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Celgene Corporation (NASDAQ:CELG)

Q1 2006 Earnings Conference Call

April 27th 2006, 9:00 AM.


Robert Hugin, Chief Financial Officer, Senior Vice President, Secretary

Sol Barer, President, Chief Operating Officer

John Jackson, Chairman, Chief Executive Officer


James Reddoch, Friedman, Billings Ramsey

Geoffrey Meacham, JP Morgan

Thomas McGahren, Merrill Lynch

Yaron Werber, Citigroup

Ian Somaiya, Thomas Weisel Partners

Matthew Osborne, Lazard Capital Markets

Sapna Srivastava, Morgan Stanley


Good morning, my name is Beth and I will be your conference operator today. At this time, I would like to welcome everyone to the Celgene First Quarter Conference Call. Operator Instructions Thank you. Mr. Hugin, you may begin your conference.

Robert Hugin, Chief Financial Officer, Senior Vice President, Secretary

Thank you, and good morning. I'm Bob Hugin, Celgene's Chief Financial Officer. And thank you for joining us today. With me are John Jackson, our Chairman and Chief Executive Officer; and Sol Barer, Celgene's President and Chief Operating Officer.

Before we begin, I will review our Safe Harbor statement. Certain statements made during this conference call may be forward-looking and are made pursuant to the Safe Harbor provisions of the Securities Litigation Reform Act of 1995. Certain forward-looking statements which involve known and unknown risks, delays, uncertainties and other factors not under our control may cause actual results, performance and achievements to be materially different from the results, performance or other expectations implied by these forward-looking statements. These factors include the results of current or pending clinical trials, our products failure to demonstrate efficacy on an acceptable safety profile, actions by the FDA, the financial condition of suppliers, including their solvency and the ability to supply products and other factors detailed in our filings with the Securities and Exchange Commission, or referred to in the press release issued this morning.

Now to the results. We're very pleased with the first quarter results announced this morning. Excellent progress was achieved across all business units of the company, highlighted by the initial results from the launch of REVLIMID. Total revenue for the quarter rose to nearly $182 million, a 62% increase over the year-ago quarter, and up almost 22% from the $149 million from the fourth quarter of 2005. This sharp rise in revenue was a result of a significant increase in product sales and higher royalties from our Focalin/Ritalin collaboration with Novartis.

Product sales were strong for all of our products. Total product sales increased to $160 million for the quarter, up from $98 million in the year-ago quarter, and up nearly 25% from the fourth quarter of 2005.

THALOMID sales increased to a record $107 million, a 21% year-over-year rise. With new data presented at December's American Society of Hematology meeting leading to further increases in usage in newly diagnosed multiple myeloma patients.

REVLIMID product sales totaled $32.4 million for the two and one half months since the mid-January launch, with MDS accounting for approximately 70% of dispenses, multiple myeloma accounted for the majority of the remaining dispenses. Though wholesalers may not inventory REVLIMID, we estimate that contracted specialty pharmacies have established inventory positions of approximately $5 million to accommodate patient demand.

ALKERAN sales of $18.3 million were in line with fourth quarter sales and more than doubled the first quarter 2005 level. Although significant potential variability remains, based on the results of the first quarter, we would expect ALKERAN sales for the year to be in the $65 million to $70 million range.

Combined market share gains for Focalin XR and Ritalin LA achieved by the Novartis commercial team contributed to the 18% increase over the fourth quarter of 2005. The combined Focalin/Ritalin family of drugs now command an overall 10% market share in the once-a-day attention deficit market, with an even higher market share among neurologists and psychiatrists.

Our R&D expenditures are focused on fully capitalizing on the potential of REVLIMID in a range of indications and accelerating the development of our IMiD pipeline and other programs. R&D spending increased to a little over $50 million in the quarter. We will continue to invest as appropriate to advance these promising programs.

During the quarter, we launched REVLIMID in MDS 5q Deletion, our first step in building a franchise in MDS. We made significant progress in educating and building a market where for the most part supportive care has been the only option. We are committed to building a major MDS franchise. At the same time, during the quarter we have made meaningful progress refining our launch preparations and strategies for multiple myeloma. We are eagerly anticipating FDA action on our supplemental application.

