Celgene reported operating results for the fourth quarter and full year of 2017. For the fourth quarter of 2017, net product sales were $3,479 million, an increase of 17 percent, year-over-year. Fourth quarter total revenue increased 17 percent to $3,483 million.
Net product sales for the full year of 2017 were $12,973 million, an increase of 16 percent year-over-year. Total revenue for the full year of 2017 was $13,003 million, an increase of 16 percent year-over-year.
Based on U.S. GAAP (Generally Accepted Accounting Principles), Celgene reported a net loss of $81 million and diluted earnings per share (EPS) of ($0.10) for the fourth quarter of 2017. For the fourth quarter of 2016, GAAP net income was $429 million and diluted EPS was $0.53. The decrease was primarily due to the impact of the Tax Cuts and Jobs Act. Full-year GAAP net income for 2017 was $2,940 million and diluted EPS was $3.64. Full-year GAAP net income for 2016 was $1,999 million and diluted EPS was $2.49.
Adjusted net income for the fourth quarter of 2017 increased 23 percent to $1,592 million compared to $1,290 million in the fourth quarter of 2016. For the same period, adjusted diluted EPS increased 24 percent to $2.00 from $1.61.
Adjusted net income for the full year 2017 increased 26 percent to $6,016 million. Adjusted diluted EPS increased 25 percent to $7.44 from $5.94 for the full year of 2016.
“Our 2017 commercial, regulatory and clinical execution lay the foundation for success in 2018 and beyond," said Mark J. Alles, Chief Executive Officer of Celgene Corporation. "Our operating momentum enables us to continue expanding our portfolio, as demonstrated by the two strategic transactions announced this year."
Fourth Quarter and Full-Year 2017 Financial Highlights
Unless otherwise stated, all comparisons are for the fourth quarter and full year of 2017 compared to the fourth quarter and full year of 2016. The adjusted operating expense categories presented below exclude share-based employee compensation expense, collaboration-related upfront expense, research and development asset acquisition expense, IPR&D asset impairment charges, clinical trial and development activity wind-down costs and a litigation-related loss contingency accrual expense. Please see the attached Use of Non-GAAP Financial Measures and Reconciliation of GAAP to Adjusted Net Income for further information relevant to the interpretation of adjusted financial measures and reconciliations of these adjusted financial measures to the most comparable GAAP measures, respectively.
Net Product Sales Performance
REVLIMID sales for the fourth quarter increased 21 percent to $2,188 million. Fourth quarter U.S. sales of $1,473 million and international sales of $715 million increased 24 percent and 15 percent, respectively. Full-year REVLIMID sales were $8,187 million, an increase of 17 percent year-over-year. Sales growth was driven primarily by higher volume due to increases in duration and market share.
POMALYST/IMNOVID sales for the fourth quarter were $442 million, an increase of 17 percent year-over-year. Fourth quarter U.S. sales of $283 million increased 29 percent and international sales were unchanged at $159 million. Full-year POMALYST/IMNOVID sales were $1,614 million, an increase of 23% year-over-year. Sales growth was driven primarily by increased volume due to increases in market share and duration.
OTEZLA sales in the fourth quarter were $371 million, a 22 percent increase year-over-year. Fourth quarter U.S. sales of $303 million and international sales of $68 million increased 13 percent and 84 percent, respectively. Full-year OTEZLA sales were $1,279 million, an increase of 26 percent year-over-year. OTEZLA sales were primarily driven by volume gains in the U.S. and strong uptake in key international markets.
ABRAXANE sales for the fourth quarter were $251 million, a decrease of 6 percent year-over-year. U.S. sales were $155 million and international sales were $96 million, a decrease of 10 percent and an increase of 2 percent, respectively. Full-year ABRAXANE sales were $992 million, an increase of 2 percent year-over-year. ABRAXANE market shares in pancreatic cancer, first-line advanced non-squamous lung cancer and metastatic breast cancer in the U.S. have remained stable. Growth in Europe was from market share gains for ABRAXANE in pancreatic cancer.
In the fourth quarter, all other product sales, which include IDHIFA, THALOMID, ISTODAX, VIDAZA and an authorized generic version of VIDAZA drug product primarily sold in the U.S., were $227 million compared to $220 million in the fourth quarter of 2016. Full-year sales for these products were $901 million compared to $910 million in full-year 2016.
