underway outside the U.S.

Regarding the impact of FX on revenues, as a reminder, we hedge revenues to the extent of our net exposure, thus this is reflected in the revenue line. That net impact for the year-over-year comparison was minimal. We maintain strong sequential growth quarter-to-quarter in 2011, coming out with a strong finish to 2010, where that fourth quarter also included our first quarter of ABRAXANE sales. Q2 2011 total revenue sequential growth was 6% and sequential product revenue growth was an even more impressive 7.6%, driven by REVLIMID global sequential growth of 7.8%. ABRAXANE grew sequentially, almost 28% and ISTODAX sequential growth was over 21%. This revenue growth drove an operating profit increase of 33% for the second quarter of 2011 over second quarter of 2010. And non-GAAP EPS in the second quarter grew by 29% to $0.89.

Year-over-year R&D expense for the quarter was up 52%, driven by progress on our late-stage clinical trials, as we reach the peak enrollment periods on many of those. The quarter also included a $7 million milestone payment to Acceleron under our collaboration agreement with them; full absorption of ABRAXANE R&D, which we did not have in the second quarter of 2010; and some costs associated with the work required to manage the second primary malignancy issue and the Article 20 regulatory procedure.

Year-over-year SG&A expense for the quarter increased 39% as it included ABRAXANE's integration costs, the impact of expenses for 8 major medical meetings versus 2 in 2010 in the quarter, some costs associated with the work on the second primary malignancy issue and a negative impact from foreign exchange. Without the impact of foreign exchange, SG&A expense would have grown slower than revenues and would have been flat sequentially.

I will cover our updated full year outlook for expenses when I cover the new guidance in a moment. Looking at key individual product results, REVLIMID had a great quarter with $795 million of sales, a year-over-year increase of 35% and a sequential increase of 7.8%. This growth includes the negative impact of the donut hole change that took effect as of January 1, 2011. The dollar impact of the donut hole in the second quarter was somewhat lower than it was in the first quarter. The dollar impact of the donut hole will be even lower in the second half of this year. I will cover the overall impact of healthcare reform in the coming slide.

Revenue growth continues to be fueled by the multiple drivers of increased share, increased duration of treatment and geographic expansion. VIDAZA net product sales grew 23% on a year-over-year basis, driven by international growth and was slightly down sequentially. First quarter sales benefited from some top line fill in Japan as we launched there. The product lost exclusivity in the U.S. on May 19, and though we do not know what the timing of generic competition to VIDAZA will be, our future revenues in that market will decline upon such entry. We have not seen that interest so far in the third quarter.

Momentum is building in ABRAXANE and we are very pleased with its sales for the quarter at $95 million. The integration of the former Abraxis commercial infrastructure into Celgene is essentially complete in the U.S. and the product is launching internationally. So it was a modest incremental bid to the quarter from top line fill in some international market. We expect to see continued success for ABRAXANE and metastatic breast cancer through the second half of this year and beyond. Regarding the geographic breakdown of REVLIMID, U.S. sales grew 30% year-over-year and almost 10% sequentially. International sales grew 43% year-over-year and approximately 5.5% sequentially.

Regarding the expected full year 2011 impact of all aspects of healthcare reform, we now forecast the total impact on revenues, including the donut hole change, to fall in the range of $70 million to $80 million, $10 million less than our original estimate of $80 million to $90 million. Particularly driven by the donut hole, a larger share of this impact has been incurred in the first half of the year. We now estimate the impact of the donut hole to be about $30 million for the full year, and we incurred about 75% of that costs in the first half of the year around $23 million for all products.

Turning to the key line items of our P&L. Our non-GAAP product gross margin was 93.2% for the quarter, consistent with the first quarter of this year and running slightly favorable to our guidance. On a year-over-year basis, that margin improved by 80 basis points, reflecting product mix. On the expense side, in the quarter, R&D increased somewhat as a percentage of revenue partly due to the $7 million Acceleron milestone payment and some of the other costs I mentioned earlier. But also, because we are hitting the peak enrollment period for many of our late-stage trials. We expect full year R&D dollars to be in line with our original dollar guidance of $1.2 billion and slightly lower, as a percentage of revenue, as you see in our updated guidance at around 26%.

SG&A expense posted modest sequential growth of $1.6 billion over the first quarter over that 39% for the year-over-year period as the current quarter includes costs associated with the ongoing integration of Abraxis, a higher than usual number of medical meetings in the quarter and costs related to the management of the second primary malignancy issue, as well as the foreign exchange impact I mentioned earlier. We now expect these expenses to come in for the full year at closer to $1 billion versus our previous guidance of $950 million, partly driven by launch expenses for ISTODAX in the U.S. and higher-than-expected contributions to patient assistance programs. Expressed as a percentage of revenue, at about 22%, they will be almost 150 basis points lower than 2010.

Our effective tax rate for the second quarter was 19%, an increase versus the comparable period 1 year ago. We now expect the full year rate to be a bit higher at 19% to 19.5%, driven by incremental VIDAZA revenue in the U.S. If U.S. VIDAZA revenues continue to exceed our forecast for the remainder of the year, this will affect our revenue mix and will drive an increase in the effective tax rate for this year. That is considered in our updated guidance. Such an impact would not be sustained after 2011. We see leveraging our P&L that is driving an expansion in our operating profit margin year-over-year. We are producing these results while investing in R&D spend that is impacted by our 25 late-stage clinical trials and while absorbing and integrating the Abraxis business into the Celgene portfolio.

Our strong profit performance is driving strong cash flow generation and our operations produced $736 million in the first half of this year. We continue to return capital to shareholders in the form of share repurchases, while investing for the long-term growth of our business. We bought back about $689 million of stock in the first 6 months of 2011 and our cash position remains relatively constant. As of today, we have approximately $800 million remaining under our existing repurchase authorization.