We also made substantial progress in building our international capability. Our global regulatory efforts are focused on making REVLIMID available in all major markets around the world. We are pleased that the review of our European marketing application for MDS is advancing and that our multiple myeloma application was accepted for review in Europe. We are developing our plans in a large number of international markets. To capitalize on the regulatory progress in these markets, we're building world-class commercial regulatory clinical and support organizations to maximize the opportunity following approvals.

SG&A expense totaled $54.3 million for the quarter, an increase of less than $1 million from the fourth quarter of 2005. This combination of revenue and expense produced an adjusted operating profit of $47.2 million, and an adjusted earnings per share of $0.09. Cash and marketable securities increased by about $45 million over year end, and totaled almost $773 million at quarter end.

The results of the quarter reflect our goal to produce both strong commercial results and to accelerate the development of our pipeline. As we look forward to the remainder of the year, we anticipate that we will continue to make appropriate investments in our clinical programs and international build-out as supported by growing revenue. Those significant uncertainty as to regulatory time lines and launch trajectories make it difficult to project specific product revenue. Our internal targets for the year are consistent with the current EPS consensus of $0.43 per share. Should product sales increase above our internal target? We will accelerate our investment in our key clinical programs and international build-out. Let me now turn the call over to Sol.

Sol Barer, President, Chief Operating Officer

Thanks, Bob. As you've heard, the results of the first quarter were very positive from both financial and operational perspectives. Let me add my perspective to these results. Starting with REVLIMID, our commercial team formulated an outstanding strategy and plan for the launch of this new product and the MDS 5q deletion indication, and have been executing such in a rigorous and effective manner, resulting in net sales for the quarter of $32.4 million. Although the initial results over the two and a half months of the launch reported today have been quite encouraging, I should note that we are still in the early days of establishing an MDS franchise beginning with the 5q deletion indication, and are very actively engaged in the building and expansion of an MDS treatment market via education and the presentation of clinical data.

Launching a new drug in a new indication is always a challenge. The successful launch of REVLIMID in MDS is all the more impressive in the context of the additional challenges pertaining to the implementation of our proprietary distribution system RevAssist, while at the same time, facing a major healthcare reimbursement shift, namely Medicare Part D. I'm extremely pleased that our commercial, medical and regulatory teams successfully implemented RevAssist, including enrolling over 7,000 physicians, validating specialty pharmacies, and educating patients. This was and is all the more challenging when implemented at the same time that the entire healthcare system has been dealing with the introduction of Medicare Part D, a new reimbursement paradigm.

Although the introduction of this prescription drug benefit under Medicare should provide exceptional long-term benefits to American seniors, its implementation has been difficult for patients, healthcare providers, and to companies serving these constituencies. Nevertheless, although it is still very early, we have been very fortunate under this program to obtain very broad reimbursement for REVLIMID and are continuing to work very diligently to ensure continued broad access to this drug.

Turning to THALOMID, the record THALOMID revenue showing an increase of 21.3% year-over-year, also significantly impacted the overall results for the quarter. THALOMID continues to be very widely prescribed as a first-line treatment for multiple myeloma based on continuing positive clinical data reported at major medical meetings, such data clearly influencing its use by hematologists and oncologists. For example, at the most recent American Society of Hematology meeting, clinical investigators reported unprecedented data from recent and ongoing clinical trials on THALOMID, including two Phase III studies reporting survival advantage for elderly newly-diagnosed multiple myeloma patients treated with oral combination thalidomide therapy.

