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Celgene (NASDAQ:CELG)
Q2 2018 Earnings Conference Call
Jul. 26, 2018 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

[Operator instructions] Good morning, and welcome to the Celgene investor and analyst conference call. I would like to remind you this call is being recorded. I would now like to turn the call over to Patrick Flanigan, senior vice president of investor relations and treasury at Celgene.

Patrick Flanigan -- Senior Vice President, Investor Relations

Thanks, Crystal, and welcome, everyone, to our second-quarter earnings conference call. The press release reporting our financial results, in addition to a presentation for today's webcast, can be accessed by going to the Investor Relations section of the corporate website at celgene.com. Joining me in the room today with prepared remarks are Mark Alles, our chairman and chief executive officer; Peter Kellogg, who's currently our chief financial officer; Nadim Ahmed, global head of our hematology and oncology franchise; Terrie Curran, global head of our inflammation and immunology franchise; and Jay Backstrom, our chief medical officer. Also available for a Q&A portion of the call are Rupert Vessey, global head of our research and early development group; Jonathan Biller, our general counsel; and David Elkins, our new chief financial officer effective on August 1.

As a reminder, during today's call, we will be making forward-looking statements regarding our financial outlook in addition to regulatory and product development plans. These statements are subject to risks and uncertainties that may cause the actual results to differ from those forecasted. A description of these risks can be found in our most recent 10-Q on file with the SEC. These statements speak only as of today's date, and we undertake no duty to update or revise them.

Reconciliation of the adjusted financial measures to the most comparable GAAP measures are available as part of the earnings release. I would now like to turn the call over to Mark.

Mark J. Alles -- Chairman and Chief Executive Officer

Thank you, Patrick. Good morning, everyone, and thank you for joining us. We're excited to share our second-quarter results, representing excellent financial performance and significant progress advancing our pipeline of near-term value drivers. Our global commercial team delivered another strong quarter of volume-driven sales growth while we simultaneously integrated Juno Therapeutics.

First-half and Q2 momentum supports raising our 2018 revenue guidance from $14.8 billion to $15 billion. Accounting for the impact of the Juno acquisition, lower share count, and operating momentum, we are also updating our 2018 adjusted diluted EPS guidance from $8.45 to a range of $8.70 to $8.75. Driven by five late-stage potential blockbusters expected to launch by the end of 2020, the next stage of our innovation cycle is well under way. During the quarter, our teams made substantial progress on the regulatory applications for fedratinib and ozanimod.

We are preparing the NDA for fedratinib in myelofibrosis for submission by the end of this year, and we remain on track for U.S. NDA and EU MAA submissions for ozanimod in relapsing multiple sclerosis in the first quarter of 2019. Data updates at ASCO provided additional evidence of liso-cel's potentially best-in-class and bb2121's first-in-class clinical profiles. Our strategic intent is to become a global leader in the field of cellular immunotherapy, and we are advancing these two assets to regulatory submission as soon as possible.

In the last four weeks, we announced positive top-line results from three pivotal Phase 3 trials, the luspatercept trials, MEDALIST in myelodysplastic syndromes, and BELIEVE in beta thalassemia, and the just-announced AUGMENT study of Revlimid plus rituximab in follicular lymphoma. Including these studies, our clinical development teams and partners have delivered more than 10 positive Phase 3 trials for our commercial and investigational medicines across multiple sclerosis, the Behcet's disease, multiple myeloma, lymphoma, MDS, beta thalassemia and breast and lung cancer, all in the last 12 months. Like most dynamic organizations, we are continuously working to strengthen our company by developing internal talent and hiring the strongest and most accomplished leaders. In the second quarter, we were pleased to announce three significant leadership changes.

Jonathan Biller was appointed executive vice president and general counsel. Jonathan is an accomplished attorney and a finance professional who has been at Celgene since 2011, leading our tax and treasury team. He has previously worked as a partner at a major law firm and served as general counsel at Bunge Limited. David Elkins has joined as executive vice president and our next chief financial officer.

David comes to Celgene from Johnson & Johnson, where he was worldwide vice president and CFO for consumer products, medical devices, and corporate functions. He has held financial and operational roles of increasing responsibility throughout his career, including serving as CFO of Becton, Dickinson and Company. Welcome to the team, David. David succeeds Peter Kellogg, who will remain at Celgene as executive vice president and chief corporate strategy officer until his retirement planned for mid-2019.

In this important role, Peter's insight will be critical to the progression of Celgene's strategy for sustainable long-term growth. As this is Peter's final quarterly earnings call as our CFO, I'd like to extend my personal thanks for his wisdom, his friendship, and his immeasurable impact on Celgene since joining us in 2014. Our financial performance in this time frame has been industry-leading, and we are grateful for his leadership and continued involvement well into next year. Peter, on behalf of everybody at Celgene, thank you very much.

Before we move to a detailed review of our financial results, I would like to address Celgene's participation in the very important dialogue occurring in the United States around value, access, and the affordability of healthcare. We begin with the principle that after spending many years and significant resources to discover and develop innovative new therapies, our greatest priority is ensuring that patients have access to them. Celgene has been proactive and transparent on these issues. In May, we published our first annual value and innovation report for the U.S.

and other healthcare policymakers and opinion leaders. This report offers comprehensive evidence on the value our medicines provide to patients, the healthcare system, the economy, and society. In June, we updated our principles for the pricing of innovative medicines. Going forward, as Celgene increases the price of any individual therapy across our portfolio, that price increase will be limited to no more than once a year and at a level no greater than the CMS projected increase in national health expenditures for the year.