Turning to our updated 2011 financial outlook. We have updated our full year revenue and earnings guidance to reflect several factors. First, we expect continued strong growth from our hematology franchise of shares and duration gains, as well as geographic expansion are all driving revenues. Second, that we expect sales of VIDAZA in the U.S. to eventually being negatively impacted upon entry of a generic competitor, accounting for that entry is lighter than we originally anticipated. Second quarter VIDAZA sales benefited incrementally from this situation and we are benefiting from it so far in the third quarter. Finally, several expense items were more heavily weighted to the first half of the year and we will see most of this year's P&L leverage in the second half of the year, particularly in SG&A expense.

We now expect full year REVLIMID net product sales to reach $3.15 billion to $3.25 billion and total non-GAAP revenue to be in the range of $4.6 billion to $4.7 billion. Mostly driven by higher revenues, we have increased our full year guidance for earnings per share to $3.45 to $3.55 range. We widened the forecasted EPS range to take any consideration the uncertain timing of generic competition to VIDAZA. Our dollar guidance for non-GAAP R&D expense has not changed, though its percentage of revenue fall as a result of the increase in revenues. And I already mentioned the modest changes to our expectations for full year SG&A expense and the tax rate.

So to summarize, the Celgene team again delivered an outstanding result during the second quarter of 2011, producing strong growth in the overall top and bottom lines, as well as by key products. Our performance is sustainable and robust because it is fueled by multiple value drivers. We are performing well across all major metrics and maintain our position of excellence, financial strength and flexibility. We will continue to deliver strong performance for all of our stakeholders and invest appropriately to sustain a strong trajectory of industry-leading profitable growth for many years into the future.

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

Robert Hugin

Thank you, Jackie. As you've heard, it was quite a quarter. I'd like to take a few minutes and share my perspective. Let me start with REVLIMID. REVLIMID sales continue to be strong with 35% year-over-year growth. In the United States, REVLIMID has approximately 50% of the overall myeloma market, up 2 points versus last quarter and 52% share in second line also up 2 points versus the first quarter of the year. Increasing duration of treatment is a continuing indicator of effective chronic disease control and a valuable growth driver. International sales grew 43% year-over-year. Line 2 share in the 4 major European markets were second line as reimbursed is approximately 50%, up from 46% in the first quarter. Line 3 in the 5 major markets is approximately 42%. After 1 full year of commercialization in Japan, we are pleased of the overall market share from REVLIMID in multiple myeloma is about 22%, an excellent beginning to our launch in spite of the tragic events of early 2011. We continue to expand our global reach for REVLIMID through regulatory and reimbursement approvals in emerging markets also. The clinical potential of REVLIMID in other areas is being recognized. Of note, emerging data on REVLIMID was highlighted at the International Conference on Malignant Lymphoma in Switzerland. And based on these data, REVLIMID was granted reimbursement in mantle cell and diffuse large B-cell lymphoma in Italy. Across all metrics, it was an excellent quarter for REVLIMID with strong momentum.

VIDAZA sales grew 23% year-over-year, driven primarily by strong performance in Europe, Asia Pacific and Japan. Following the first quarter approval by the health technology assessment agency, NICE, VIDAZA sales have grown dramatically in the United Kingdom, increasing 48% quarter-over-quarter Additionally, our teams in Australia and Canada are producing strong sales in their first few quarters since launch. Despite the loss of orphan drug exclusivity for VIDAZA in the United States, no generic has entered the market, as Jackie reported, and our quarter-over-quarter sales remain steady. With the approval of ISTODAX in peripheral T-cell lymphoma, our sales force now has the added responsibility of launching ISTODAX to this new indication in the U.S.

Expanding our oncology franchise is an important objective. ABRAXANE sales grew by 28% quarter-over-quarter to $95 million. Following the completion of the commercial team integration and the repositioning of ABRAXANE, sales in the United States grew 15%. In Europe, ABRAXANE is being launched in the 4 major markets and will continue to launch on a country-by-country basis in the second half of 2011 and 2012. We believe that the development of ABRAXANE in all stages of breast cancer, non-small cell lung cancer, pancreatic, metastatic melanoma and multiple other indications offer significant high growth opportunities for our oncology franchise.

Clinical data is the lifeblood of hematology, oncology franchises. The past several months were significant for the number of major medical meetings where Celgene's compounds were highlighted. In hematology, the presentation of updated data from the CALGB, IFM and MM-015 newly diagnosed multiple myeloma studies confirmed a 50% to 60% improvement in progression-free survival, high overall response rates and now an overall survival benefit in the CALGB post-transplant maintenance study. This significant overall survival benefit and the ongoing analyses of the reports of second primary malignancies advanced the global myeloma communities understanding of the benefit risk profile of REVLIMID in myeloma.

In lymphoma, compelling REVLIMID Phase II data were presented at the International Conference on Malignant Lymphoma for patients with untreated diffuse large B-cell, mantle cell and follicular lymphoma. Updated data on the combination of REVLIMID with rituximab, or R2, in previously untreated follicular lymphoma, demonstrated a 98% overall response rate, with an 85% complete response rate and for patients follow-up for 24 months, progression-free survival was 83%. These data are the basis for the recently announced Phase III GELA study evaluating the combination of REVLIMID plus rituximab for patients with newly diagnosed follicular lymphoma. We expect this very important study to start later this year. As many of you are aware, in June, we received the accelerated approval for ISTODAX for the treatment of peripheral T-cell lymphoma in patients who have received at least 1 prior therapy. Our U.S. sales force has just completed product training to support the U.S. commercial launch.

In oncology, the full data analysis from our ABRAXANE Phase III trial and non-small cell lung cancer were presented at ASCO in June at the International Association for the Study of Lung Cancer meeting in July. In the final data, a significant improvement in overall response rate of 33% for the combination of ABRAXANE plus carboplatin versus 25% for the paclitaxel, carboplatin arm. A subset analysis demonstrated that patients 70 years and older achieved almost a doubling of overall survival to almost 20 months versus approximately 10 months. Additional perspective studies of ABRAXANE and non-small cell lung cancer are being evaluated to follow up on clinical outcome based on histology and age. We're on schedule to file our sNDA with the SPA by the end of this year and are reviewing our filing options for other international markets.