We expect new and maturing THALOMID data to continue to be reported in major peer-reviewed publications and medical meetings, including ASCO, the European Hematology Association, and of course, ASH. Indeed, the upcoming ASCO promises to be very positive for Celgene. ASCO is traditionally a meeting focused on solid tumor advances and it is therefore, particularly encouraging for us to note the increase in number of REVLIMID oral and poster presentations in several hematological indications: myeloma, MDS, myelofibrosis, amyloidosis, and CLL. In total, there will be approximately 24 oral and poster sessions on Celgene products, including 11 discussing REVLIMID and 13 on THAL, including a plenary session discussing the Malfolan Prednasone THALOMID regimen in newly-diagnosed multiple myeloma. Important sessions focusing on the role of REVLIMID's activity in hematological diseases include the REV Malfolan Prednasone regimen in newly-diagnosed myeloma, overall survival advantage in the 009 REVLIMID dex pivotal trial, perspective subgroup analysis of REVLIMID's pivotal trials in myeloma with respect to prior therapy, an update of a Phase II trial in relapse or refractory CLL, results of a Phase II study in amyloidosis, a Phase II study in myelofibrosis, new combination therapy for REVLIMID and myeloma, advantage of early use in myeloma, as well as presentations and posters focusing on pharmacal economics and safety. Additionally, very preliminary reports in renal cell carcinoma are also being presented.

Highlights of the presentations and posters on THALOMID include the plenary session on the major Malfolan Prednasone THALOMID versus Malfolan Prednasone trial in newly-diagnosed multiple myeloma and a major multisensor ECOG trial comparing THALOMID and Dexamethasone versus Dexamethasone as initial therapy in myeloma. In addition, we view the upcoming European Hematology Association meeting in June as positive, including a presentation on REVLIMID's activity in relapse refractory aggressive non-Hodgkin's lymphoma.

Based on the results of these trials we are currently pursuing, a detailed clinical and regulatory strategy to fully explore and develop REVLIMID's significant potential as a broad-based treatment for hematological malignancies and cancer. Our current regulatory filings encompass myelodysplastic syndromes and multiple myeloma, and I will discuss these global initiatives first. In the U.S., our PDUFA date for sNDA for REVLIMID for the treatment of previously treated myeloma is June 30th. And we're currently formulating detailed plans for this launch.

We are also proceeding with our international regulatory strategy for REVLIMID. A more aggressive strategy in Europe, as was in the U.S. is based on our 5q deletion MDS data, and as part of the review process, we are currently responding to the EMEA's questions. The review of our multiple myeloma submission to the EMEA began on March 29th. We also submitted the 5q deletion data in Switzerland with a review initiated at the end of February, and are planning to submit the multiple myeloma data this quarter. We are also in detailed discussions with regulatory authorities in a number of countries around the world, including Japan, Australia, Canada, as well as various other regions.

We are also excited about the potential to expand the global market opportunities for REVLIMID beyond MDS and multiple myeloma based on promising initial results, as well as significant unmet medical needs. Chronic lymphocytic leukemia and non-Hodgkin's lymphoma are currently priority indications for REVLIMID. Focusing on chronic lymphocytic leukemia, there are approximately 100,000 people diagnosed with CLL in the United States alone. There are currently several studies evaluating REVLIMID as a treatment for relapse refractory in newly diagnosed CLL.

Based on the ongoing clinical results and on consultations with leading investigators, we have formulated a three-pronged approach to CLL. This year we will initiate a controlled randomized dose comparison trial in the treatment of relapse CLL. In addition, protocols for two other randomized double-blind controlled trials will be submitted for review by the FDA under a special protocol assessment namely, elderly patients with untreated symptomatic CLL, in which REVLIMID will be used to induce or maintain a remission, and relapse patients who have responded to a salvage regimen in which REVLIMID will be used to maintain the remission. We will be providing additional information for these trials as the protocols are finalized under the special protocol assessment program.

Non-Hodgkin's lymphoma is another incurable hematological malignancy with significant unmet medical needs, affecting close to 200,000 people in the United States alone, greater in prevalence to multiple myeloma, MDS and CLL combined. As a result of encouraging initial data from Celgene-sponsored studies evaluating REVLIMID's clinical potential as a single agent in indolent and relaxed or refractory aggressive NHL, we are advancing our regulatory plans for the development of REVLIMID as a new approach for the treatment of NHL. We expect to initiate additional trials, including two Phase III registration studies, to evaluate REVLIMID plus Rituxan versus Rituxan alone in elderly patients with untreated aggressive NHL, and to evaluate REVLIMID plus Rituxan versus Rituxan alone in patients with relapse or refractory aggressive NHL. We will be submitting protocols to the FDA for these for review under a special protocol assessment later this year, and will provide more details as the protocols are approved.