Total net product sales for the fourth quarter of 2017 increased 17 percent year-over-year, driven by operational growth. Net product sales growth also includes a 1.4 percent negative impact from currency exchange effects.
Research and Development (R&D)
On a GAAP basis, R&D expenses were $2,738 million for the fourth quarter of 2017 versus $1,135 million for the same period in 2016. Full-year 2017 R&D expenses were $5,915 million compared to $4,470 million for 2016. Both the fourth-quarter and full-year 2017 increases in R&D expenses on a GAAP basis were primarily due to the charges related to the discontinuation of the GED-0301 clinical trials in Crohn’s disease, including impairment of an IPR&D asset and other one-time charges related to wind-down costs associated with the GED-0301 clinical trials in Crohn’s disease and certain development activities.
Adjusted R&D expenses were $766 million for the fourth quarter of 2017 compared to $673 million for the fourth quarter of 2016. For the full year 2017, adjusted R&D expenses were $2,749 million compared to $2,508 million for the full year 2016. Both the fourth quarter and full-year 2017 increases in adjusted R&D expenses were primarily due to increased spending related to clinical trial and other R&D activity.
Selling, General, and Administrative (SG&A)
On a GAAP basis, SG&A expenses were $774 million for the fourth quarter of 2017 compared to $685 million for the same period in 2016. Full-year SG&A expenses were $2,941 million for 2017 compared to $2,658 million for 2016. The full-year 2017 increase in SG&A expenses was primarily due to an increase in litigation-related loss contingency accrual expense.
Adjusted SG&A expenses were $687 million for the fourth quarter of 2017 compared to $533 million for the fourth quarter of 2016. For full-year 2017, adjusted SG&A expenses were $2,279 million versus $2,139 million in 2016.
Cash, Cash Equivalents, and Marketable Securities
Operating cash flow was $5,246 million for 2017, an increase of 26 percent compared to 2016. For the full-year 2017, Celgene purchased approximately $3,911 million of its common shares. As of December 31, 2017, the Company had $822 million remaining under the existing share repurchase program. The Company ended the year with $12,042 million in cash and marketable securities.
Product and Pipeline Updates
Hematology & Oncology
At the 59th American Society of Hematology (ASH) Annual Meeting in December, data were presented on Celgene’s marketed and pipeline hematology assets. Select data presentations included:
Celgene and partner bluebird bio presented updated data from the phase I trial evaluating bb2121 in patients with relapsed and/or refractory multiple myeloma (RRMM). In November, bb2121 was granted Breakthrough Therapy Designation (BTD) by the U.S. Food and Drug Administration (FDA) and PRIority MEdicines (PRIME) eligibility by the European Medicines Agency (EMA). In December, the pivotal KarMMa trial evaluating bb2121 in RRMM was initiated.
Celgene and partner Juno Therapeutics presented updated data from the phase I TRANSCEND trial evaluating JCAR017 in patients with relapsed or refractory aggressive non-Hodgkin lymphoma (NHL). The pivotal TRANSCEND program in the U.S. with JCAR017 in diffuse large B-cell lymphoma (DLBCL) is under way and the TRANSCEND WORLD cohort is on-track to initiate in the first half of 2018.
Celgene and partner Acceleron Pharma presented updated data from the ongoing phase II trials with luspatercept in patients with lower-risk myelodysplastic syndromes (MDS). Data from the phase III MEDALIST and BELIEVE trials are expected in mid-2018. Additionally, Celgene plans to initiate the phase III COMMANDS trial with luspatercept in front-line MDS during the first half of 2018.
Updated data were presented from the phase Ib trial evaluating CC-122 in combination with obinutuzumab in patients with DLBCL, follicular lymphoma (FL) or marginal zone lymphoma (MZL). A pivotal program with CC-122 in NHL is expected to initiate in 2018.
Updated data were presented from the phase I trial evaluating CC-486 in combination with rituximab plus chemotherapy (R-CHOP) in patients with DLBCL, FL or transformed lymphoma. Data from the phase III QUAZAR AML-001 trial evaluating CC-486 as maintenance therapy in post-induction acute myeloid leukemia (AML) is expected in the second half of 2018.