Also, presented at ASCO were encouraging data from a randomized Phase II study evaluating the combination of ABRAXANE, Avastin and carboplatin in melanoma, which reported 1 year survival rates of nearly 60%, with an estimated medium overall survival of nearly 14 months. Additionally, Phase II data presented at ASCO on the combination of REVLIMID, Avastin and docetaxel in first line castrate-resistant prostate cancer showed more than 86% of patients achieved a 50% reduction of PSA or better. Celgene's REVLIMID Phase III MAINSAIL study with docetaxel is rapidly accruing patients and is expected to complete enrollment this quarter.

We have multiple near-term regulatory growth drivers. The highest priorities of our clinical and regulatory teams are on the resolution of the Article 20 procedure and our REVLIMID filing for newly diagnosed multiple myeloma and maintenance therapy with the EMEA. We're working on the responses to the 120 day and the Article 20 questions in parallel, and we remain on track with the newly diagnosed multiple myeloma regulatory strategy targeted for the first quarter of 2012. At the completion of the Article 20 procedure, we plan to file for MDS deletion 5q in Europe. Separately, we're optimistic on Swiss regulatory approval for REVLIMID in the MDS deletion 5q indication late this year. We continue to advance our global regulatory strategy for pomalidomide and relapsed/refractory multiple myeloma and myelofibrosis. Given the increasing pool of patients who have very limited treatment options in their last myeloma setting, there's broad-based participation in the clinical development of pomalidomide. Importantly, our international Phase III study in 15 countries is open and accruing.

Additionally, we expect the final data from our Phase II pomalidomide MM-002 study to be presented at the upcoming ASH meeting in December. We continue that active discussions with regulatory agencies and as soon as we are able to provide you with an update on the filing strategy, we will. We're also making outstanding progress advancing our clinical programs with key milestones throughout the remainder of this year and 2012. Data from REVLIMID and pomalidomide, myeloma studies will be presented late this year and with additional data throughout 2012. New pivotal trials in lymphoma and leukemia will open, while others will complete accrual. And the first Phase III trial of REVLIMID with a solid tumor indication will again complete enrollment this quarter. We'll continue to update you on the status of our promising pivotal ABRAXANE trial in pancreatic cancer.

Our immunology and inflammation franchise is making significant progress with full enrollment of 6 Phase III apremilast study and expected by year end. And we'll advance our novel cellular therapy PDA-001 in 3 Phase II studies, which we will expect will also complete enrollment by year end, with proof of concept result in 2012. These high value clinical programs with breakthrough potential are the result of a sustained focus investment in R&D. We're executing on our strategy, delivering strong operational and financial results, expanding our global reach and advancing our regulatory, clinical and research programs by driving operational excellence in all functions. We are delivering in the here and now and building a tremendous future for Celgene and our shareholders.

Thank you very much for joining us today. And operator, would you please open the line for questions?

Question-and-Answer Session

Operator

[Operator Instructions] Our first questioner in queue is Matt Roden with UBS.

Matthew Roden - UBS Investment Bank

So firstly, on the day 120 questions on the newly diagnosed myeloma filing, is there anything in those questions that would change your confidence one way or another in terms of the outcome of the filing? And then secondly, more of a longer-term strategic question as it relates to operating leverage. Jackie, you've indicated that near term, more of the leverage is going to come from the SG&A side, but then you guys have something like 10 Phase III trials reading out over the next 2 years. So with that in mind, longer term, do you see some potential to have a little bit of leverage coming from the R&D side as well?

Robert Hugin

First, Matt, it's Bob. On the 120 day questions for the -- and the Article 20 just to cover that, there are no questions there that we think are not expected. They're very much in line with what we've expected and we're working very focused and expeditiously to ensure we give the complete comprehensive answers and we're very confident of our ability to do so. So I wouldn't say there's anything that we're not expecting. We're moving very aggressively to complete it as quickly as we can.

Jacqualyn Fouse

Matt, just on your operating leverage question. So yes, you see the leverage coming through in SG&A, and I think I've spoken before about my expectations for that over time, where I think that percentage of revenue is going to trend down into the teens and you see that, that coming through this year already with about 150 basis point move. On the R&D side, you're absolutely right. We have a lot of late-stage trials reaching peak enrollment periods. We are going to continue to invest appropriately in R&D. Given the platform that we have today, I would expect to potentially see some leverage from that over time. And as I think I've highlighted when we've spoken about our 2015 long term very high level guidance, what we've assumed there is that R&D stays at flat and about 25% of revenues and we're still driving EPS growth even with that assumption in the mid-20% range. So I think that's a conservative assumption and you see how we're doing with this year even with everything that we've got going on.

Operator

Our next questioner in queue is Geoff Porges with Bernstein.

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

Just related to this operating leverage question. Jackie, it looks as though in the second half, your guidance is that at least in the current basis that revenue will grow to a slow down to something around 20%, but did you deliver EPS growth in the second half substantially above that revenue growth. So 2 questions, one, is that a correct interpretation of the guidance? And secondly, if indeed revenue growth is sustained at the growth that you saw in the first half of the year, which is closer to 40%, should we anticipate that the EPS growth in the second half will be at your guidance, which will therefore match revenue growth, or will the incremental operating income flow through to higher EPS?

Jacqualyn Fouse

Well, your interpretation of the numbers is accurate. I think you can triangulate them and come at them in a few different ways and you get more or less the same answer. So included in our revenue guidance for the second half of the year is an assumption around an eventual entrant of generic competition to VIDAZA, so one has to keep that in mind with one thing about the growth rate in the second half of the year. The comp obviously also gets harder and harder as we continue to see the base grow in revenues, so you can think about the revenue guidance that way. With respect to expenses, particularly in SG&A, for all the reasons that I mentioned in my prepared remarks, we had much more of the certain expenses loaded into the first half of the year and those will not repeat in the second half of the year. So you've got my commitment to see that leverage in the second half of the year.

Robert Hugin

The whole team's commitment.

Jacqualyn Fouse

The whole team's commitment. And just -- when we look at R&D as a percent of revenues, we don't make our investment decisions that way as everyone knows. But we are tracking very nicely to that $1.2 billion. So if revenues continue to exceed expectations then obviously that percent of revenue has come down, so when you just think about straightforward P&L leverage.