We are also obtaining preliminary positive clinical data on other blood disorders with significant unmet medical needs, such as amyloidosis, myelofibrosis, acute myeloid leukemia and T-cell lymphoma. These are significant unmet medical conditions, representing an aggregate more than 60,000 people in the U.S. We will evaluate the clinical data in these indications, as well as an additional indications including solid tumors as the REVLIMID program advances.

Although the opportunity for REVLIMID is significant, it is but one compound in the IMiD class. This class, which is proprietary to Celgene has unique capabilities to profoundly affect a number of biological pathways, potentially leading to the treatment of diseases which are difficult to currently treat. We now have the ability to design IMiDs to provide specific biological responses.

We have a number of compounds that are either in the clinic or rapidly advancing to human trials. We advanced our strategy for the next IMiD, CC 4047, formerly known as ACTAMID during the quarter. Specifically, we are moving forward on a regulatory track in myelofibrosis and are finalizing the protocol for our first trial in sickle cell anemia. We will update you on the progress in these two indications, as well as in another potential indication: small-cell lung cancer, later this year. We will also be reporting more about the additional IMiDs CC-11006, CC-11050, throughout the year.

I should also note that we are advancing our psoriasis trials with our oral TNF-alpha inhibitor, CC-10004. We are increasing the dose and extending the duration of treatment over the initial positive Phase II trial in a controlled multi-centered dose comparison Phase II trial in moderate to severe psoriasis.

Although we do not have the time today to review the status of our earlier stage programs, substantial progress has been made in our kinase, ligase and stem cell programs during the quarter. This is a very exciting time at Celgene. We are very pleased with the initial phase of the launch of REVLIMID and are looking forward to expanding our commercial efforts into multiple myeloma, following regulatory approval. We believe that REVLIMID can become an important agent, in not only MDS and myeloma, but in a wide range of hematological malignancies and cancers. We are committed to fully exploring this potential. We are also aggressively advancing our pipeline, and our research program continues to yield potentially very significant compounds.

We are energized by the progress achieved to date across all functions and businesses of Celgene. We understand that focus and execution will be critical to the achievement of our significant milestones for 2006, and look forward to updating you throughout the year. Let me now turn the call over to John for his closing comments.

John Jackson, Chairman, Chief Executive Officer

Thank you Sol. It is indeed an exceptional time for Celgene. The results of the quarter were impressive, with the initial phase of the REVLIMID launch very encouraging. As you heard, we are committed to fully researching the potential of this remarkable compound. The success of REVLIMID further strengthens both our resolve and the resources available to accelerate the development of our IMiD pipeline and other key programs. Focus on long-term value creation continues to be our corporate priority.

As you know, this is my last conference call as CEO. It's been a fulfilling 10 years. And I want to thank many of you for your support. We've made great progress and are making a difference in the lives of cancer patients around the world. The reason Celgene is one of the very best pipelines in the industry is that we have consistently invested in our future, and we will continue to do so.

It's been a great partnership with Sol, Bob and the entire team at Celgene. They're well-prepared to take responsibility and lead the company as I step back to the Chairman's role. I've never felt better about the future of Celgene. Operator, let’s open the call for questions.

Question-and-Answer Session


Operator Instructions Your first question comes from Jim Reddoch from FBR.

Q - Jim Reddoch

Thanks for taking my call, very impressive first quarter of roll-out sales for REVLIMID. My first question is about REVLIMID, particularly in myeloma, I was little surprised that it was as high as 30% of sales in myeloma. Are these first-line patients who are ineligible for the expanded access program? Or are they relapse refractory patients who didn't, for some reason, get on the extended access program? And then I have a follow-up on NHL. Thanks.

A - Robert Hugin

Okay, we’ll first on the REVLIMID and the MDS myeloma -- the MDS was around 70%, myeloma was the majority of the 30% but not all of it, more -- I think it was a little over 20%, is what it was. And we're not able to characterize what stage of disease, though clearly, we have worked very hard to open additional sites in the expanded access program so that people and physicians and patients who want to -- who have been previously treated myeloma and want to get access to 25 milligrams on a free basis, something we've been very committed to doing, and we’ll continue to do that right through the approval of REV in myeloma. Obviously, if patients want to and physicians decide it's in their best interest to go for commercial drug and get reimbursement, that has happened to some degree in the quarter. But clearly, our focus has been on MDS and will continue to be that until we get the myeloma approval.