Celgene and partner Agios Pharmaceuticals presented data from the phase I trial evaluating ivosidenib or IDHIFA combined with standard induction chemotherapy (7+3 regimen) in patients with newly diagnosed AML with an isocitrate dehydrogenase-1 (IDH1) or isocitrate dehydrogenase-2 (IDH2) mutation.
In December, Celgene disclosed top-line results from the phase III RELEVANCE trial evaluating REVLIMID in combination with rituximab (R2) in first-line FL. This investigational study evaluated REVLIMID plus R2 followed by R2 maintenance compared to the standard of care with rituximab plus chemotherapy (R-CHOP, R-bendamustine or R-CVP) followed by rituximab maintenance in patients with previously untreated FL. The R2 treatment arm did not achieve superiority in the co-primary endpoints of complete response or unconfirmed complete response (CR/CRu) at 120 weeks and progression-free survival (PFS) during the pre-planned analysis (final analysis of CR/CRu and interim analysis of PFS). Neither arm was superior for either of the co-primary endpoints. The safety findings were consistent with the known profiles of the regimens investigated. The full data set will be presented at a future medical congress.
Inflammation & Immunology
In December, a New Drug Application (NDA) was submitted with the FDA for ozanimod in relapsing multiple sclerosis (RMS) based on data from the phase III RADIANCE Part B and SUNBEAM trials evaluating ozanimod in patients with RMS. The data were presented at the MSParis2017-7th Joint European Committee for Treatment and Research in Multiple Sclerosis (ECTRIMS)-American Committee for Treatment and Research in Multiple Sclerosis (ACTRIMS) Meeting in October. Celgene plans to submit a Marketing Authorization Application (MAA) with the EMA in the first quarter of 2018.
A robust life-cycle plan for ozanimod is advancing and a phase III pivotal trial evaluating ozanimod in Crohn’s disease was initiated. In addition, the phase III TRUE NORTH trial with ozanimod in ulcerative colitis (UC) is ongoing and on-track to complete enrollment in the second half of 2018.
In 2018, Celgene plans to initiate a phase III trial with OTEZLA in UC based on the efficacy and safety results demonstrated in a phase II randomized, double-blind, placebo-controlled proof of concept study evaluating OTEZLA in UC (n=170). The full phase II data set will be presented at the 13th Congress of the European Crohn's and Colitis Organization (ECCO) in February.
Business Update Summary
In January 2018, Celgene entered into an agreement to acquire Impact Biomedicines, Inc., a privately-held biotechnology company developing fedratinib, a highly selective JAK2 kinase inhibitor, for myelofibrosis and polycythemia vera.
Under the terms of the agreement, Celgene will pay approximately $1.1 billion upfront and up to $1.25 billion in contingent payments based on regulatory approval milestones for myelofibrosis. Additional future payments for regulatory approvals in additional indications and sales-based milestones are also possible. This acquisition will strengthen Celgene’s commitment to myelofibrosis, a disease with high unmet medical need, and will expand strategic development options within Celgene’s myeloid portfolio of assets. The transaction is expected to close in the first quarter of 2018.
In January 2018, Celgene entered into an agreement to acquire Juno Therapeutics, Inc., an integrated biopharmaceutical company focused on developing innovative cellular immunotherapies for the treatment of cancer.
Under the terms of the merger agreement, Celgene will pay $87 per share in cash, or a total of approximately $9 billion, net of cash and marketable securities acquired and Juno shares already owned by Celgene (approximately 9.7% of outstanding shares). Adding to Celgene's lymphoma program, JCAR017 represents a potentially best-in-class CD19-directed CAR T currently in a pivotal program for relapsed and/or refractory DLBCL. This acquisition will complement Celgene’s leadership in hematology and oncology as well as advance Celgene’s global leadership in cellular immunotherapy.
The transaction is subject to customary closing conditions, including the tender of a number of shares of Juno common stock that represent at least a majority of outstanding shares, and expiration of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. Celgene expects to fund the transaction through a combination of existing cash and new debt. The transaction is expected to close in the first quarter of 2018.