Operator

Our next questioner in queue is Geoff Meacham with JPMorgan.

Geoffrey Meacham - JP Morgan Chase & Co

A question on pomalidomide. I'm just curious, what the gating factor for a filing decision is? Is it more data? Have you guys met with FDA already? Is the conversation a little different in Europe with respect to filing? And then, just a quick follow-up, REVLIMID when you look at o U.S. geographies, maybe just it would be helpful if you guys put some of these emerging markets in the bigger context of what the opportunity could be just in the core myeloma indication, for example, in China, Brazil things like that.

Robert Hugin

First, on pomalidomide, as we mentioned in the earlier discussion, the MM-02 data, the updated and really complete data will be presented at ASH this year. So with any type of potential for any kind of accelerated regulatory approval, you need to have that data completely analyzed and available for any kind of discussions. So that was our first priority to ensure that. Any type of accelerated opportunity for pomalidomide would be in discussions, like you say, in the U.S. and we're engaging in continuous discussions with regulatory agencies as you'd expect. So as that data, the complete analysis is available, any potential opportunity will become clear. Once it is clear, what the strategy will be in timelines, we will be as transparent as we can when that's clear, and we're hopeful that's not in the -- that we'll make progress on that, but that's -- the belt-and-suspenders baseline guidance is based on Phase III trials and that's why we're accelerating development of the Phase III trial in Europe. And so, in Europe, we should definitely consider that as the baseline strategy. Though we'll obviously -- we're successful in any market, trying export that success to all other markets. And then on REVLIMID specifically, I think you point out 2 important markets over time that we don't yet have either regulatory or reimbursement approval, China and Brazil and China has a -- is an attractive market over time for us. We're completing the important bridging studies done in China. It's also an important accrual center for MM-020 study. So those are the markets we're focused on and we're optimistic in the next, sort of 18 to 24 months, we could see them beginning to have an impact on revenue.

Operator

Our next questioner in queue is Mark Schoenebaum with RSI (sic) [ISI] Group.

Mark Schoenebaum - ISI Group Inc.

I just had a question back on REVLIMID. Is the -- or sorry, on the EMEA regulatory process, is the Article 20 -- is getting the Article 20 issue resolve gating in any way to the label expansions? And once the label is expanded, should our expectations be that you'll get a maintenance claim in the post-transplant setting, as well as the first line setting in non-transplant patients? Or should we be assuming that you get just 1 of those 2?

Robert Hugin

Yes, I think -- a couple of questions of there. First, on the review. It is important for us to get to Article 120 [Article 20 and 120-day questions] issues resolved because that's fundamental to -- and it's just not -- we wouldn't expect to get any label expansion until the Article 20 is resolved. That's why we're so focused on making sure that we have the comprehensive complete analysis and our team has really made the investment, done a great job to ensure that we have that well positioned and the strategy being well executed there and we're moving along on the right course there. They're technically not linked but that's -- since you need to have the Article 120 done before you can have an expectation of a complete review of any of the indications. And we are -- and any label expansion is going to be based on the date that its filed and our expectation is that we will have a rigorous discussion around both the maintenance post-transplant based on the IFM and the CALGB study and on an induction or initial treatment under MM-015 based on the population within that data that would be support a label expansion. So the regulatory review in the end will determine what the outcome is on the label, good, bad or indifferent. But it is our intention to expeditiously get the Article 20 done, get 120-day questions resolved and pursue that kind of dialogue on both the newly diagnosed label expansion and the maintenance study and the regulatory process will resolve that in the coming months.

Operator

Our next questioner in queue is Chris Raymond with Robert Baird.

Christopher Raymond - Robert W. Baird & Co. Incorporated

Just want to make sure I understand completely, I don't think we saw on the slides absolute U.S. and x U.S. numbers. You typically have given that in the past, but you didn't give sequential growth. So can you just confirm, was the U.S. number $460 million and the x U.S. number $336 million? And then I have a follow-up.

Jacqualyn Fouse

Well, [indiscernible]. Yes, we did have on the slide the breakdown between U.S. and international REVLIMID product sales. The U.S. number for the quarter is $458 million, the international number for the quarter is $337 million.

Christopher Raymond - Robert W. Baird & Co. Incorporated

Great, okay. And the follow-up is on ABRAXANE. You kind of struck by the strong showing this quarter, especially we were expecting some generic Taxotere pressure at least through this quarter. So maybe can you give a little bit more color about what's going on there in terms of the upside and market share dynamics, et cetera?

Robert Hugin

Sure. As we mentioned, we're very focused on making sure that as we expanded to oncology, we do this effectively and we feel very good about the integration, the quality of team that we've put together on the sales side and the marketing side and market access, et cetera. So we're really focused on execution, which is certainly important to us expanding revenue in the metastatic breast situation. On others -- there are a number of other factors that are both positive and headwinds in the sense that when you have the generic Taxotere that certainly is a headwind that we experienced in the first quarter and there was inventory issues in the first quarter. The second quarter, we probably had a little bit of a benefit from the fact that there's been some shortages, generic anticancer or chemotherapy drugs. So for the most part, I think we're working our way through the generic Taxotere, that's something that's going to affect us this quarter in the third quarter and will gradually dissipate. So I think there's a number of positive and negative factors. We're focused on what we control as building the market share in the approved indication, and we're very pleased with the progress that we're making about building a very comprehensive development plan in lung cancer where again, we're hopeful to be able to actually promote on that in 2012. And we fully accrued the Phase III, may not be a pivotal study in melanoma, but we're seeing good traction there in terms of accelerating our program there. And as everyone knows, we're very focused on pancreatic, we expanded that trial to 800-plus patients to ensure that when we get the result there, we get a definitive answer. So we're working hard to build a very comprehensive, focus on ABRAXANE, both on commercial execution and regulatory and clinical programs.

Operator

Our next questioner in queue is Gene Mack with Mizuho Securities.

Gene Mack - Mizuho Securities USA Inc.