Q - Jim Reddoch

And the dose is 25 milligrams for those people who are using commercial drug?

A - Robert Hugin

Not completely. It's a range of -- one of the reasons why we have worked very hard to keep the EAP open and to ensure the rapid accrual of the many clinical trials in REVLIMID in myeloma, is that we really believe it's important that once the drug is approved, the 25 milligrams is likely to be the approved dose. That's what the clinical trials -- we used that with a relatively low dose reduction, I think less than about 20% of the patients even have any type of dose reductions in that area. And so we think it's important that people and physicians and patients use the right therapy and the right protocol for doing the drug. So, it is not all 25 milligram from what we've seen in the first quarter. People have used 25, have used smaller -- lower numbers also. So that's one of the reasons why we're hopeful the FDA will move quickly. But we will keep the EAP open straight through and keep encouraging accrual in the many clinical trials in that. So what was your NHL question?

Q - Jim Reddoch

Thanks, Bob. I guess for Sol, this sounds like a pretty extensive market expansion strategy in CLL and NHL. And just with respect to one of the two Phase III studies you mentioned in NHL, it sounds like it's elderly patients first-line elderly patients, I guess those patients are not getting our CHOP right now. And what percent of the first-line aggressive patient population do you think is elderly? Thanks.

A - Sol Barer

It was what percentage of -- I didn't get the last part.

A - Robert Hugin

What percentage of the aggressive NHL population is this elderly -- I guess, chemo-intolerant patient population.

A - Sol Barer

Okay. So let me start with the second part in percentage -- it's hard for us to estimate, but roughly the 15% range. And the rationale for using it initially in elderly patients is the fact that they cannot tolerate the standard regimens, the Rituxan, and CHOP, etc. So this is clearly an underserved patient population. And hopefully, REVLIMID will be very effective and safe for these patients to use. And hopefully will lead to something relatively quickly, although in terms of time lines, it's very difficult for us to estimate that. But this is a trial whose protocol in this year will certainly be going to the FDA under the special protocol assessment. And I can probably be more explicit as we get feedback from them.

Q - Jim Reddoch

Thank you.


Your next question comes from Geoff Meacham from JP Morgan.

Q - Geoff Meacham

Good morning, guys. I also wanted to add my congratulations. You mentioned second trend of scripts for MDS, Bob. Can you give us a further breakout of that?

A - Robert Hugin

We would certainly look at that. The problem is -- or the way RevAssist operates and the way the prescriptions are written, it's an MDS indication. So we don't have information on it, we do our own assessment. But that's very early-stage and there isn't anything official. So the only indication that we get on the script is MDS.

Q - Geoff Meacham

Okay, and just as it relates to the 30%?

A - Robert Hugin

As I mentioned, a little bit more than two-thirds of it was myeloma. But beyond that, there were wide range of hematological malignancies, some of the ones that Sol mentioned, that we are very much focused on for a clinical trial study in, and we're also -- even in some of the solid tumors, we've seen prostate cancer usage, other solid tumors also.

Q - Geoff Meacham

Just any color that you can provide -- reimbursement for commercial REV on an off label?

A - Robert Hugin

I'm sorry?

Q - Geoffrey Meacham

Any color that you can provide with respect to reimbursement on an off-label basis for commercial?

A - Robert Hugin

Yes, I think that -- obviously for that -- for the scripts that were dispensed here off label, people could pay cash for. For the most part, our understanding is those are reimbursed, obviously, expenditures. And we're working very hard to ensure that we have the same type of reimbursement success -- or patients have the same type of reimbursement success that we have with THAL, where we have multiple compendia listing for different indications for THAL to lead to broader reimbursement. And we do think that our clinical trial program -- over 50 REVLIMID trials now will produce peer-reviewed publications that will support it over time. But we are encouraged by, despite the difficult marketplace in terms of Medicare Part D, that patients are getting reimbursed for a wide range of indications today. And it is our job over time to support that with good clinical data and peer-reviewed publications and major medical presentations to ensure that patients continue -- and physicians are capable of prescribing and getting reimbursed for the indications they believe the drug is helpful to their patients in. And so that's about all we really can tell you at this point, but it's certainly -- we believe clinical datas what will drive usage. And we're committed to getting as broad and expansive body of clinical data supporting the usefulness of REV.