I wonder if I could just follow-up on ABRAXANE and get a sense of how gross margins might be impacted as sales increase, or is [indiscernible] products becomes a little bit more of the sales mix. And then, could we also get an update on where -- what the status of oral formulation of VIDAZA is? And then, just a break out of or maybe what REVLIMID sales were in Japan?

Jacqualyn Fouse

Gene, it's Jackie. Let me start with the ABRAXANE question. So the cost of goods on ABRAXANE is a little bit higher than it is on our hematology products. So from an overall standpoint, this impact on the mix, all other things being equal, it would tend to be a little bit negative for the portfolio from a mix standpoint. However, the hematology products are growing so nicely and weigh so heavily in that mix that they contribute very positively. And what we see with ABRAXANE is 10, 20 basis points here or there, then we push maybe that number up, but the momentum for the cost of goods is very much on the downward trajectory. So the net impact is still positive and you see that we're running 20 basis points ahead of our guidance. So I'm not at all concerned that momentum in ABRAXANE is going to have a negative impact on the cost of goods. I'm very happy to see the momentum in ABRAXANE. And when you think out, for the long term, with other products that should be coming into the revenue mix in the not too distant future products like pomalidomide, other indications and the future for REVLIMID, those are -- that's a very good thing from a cost of goods standpoint. Gene, I think your question was oral -- update on oral azacitidine?

Robert Hugin

Yes, I think we're very encouraged by what we're seeing in terms of the activity and the tremendous interests in really having an oral epigenetic therapy that can dosed on an ongoing basis to really have a positive impact, especially in combination therapy. So we've made great progress on the formulation and we're accelerating that development program as quickly as we can, because we think in a number of indications, this is going to be a very attractive opportunity for us. And I think the other question was on Japan, we don't specifically break out Japan. And I'd say there are some very positives in Japan like we've always talked about, the idea of nature of REVLIMID fitting that marketplace and we're on track with where we'd hope we'd be. And so we haven't seen any dramatic impact from the events in the first quarter, but we're always sensitive to what the future might bring.

Jacqualyn Fouse

I'm sorry, I think you probably saw on the slide that we did give you an overall share number for REVLIMID in Japan at 22% total, all lines.

Operator

Our next questioner in queue is Yaron Werber with Citi.

Yaron Werber - Citigroup Inc

So two questions. First, just help us understand a little bit REVLIMID in the U.S. and what exactly are you waiting in order to file the first line in maintenance filing? Is it -- are you waiting for the IFM survival card? Is that what it is? And then I have a follow-on as well.

Robert Hugin

So the first thing that we are doing is resolving the SPM and the Article 20 process, because I don't think any regulatory agency is going to say, I'm going to ignore that, even though I don't see that. We don't use melphalan in this country in a very significant way, and it's very clear to us what the risk benefit -- is they're going to want to see that. So we want to make sure the Article 20 process comes to a resolution. And we keep all regulatory agencies, all over the world, updated on that. So we want to that and then we'll have the maximum updated most matured data in both MM-015 and in the maintenance studies and it will be -- or it is our objective to submit both MM-015 and the maintenance study CALGB and IFM in the U.S. once we get the completed Article 20 and a resolution of the whole package of the maturity of the data.

Yaron Werber - Citigroup Inc

Okay. And then secondly, when we look sequentially quarter-over-quarter, o U.S. I mean the growth was, it's 5.5%, it was around $19 million or $18 million. Can you quantify how much of that is Europe versus the rest of the world, outside of Europe?

Jacqualyn Fouse

Yaron, the one thing that I would say about Europe is you do have some impact in, specifically, in the French market with REVLIMID with what's going on there, which I think is to be expected given everything that's been gone on around the SPM issues and the IFM trial in the environment there in France. So that -- it's a big market for us in Europe. So the European growth for the whole portfolio was very good, but it would have been even better if France had performed in line with what we would expect under a more usual market situation. So I think that's probably the best way to think about it.

Operator

Our next questioner in queue is Bret Holley with Oppenheimer.

Bret Holley - Oppenheimer & Co. Inc.

I guess, my question is kind of a follow-up to that last question. I guess, you said that you have very rapid share gains in Europe in Line 2, 3 REVLIMID use. And I'm wondering what's driving that phenomenon and given the fact that newest data, obviously, is focused on front-line maintenance?

Robert Hugin

I think there's a couple of positive factors affecting it. One, you have other therapies moving more to first line so you have a positive impact by using more novel therapies and front line, which will give REVLIMID even a stronger position in second and third line. I think that the whole idea, the whole paradigm of continuous therapy continues to be validated in medical meetings throughout the period. So I think there's very positive data that really improves the whole messaging around continuous therapy and the dynamic of using innovative therapy as early as possible leads to longer duration and more effective patient treatment. So that's positive. The one offset that we have, that everyone needs to keep in mind is that in the second half of 2010 and even in the first -- in the second quarter of 2010, you saw price decreases in Spain and you had Germany's price decrease in the third quarter of last year. So we're offsetting those and continues to grow in spite of those, so that's a very encouraging sign.

Operator

Our next questioner in queue is Brian Abrahams with Wells Fargo.

Brian Abrahams - Wells Fargo Securities, LLC

Can you talk us through potential outcomes with respect to the impact in the Article 20 review on your existing label for REVLIMID in Europe? And how that might affect the size of your current reimbursable population there?

Robert Hugin

Our analysis of all -- and all the work that we've done for months really in our -- we believe strongly validates the benefit risk value proposition of REVLIMID, and we would not anticipate any impact on the opportunity that REVLIMID has in the existing label or longer term in broadening the label in many, many different ways in myeloma and in many diseases, in indications outside of myeloma. So we have not seen anything that would give us any reason to reconsider our outlook in myeloma or in other indications. So that's very clear with what we see. Now we, obviously, have -- we just continue to make sure that information is presented effectively, communicated to regulatory agencies around the world. So there isn't anything that would change our optimism, our investment in broadening and strengthening the REVLIMID franchise by diseases with myeloma globally.

Operator

Our next questioner in queue is Michael Yee with RBC Capital Markets.

Michael Yee - RBC Capital Markets, LLC

Just a follow-up on the Article 20. Is there actually a clock in terms of responding to the 100-day (sic) [120-day] questions, have you actually filed? Is there a gating timeline along that? And do you expect to resolve that around the end of summer, early fall? And at what point, if any, does impact stay in the course for the newly diagnosed EMEA filing?

Robert Hugin

Yes. As we've mentioned earlier, the Article 120 -- the Article 20 and the 120-day questions are separate phenomenon, but though -- and are being worked on in parallel. But you're not going to see a complete review of any regulatory package until the Article 20 procedure is completed and there are not specific timelines related to the Article 20. But I can assure you that we are working expeditiously to ensure that any and all questions are very rapidly and effectively answered and obviously, a little bit of a summer issue in terms of August, et cetera. But in terms of review of our responses and discussions, but it is moving along, I think, very appropriately. We do not feel there's any issues of it not being handled expeditiously. We're working very closely with the regulators, and we think it's a very appropriate timing of how things are going and we feel very good, again, to reiterate on the analysis that we've done, which is a very comprehensive analysis.

Operator

Our next questioner in queue is Ian Somaiya with Piper Jaffray.

M. Ian Somaiya - Piper Jaffray Companies

I had a couple of questions. First, on VIDAZA, Jackie, you mentioned that there's no generic entrant. I was wondering if you can confirm whether there's been a generic filing in the U.S.? Unrelated, but a question on VIDAZA, is the trial that you announced, the start of a REVLIMID-VIDAZA trial in AML, just curious why you would pursue a trial when there's potential for a generic entry at some point? And then, I had one last question, if you don't mind.

Robert Hugin

Look, we don't have any access to any information regarding any other regulatory filings outside to the ones that Celgene does than anybody else would, so I couldn't give you any more assistance on that. And I think that we have a number of strategies around VIDAZA, oral azacitidine and REVLIMID in a number of indications. And we think REVLIMID will be significantly enhanced in AML, whether it's used with a generic VIDAZA, a branded VIDAZA or oral azacitidine. So we will explore the combination that we think have the most patient impact. We think that combination is going to have a big impact on AML patients and we'll certainly benefit directly from REVLIMID, potentially VIDAZA and over time, potentially oral azacitidine. And outside the United States, also, we'll have significant value to us both in VIDAZA and REVLIMID.

M. Ian Somaiya - Piper Jaffray Companies

Okay. And just the last question was on, maybe a follow-up to Matt's earlier question on R&D spend. Just tracking the 25 Phase III trials that are ongoing, it looks like about 9 readout are finish in 2012, about 14 or 15 by the end of 2013. So is there a potential for a scenario where R&D spend on an absolute basis could be either flat or down? I know you've historically spoken to R&D declining as a percent of sales, but just curious from a standpoint of absolute dollar.

Robert Hugin

Yes. I think that one of things that we have tried to do and obviously, we will evolve our processes appropriately over time. But historically and where we are today is, we look at the value proposition and does that investment justify another dollar or not? And so there absolutely is the potential for an absolute dollar decline in R&D, but I'm not predicting that. I'm hopeful that the pipeline will accelerate, other opportunities will come along. But we have no -- we set no standard that we must invest in this, where we cannot have a decline. And if it's appropriate to have a decline based on the opportunities we have, we will not spend the money without, we believe, the proper value proposition.

Operator

Our next questioner in queue is Ying Huang with Gleacher & Company.

Ying Huang - Gleacher & Company, Inc.

So can you give us an update of the FDA safety review process for REVLIMID? And then, is that a factor why you're delaying the filing in the front line?

Robert Hugin

Just to make it clear, we work very appropriately to ensure that every regulatory agency around the world is fully kept informed of any discussions with any other regulatory authority in terms of data filing. And that there's nothing specific in any market that is different and just -- let's resolve the Article 20 process so that we can -- we'll disseminate that information and we disseminated -- as we -- once we provide it to 1 agency, we provide it to another. So there's nothing in the U.S. that is different than what we're trying to do and once we resolve the Article 20 process, we'll move expeditiously all around the world.

Operator

Our next questioner in queue is Eric Schmidt with Cowen and Company.

Eric Schmidt - Cowen and Company, LLC

Just as a follow-up to that safety review question, when might we see some resolution, and do you expect any update to the label to be made after that safety review? And then, second, just maybe try and kill the questions around the Article 20 resolution, do you think, Bob, that you're still on track for, say, a standard 15-ish month approval process in Europe given that you filed back in January of this year for the expanded label?

Robert Hugin

First, on the Article 20 and, in general, this whole area. I just want to reemphasize again that we have done incredibly comprehensive, detailed, substantive review of all available data on REVLIMID and do not believe that there's any issue out there that will prevent us from fully capitalizing on the potential of REVLIMID within myeloma and with every other indication that we pursue as a potential for REVLIMID. So there's nothing new that we would -- that we're aware of, that would have a deleterious effect on any type of regulatory clinical, commercial opportunity for REVLIMID. That being said, we got to finish the Article 20 process. We think it's moving expeditiously. There's not a specific date for that review, but we're doing everything and we don't sense in our regulatory discussions any type of issue that is not in a very constructive, engaged process of achieving this review in completing it. And when that's completed, then we'll be able to have the rigorous review about the MM-015 and the IFM and the CALGB. So specifically, the timeline there, there's nothing that we're aware of that would change the timelines that we've targeted. But we have to get through the Article 20 process, we have to go through the regulatory process. And then in the end the timeline and the actual label will be what it will be, but we're not aware of any date that, that should have any fundamental change to our ability in any of the areas that we're focused on.

Operator

Our next questioner in queue is Rachel McMinn with Bank of America.

Rachel McMinn - BofA Merrill Lynch

Two questions. Just one on capital deployment. Jackie, I think you've talked about $2 billion in cash being a comfort zone on the balance sheet. So as your cash flow continues to be really strong, should we expect you to continue to augment your buyback program, or how are you thinking about M&A? And then, sorry for this, but just on the U.S. and EU filing, is there -- I guess, what are the chances or do you think there's any reason, at this point, based on the questions that you have from EMEA that you would need to supplement your filing with the 020 data?