Your next question comes from Tom McGahren with Merrill Lynch.

Q - Thomas McGahren

Thanks. Two quick questions. First one on your European commercial strategy. If you could update us on the idea of still going it alone in Europe, and if you're going full bore in that way? And also if you could talk about the European or western world trend -- sales trends for THALOMID. And the second question is when do you think REVLIMID sales data would be available? Thanks.

A - Robert Hugin

Well, on the first front, we're very encouraged by the progress that we're making outside the United States, specifically in Europe. But also, we're moving forward on strategies in Canada, Australia, and Japan, as Sol mentioned. In Europe, we have been able to attract very high-quality people to lead the effort from a very wide range of companies and academic backgrounds. We've just -- in Germany, one of the leading thought leaders in the myeloma space has joined us to be a -- on a medical director in Germany. So, from a wide range of sources -- very, very high-quality people are joining us. We're very much focused on the leadership in the countries which we have now put in place in all of the major countries in Europe. And focused on the key medical directors that really have, from a functional point of view, in terms of what we need to do is; one, continue to build-out our clinical trial expertise, because we're committed to broadening our clinical trials throughout the world, specifically in Europe; develop very deep relationship with the key thought leaders in Europe; and having medical professionals and people who are expert in hematology to lead that effort in all of the countries, is a very important consideration. And we've been very fortunate to have very important leaders in those communities, in each of the major markets come and join us -- and also experts on reimbursement and pricing to ensure that, as our regulatory team in Europe, which is also obviously an important component along with clinical and commercial leadership, is that we have the kind of -- once we have approvals, that we are successful in getting reimbursement and the appropriate pricing for the drug. The actual commercial team in terms of sales and people in the field, we obviously have to have market leadership there and advance the plan and strategy. The actual distribution will be late in the process as the regulatory timelines become clear. So I can tell you -- we obviously, have ways to go. And Sol outlined the regulatory strategies there. And that we are making progress. But as he's mentioned, the MDS is a more aggressive strategy, as it was in the U.S., based on the 5q data. The myeloma review is moving forward in Switzerland and in Europe and other countries you'll hear about throughout the course of the year. But we've got to get that done. But I think we're just feeling that the right people have joined us, they're doing a great job putting together a very strong plan, and the commitment on our part in terms of creating long-term value, is through executing through your own organization, that's where a company retains the full economic value of the products. And that's our commitment there. And we're going to look at every other marketplace with that intention where it's appropriate. And if it is appropriate for us to partner other markets because we don't think we can compete effectively and really do justice to the drug and to patients in those markets, we will partner. But clearly long-term strategy is to go alone and build it for ourselves. In terms of THAL outside the United States, that really is something that is a fermion in the markets that we've licensed about to THALOMID to -- that's really something you should hear directly from them. I don't think it's appropriate for us to comment on that, that's really their strategy. We hope they're very successful, since we have a fairly significant economic stake in those revenues. And the last thing on REV; I think that as trends become clear in the usage of REV over the coming months and that we cleared with the commercial experts at Celgene so that we're not providing information that is not competitive or could be used in a way to harm the product by people who compete with us, that we would look to be as forthcoming as appropriate.


Your next question is from Yaron Werber with Citigroup.

Q - Yaron Werber

Hi good morning, congratulations on a very good quarter. I wanted to start with -- to the extent you can, can you just give us a little bit of an indication as to what is your current market share of REVLIMID in MDS? And also based on the preliminary anecdotal experience, kind of what are you hearing from docs out there regarding toxicity that's well-publicized for the product?

A - Robert Hugin

I'm sorry, the second part of the question?

Q - Yaron Werber

What's the early experience showing you relating to the hematological toxicity of the product? Is it pretty much inline with the label or what are you hearing from docs?