Robert Hugin

Let me answer the second one first. There are not any questions that we're aware of that would change our view on filing additional data or waiting for additional data. We have to go through the review process and the label will reflect what's in the data submissions, but we don't have any plans today to add to the filing of MM-015, IFM and CALGB. That being said, all along MM-020 is an incredibly important study because it really does challenge any type of melphalan initial therapy and that 1,600 patient study, as you know, finished accruing last year. And so we're going to see data in hopefully not too distant future than we think has the potential to really be definitive answer. So assuming we get the regulatory review of MM-015, IFM and CALGB, all around the world, we're not going to wait anywhere for the MM-020 data. But once we have the MM-020 data and if it's as positive as we hope it will be, we'll obviously look to augment those filings and those labels.

Jacqualyn Fouse

Rachel, into your question on capital deployment. We're going to continue to manage the capital structure dynamically and you'll see that for months just on an ongoing basis. So I think what you've seen is during the first half of the year is somewhat representative of how I would think about the second half of the year as long as we don't have some kind of a major M&A transaction. As you know, on both, we look at them, again, based on the value proposition and the strategic importance for Celgene and we'll do those as appropriate. If we do not have that kind of a capital need in any given year, we are generating very strong cash flow and we're going to use that to dynamically manage our capital structure. So that will be something that you'll just see evolve on a quarter-to-quarter basis. I've said it before, I'll say it again, we don't need to build up huge amounts of cash in our balance sheet. We're not going to do that.

Operator

Our next questioner in queue is Joel Sendek with Lazard Capital Markets.

Joel Sendek - Lazard Capital Markets LLC

I had a question on ABRAXANE. Can you help us understand when -- how soon you could get the approval in lung cancer? And are you specifically going after a label in the over 70 population and have you had discussions with the FDA about that, in particular, yet?

Robert Hugin

I mean, specifically to the non-small cell lung application we're absolutely pulling that together and we'll get that submitted as quickly as possible because we do expect a standard 10-month review. So the sooner we get that done, the quicker that ability for us to do that. And then we're looking at other opportunities. Clearly, our nearest term targets are both melanoma and pancreatic, even though we've got other targets that we think have the potential for both clinical and regulatory progress, ovarian bladder. But clearly, the next 2 are going to be the pancreatic and melanoma.

Operator

Our next questioner in queue is Thomas Wei with Jefferies & Company.

Thomas Wei - Jefferies & Company, Inc.

I was wondering -- another follow-up on the potential label that you might get in Europe. When you say the label will reflect the data that you've got so far, is there any indication from the questions or your interactions with the EMEA that they would look at the data from MM-015 and somehow draw the conclusion that REVLIMID is not offering any benefit as part of induction, and that in the transplant ineligible population, it should only get a label for maintenance only? Is that even possible to draw that conclusion scientifically without an arm that contains MP followed by REV maintenance? And then, just a second question on any plans that you're aware of been developed by cooperative groups to look at the question of a fixed duration of REVLIMID maintenance versus continuous REVLIMID maintenance through progression?

Robert Hugin

Obviously, any regulatory outcome is possible, and certainly a maintenance label is a possible outcome because the IFM data and the CALGB data are part for the filings. So regardless of MM-015, which is the base part of the filing. We do have the IFM and CALGB in there. So having a maintenance expansion, the label based on the European filing is a very possible outcome. I think that the analysis and the review of the MM-015 data may look at populations within that prior to transplant by age or other stuff that could have an effect on the actual upfront newly diagnosed label. But that will be part of the regulatory review, and so far from what we've seen it's going to be the kind of normal regulatory review that you would expect, that would go through all of these issues.

Operator

Our next questioner in queue is Shiv Kapoor with Morgan Joseph.

Shiv Kapoor - Morgan Joseph TriArtisan LLC

Most of my questions have been answered, but I wanted to find what kind of exposure you might have to southern Europe? And what kind of changes you've made, if any, to your bad debt expense from that area?

Robert Hugin

Let me just -- I just want to make sure -- before we answer that question that we just fill-in one of the previous questions, a little bit about studies that we'll look at, fixed duration of maintenance therapy versus continuous maintenance therapy to REVLIMID post-transplant. Obviously, the data that we're looking at -- we analyze all the subsets of the existing data and so far, what we seem to see is that continuous therapy seems to have the greatest potential for patient benefit. But it is a good question, our studies is being planned and looked at -- that will look at 18 months, 2 years of REV treatment versus continuous in the post-transplant setting. So I think over time, over the next 5, 6 years, you will see a day that will come out to help answer that. But initially, our -- we think as we look and as people examine this data, it's very possible that the conclusion will be -- that in certain populations you may want to limit. But for the most largest percentage of the population, you want to have continuous therapy. So that's what we have with this question.

Jacqualyn Fouse

Right. So just on the southern European exposure, market has gotten particular attention is being Greece, we used a distributor in Greece, so we have minimal, minimal exposure there and all of that is current on -- if you look at Spain, Italy, Portugal, those countries the company has always been quite diligent in how -- in managing so we're seeing visibility continue to do that. So if you look at our days sales outstanding by country, which you don't have visibility to, but you would find that from those countries, obviously, they are a bit longer than they are for countries like France and Germany and the others. But they are lower than the benchmark for the typical payment terms in those countries. So we manage the exposure very closely, and we are diligent about staying on top of that. Our relative exposures are quite modest, actually.

Operator

Our next questioner in queue is Howard Liang with Leerink Swann.

Howard Liang - Leerink Swann LLC

Have you seen a positive impact since the second part of this -- second quarter after CALGB overall survival data? And are you able to communicate a highlighted data to physicians?

Robert Hugin

I think the impact of that data is and will be quite positive. Clearly, the timing of the data -- there hasn't been much time and we really don't have internal resource or research that would indicate what the impact is. Over time, we'll have third-party research and we'll be able to do better analysis. I really can't give you much of a -- what the near-term impact has been. And the communication of it, obviously, the most value to the marketplace will be peer-reviewed publication of the data. That's something that the scientific community is working on and that will be a big advantage to us when it's peer-reviewed published.

Operator

Our next questioner in queue is Sapna Srivastava with Goldman Sachs.