A - Robert Hugin

A couple of things. One of the things that we're committed to is that when you think about MDS, it really has been, other than in the very high risk patient population with the use of laser with a reasonable percentage of those patients, it has been a marketplace where supportive care has been the only option for the physician and the patient. So we really have been embarked on a multipronged strategy here. And several important of those initiatives have been, first, to educate the market about the fact that supportive care is – is that's what it is, it's supportive care. It really is not making a difference in the disease or a clinical benefit for the patient. And we have a product here that now has demonstrated, through FDA approval, a clinical benefit in a population -- a certain population of MDS patients. We need to educate people about that clinical data and recognize that there's a benefit of treating patients that have previously not been actively treated. Also, we have to recognize that one of the things that we're concerned about the long-term success of REVLIMID is using the drug successfully, especially the first number of patients. So, our team in the field has been very aggressive to ensure that the physicians understand how to manage the patients, especially in the first eight weeks, with weekly blood tests. And as we evaluate the feedback we get from our different market research, we look very closely. Our physicians saying that they're hearing about how to manage the drug safely. On the positive side of that, the feedback is that we're getting is that physicians have gotten that message, they hear the message, they listen to it, they are obviously – not everybody is going to listen as closely as others. But we feel very good that the side-effect profile that we are seeing, both from a reported basis and anecdotally and in conversations with all the thought leaders and the community physicians, are very much consistent with the side-effect profile we saw in the trial. And nothing new or troubling has come to attention. And, in fact -- and again, I don't really like to say this, but we're seeing that people seem -- the evidence initially is, that they feel very comfortable that they can manage the side effects effectively as we had anticipated. But we're not going to let up. We're going to continue to focus on ensuring that people understand this is a potent drug, it has great activity. And to really have long-term success, you need to get that -- make sure the patient gets through the first couple of months. And what we're seeing with drug holidays, if anything is slightly less than anticipated, but very much consistent with what we would have expected. So again, it's early in the launch of the product. We're careful -- we don't want to draw too many strong conclusions about the long-term. But I think we're focused on what the right messages are. And the feedback so far has been consistent with what those messages were in our expectations. But we're going to continue to be careful about it. And again, I think we're going to be careful about drawing too many long-term conclusions from two and half months -- maybe now, three and half months of experience.


Your next question comes from Ian Somaiya with Thomas Weisel Partners.

Q - Ian Somaiya

Thanks for taking my question. And I also wanted to add my congratulations. A couple of questions. First, just on the reimbursement side; did you see any uptake in Part D beneficiaries in REVLIMID?

A - Robert Hugin

Yeah and obviously it's important with Medicare Part D, it has been a very difficult time for patients to get through that process, but we are clearly part of the Medicare Part D. And patients are getting reimbursed under Medicare Part D. The key issue with that, whether it's Celgene or other companies is that the doughnut hole is a very important and difficult thing for patients to get through, especially senior citizens with such a large payment required after the initial -- once you get through the initial threshold and get to the doughnut hole. We think that's something that the states have been very helpful to. Many states have programs to assist senior citizens through that doughnut hole, which is allowed. We are obviously not allowed at all to help people through that doughnut hole, states are. And a lot of state programs are helping patients through that -- that are appropriate, that are above the Medicare threshold -- Medicaid threshold, but are not eligible above Medicaid, but have no other assistance for the doughnut hole. And we will continue to be supportive of independent third-party foundations that are committed to providing co-pay assistance to these types of patients, whether it be Medicare or other insurance programs to help them with co-pays for both myeloma and MDS. So generally, it's been a positive. You don't see a lot of the benefits, in terms of existing patients switching to Medicare until two or three quarters later. There's a lag in the whole gross to net effect. And we'll hopefully see modest positive impact in a couple of quarters from that. In terms of REVLIMID, it is very difficult for patients. But we'll keep our fingers crossed that our -- that the third-party providers that we have that assist patients and physicians and caregivers to help people through the work with Medicare and co-pay assistance and free drug -- because we're still committed to keeping our free drug programs, make the drug as available and access as wide-ranging for both THAL and REV. And we still have -- I don't know what the number is, but eight to ten million senior citizens who haven't signed up for Medicare Part D yet. I hope anybody who knows any of those people, May 15th is approaching, there's a penalty if they don't sign up by then. So it’s really in everybody's interest, not just from a commercial point of view, but for the benefit of protection of those seniors, to get into the Medicare Part D program. We have time operator, for two more questions.


Your next question is from Matt Osborne with Lazard.

Q - Matthew Osborne

Great, good morning. Thanks for taking the question, and congratulations again. And John, good luck in your new role. I just wanted to -- Bob, if you can clarify the wholesaler inventory, around $5 million for the quarter. In the 10-K, I think you booked about $3 million for REVLIMID in the fourth quarter. So is that a net addition of $2 million? Or is that $5 million all taken in the first quarter?

A - Robert Hugin

Yeah. Again, I want to make sure that we look at -- wholesalers do not and cannot inventory THAL or REV under the RevAssist or STEPS program. The only inventory that can be held is that a pharmacy. And with REV going through specialty pharmacy -- that we provide overnight shipment to those pharmacies and so that it's our estimate that of the $32 plus million in the first quarter, about $5 million or so would have not been pulled through. But that X number of days is just consistent with the -- with the pull-through. So, the total number of in-stocking would have been above the $5 million. But I wanted to -- I guess -- I appreciate the question, so make sure it's clear that when we look through the pull-through, the stocking would be $5 million in the first quarter, and a little bit that was put on the shelf to ensure that we qualified for Medicare, that the drug was available in 2005, was pretty much for the most part put on the pharmacy shelf. So it's probably $6.5 million or so that is actually out there in pharmacies. Those are all estimates. And everyday it changes. If what would have shipped that day versus the dispenses change a little bit because we're still pretty early in the process. But in terms of the five and ten milligrams, we would not anticipate a much higher level of that, because again, we have ready supply -- these are a concentrated group of contracted specialty pharmacies that are shipped overnight. So we wouldn't anticipate, again, on the five and ten milligrams, to have much of any increase from that kind of inventory levels, going forward. Thanks for the question, that's good to clarify that.


Your last question comes from Sapna Srivastava with Morgan Stanley.

Q - Sapna Srivastava

Hi, congratulations on a good quarter. I may have just missed this, but could you walk us through the trials which you have for REVLIMID which could eventually go for compendia listing for peer-reviewed publications, the timeline for that?

A - Robert Hugin

Well, I guess our focus on the compendia is with every indication that we explore, if we can produce major presentations at medical meetings or peer-reviewed publications. With THAL, I think we have eight-plus compendia listings in the United States. And with over 50 trials underway, if we have positive results in different stages of MDS, we will work very aggressively there to get compendia support. The approval of myeloma, we believe will satisfy our needs in myeloma. So I think we're going to be in good shape there. We're still going to produce very significant peer-reviewed publication, all different stages of myeloma and different combination therapies. Because again, it’s usage is very data driven, we want to provide clinicians and physicians with the widest range and depth of data possible to help assist in the appropriate use of the drug. But all the indications Sol mentioned with amyloidosis, myelofibrosis, all the ones -- NHL, CLL, we are committed to a peer-reviewed publication strategy to get the disseminated of that clinical trial data. I believe our goal for this year is certainly north of 20 peer-reviewed publications in 2006. Then our reimbursement teams have to work with the appropriate people to ensure that we get the commensurate compendia listing and all the ranges of indications. But we have a wide -- we want full, full disclosure. And we think that by the end of the year, we're talking about nine different CLL trials and expected data from several, that will lead to publications, hopefully quickly. So, it is a broad range strategy, it's not an off label promotion strategy, it's simply getting data out there, give physicians and patients the choice. But our desire is to get the drug approved for as many indications as to where we have the data to support that and get data presented in all the ways we can.

So, thank you very much. We're going to thank everybody for dialing in. It was certainly a very strong quarter for us, we were excited about the prospects for REVLIMID. We're committed to maximizing its potential, both commercially and in the clinic and in research. And we look forward to updating you throughout the course of the quarter, and certainly at the end of the quarter, our conference call in July. So, thank you very much.


This concludes today's teleconference, you may now disconnect.

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