Sapna Srivastava - Goldman Sachs Group Inc.

I had just a couple of quick clarifications. One on VIDAZA, could you help us understand what's the exposure to x U.S. and the U.S. sales? And secondly, just with the debt ceiling debate, do you have any comments on dual eligibles, and is there any concern that, that may come to fruition this time versus healthcare reform? And that's basically it.

Jacqualyn Fouse

Sapna, so just on your VIDAZA question, I mean, obviously the growth is mostly outside of the U.S. So the product is doing extremely well and what we start to see is in terms of the overall global sales for VIDAZA, it will be shifting closer and closer to -- I mean, more in more in favor of international and that will be significantly accelerated when we see generic entrant in U.S. and that's quite obvious to everybody, I think. So if we look at the numbers for Q2, the split is roughly 50-50. And again, we said, the overall global growth of 23% is driven by international.

Robert Hugin

And on dual eligibles, so we expect -- if something were to happen, it would have a modest impact on us. That, I think, if you look at the Wall Street Journal on Tuesday, I believe it was -- there are very -- a number of op-eds and editorials about the importance of the value of what Medicare Part D has done to senior citizens and to lowering cost of prescription drugs and the impact on healthcare systems, et cetera. So there's very strong support for the value of Part D and we do not anticipate. Though deficit-reduction is a very important issue, we do not think that Part D will be part of that deficit-reduction here in the near term and we think the compelling value of Medicare Part D will -- it will retain its position for a long time.

Operator

Next questioner in queue is Maged Shenouda with Stifel, Nicolaus.

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

Can you just discuss your current thinking about smoldering myeloma development with REVLIMID? It was absent from your prepared comments.

Robert Hugin

Yes, I appreciate you raising that, Maged, it certainly wasn't absent for any messaging point of view. We think that if your -- with survival data from a high risk smoldering population, it was very, very intriguing and very important for us because if you can really -- we continue to -- we're going to explore this aggressively in the clinical and regulatory arena and that the ability to identify those patients that will clearly have a survival advantage and that population is an untapped market for us and position REVLIMID very nicely in all segments of myeloma. So I would not read anything into our comments. It was just that there hasn't been any new data since the last time we are working with clinical programs. And we're working to both in the U.S, where their studies are open and in Europe to expand our knowledge on this and hopefully, the data will continue to show what a very encouraging initial data has shown. So it is something of high priority to us and please don't read anything to the absent in this one quarter's comments.

Operator

Next questioner in queue is Ian Somaiya with Piper Jaffray.

M. Ian Somaiya - Piper Jaffray Companies

Just a follow-up on apremilast. Given the data, what were you expecting next year? I'm just curious if 1 of those 2 scenarios plays out, where apremilast is equivalent to the methotrexates of the world, or the other scenario being it's equivalent to many of the biologics? What is the market opportunity under those scenarios, and if you can just provide some comments related to it?

Robert Hugin

Yes, I think if you look at the control Phase II data, it's very encouraging what you saw, especially about when you go from 20 milligrams twice a day to 30 milligrams twice a day, the increase in efficacy was very little change in the very encouraging side effect profile. So you've got that why we're doing this Phase III trial. And as a reminder, we're doing Phase III trials in psoriatic arthritis, in psoriasis. We're doing a very large Phase IIb in rheumatoid arthritis that is the completed accrual here. In the very, very near term, we'd see data on that as early as the first half of next year or middle of next year to see what we can do. And that indication, for us, I think we've mentioned that we're expecting at ACR to have our first data from ankylosing spondylitis and based on that data, which we've already seen, we've had regulatory discussions around the world about the Phase III program for ankylosing spondylitis, so we'll be -- and when that data comes out and we finished those discussions, I wouldn't be surprised for us to see us get moving to Phase III there. So obviously, the positioning of apremilast based on the data is going to be very important. But if the data comes out where we think it will come out based on the benefit, the activity versus the side effect profile, this has a high, high market opportunity to be used pre-biologics, a very safe oral therapy, likely to be less expensive in biologics, diffuse it for a sustained period of time. So again, we've got to have the Phase III data, but all of the indications we're pursuing are -- certainly more than $1 billion in opportunity for each of those indications.

Operator

Next questioner in queue is Gene Mack with Mizuho Securities.

Gene Mack - Mizuho Securities USA Inc.

My questions was answered.

Operator

There is another questioner, Maged Shenouda with Stifel, Nicolaus.

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

Well, can you discuss your unit growth trends for x U.S. REVLIMID figures for the second quarter?

Jacqualyn Fouse

Yes, well, let me just make some general comments. We don't -- I can't give you that specific breakdown, but you can think about what we have told you particularly with respect to Europe and the price evolution environment there where every year for that basket of countries we get some form of price decline. You can also triangulate your thoughts back to our market share numbers that we give you on some of the slides and make some inferences about unit growth, because we're growing very nicely despite price decreases that we see every year on that portfolio of countries.

Operator

Geoff Porges, Bernstein.

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

One thing we haven't discussed is duration. Could -- in the past, you've suggested that duration was increasing in the U.S. by about 1 month a year, and that you're also seeing increases in Europe. Could you -- you've given us some perspective on penetration and share, but could you talk a little bit about whether that duration trend is continuing or even accelerating with the maintenance data?

Robert Hugin

Jeff, I would say that the data that we have most recently looked at is a continuation of that trend that you outlined, and I think that is continuing in the markets generally. And I hate to be obtuse about it, it's just that it really is not in our interest from the kind of discussions we have with payers, et cetera and competitors in the field, that it's not something we think is appropriate for us to share the specific data. But there isn't been any track change at all in the very positive momentum and trends we're seeing in duration.

Jacqualyn Fouse

So thank you, everybody. I think that we don't have any more questions in the queue. We appreciate you spending the time with us on the call today, and we look forward to speaking with you soon. Thank you.

Operator

Ladies and gentlemen, this does conclude today's program. Thank you for your participation, and have a wonderful day. Attendees, you may disconnect at this time.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Celgene Management Discusses Q2 2011 Results - Earnings Call Transcript
This Transcript
All Transcripts