For 2018, this rate is 5.3%. Our pricing principles also consider circumstances in which additional clinical or health economic evidence demonstrates a significant increase in the value of one of our medicines where this standard would not apply. Earlier this month, we increased the list price for Revlimid and Pomalyst by 5%, and no further pricing actions for these or any of our other products are anticipated in 2018. We believe this transparency provides greater certainty for all stakeholders and helps to contribute to collaborative solutions that address healthcare access and affordability.

As the business environment in which we operate rapidly evolves, Celgene's year-to-date performance has been defined by industry-leading top- and bottom-line growth, meaningfully advancing our late-stage portfolio and continuing to invest in the pipeline and the people that will shape Celgene's future. Thanks again for joining us today, and I'll now turn the call over to our chief financial officer, Peter Kellogg.

Peter N. Kellogg -- Chief Financial Officer

Thank you, Mark, and a warm welcome to Celgene, David, and congratulations to Jonathan. Good morning, everyone. Momentum and operational excellence we saw in the first quarter has continued into the second quarter. Our net product sales performance continues across our portfolio.

Our increased visibility into the full year allows us to raise 2018 guidance for total revenue in Revlimid net sales. Finally, we are continuing to integrate Juno Therapeutics operations as we advance to become a global leader in cellular immunotherapy. In Q2, we took advantage of our lower stock price to accelerate our planned share-repurchase program. In summary, the way to think about it is that the shares that would have been bought over the next few quarters were pulled forward into Q2, including the May ASR.

The resulting reduced share count impact has been incorporated into our revised full-year adjusted EPS guidance. We also continue to support growing the pipeline with our M&A and BD investments. Year to date, we have deployed over $10 billion on M&A and BD, so it should be very clear that this remains our top priority. Turning to our Q2 performance.

Total net product sales grew 17% year over year to $3.8 billion. Our growth continues to be strong. Volume grew 15.1%, and total net product sales grew 16.8%. Clearly, a volume-driven result.

This strong growth was achieved across the portfolio with key contributions from Revlimid, Pomalyst, and Otezla. Nadim and Terrie will discuss these results in a few minutes. Our adjusted EPS increased 16% versus prior year. In Q2, our P&L reflects the first full quarter of Juno operating expenses, which impacted operating income by about $0.14 per share.

Despite that, our operating income grew $0.13 per share. Additionally, the accelerated timing of our share-repurchase program into Q2, as mentioned earlier, reduced our share count in Q2 and affects our Q2 results as shown in this chart here. Turning to the P&L. R&D and SG&A expenses increased as a percentage of revenue versus prior year.

As just mentioned, the Q2 financials include a full quarter of Juno's significant pipeline and operations. We also had increased expenses related to regulatory submission work on multiple programs. The increase in operating expenses drove a decrease in Q2 operating margin of about 500 basis points year over year. This increase was fully planned and incorporated in our guidance provided on our Q1 earnings call, and we are on track for full-year operating margin guidance of approximately 56%.

We ended the quarter with $3.4 billion in cash and marketable securities. In the second quarter, our board authorized an additional $3 billion in share repurchases and a $2 billion accelerated share repurchase. We entered into an agreement for the ASR on May 30, and it is expected to be completed on or before August 31. We purchased $3.3 billion of shares and have approximately $2.8 billion left under the program, however, you should expect a very low level of share-repurchase activity in the balance of 2018.

Turning to the 2018 guidance. Based on the strong performance of Revlimid, we are increasing full-year guidance for Revlimid net product sales from approximately $9.5 billion to approximately $9.7 billion. Accordingly, we are increasing full-year total revenue from approximately $14.8 billion to approximately $15 billion. All other product sales guidance remains unchanged from before.

There is also no change to our full-year adjusted operating margin guidance, as I mentioned earlier, nor to our adjusted tax rate. Now looking ahead to Q3. We expect approximately $90 million in potential milestone payments in the third quarter, which together with our ongoing late-stage activity and our filing preparation efforts, will cause R&D to rise to a higher third-quarter and full-year level, a strategically positive dynamic given our important pipeline assets. Now Jay will provide an overview of this activity in a minute.

However, for your planning, you should expect our Q3 adjusted EPS to be similar to the Q2 result. However, on a full-year basis, we are raising adjusted diluted EPS from approximately $8.45 to a range of $8.70 to $8.75. Our raise of full-year adjusted EPS guidance takes into account the expected top-line performance from our portfolio, the reduced share count for the year, but also takes into account our increased R&D investments for our late-stage programs. Now to help with your financial modeling, please note that the share count in Q2 reflects a partial quarter of the ASR as it was implemented in late May.

Q3 and Q4 share counts should be roughly in the 720 million share range, leading to a full-year average share count of approximately 735 million shares. I hope that's helpful. Thank you. I would now like to turn the call over to my colleague, Nadim.

Nadim Ahmed -- President, Hematology and Oncology

Thank you, Peter, and good morning, everyone. The hematology and oncology franchise had a robust second quarter, with revenue of $3.4 billion at 18% year-over-year growth. Revlimid and Pomalyst/Imnovid continued to drive our overall growth, with volume gains across geographies. Based on this positive momentum, we have raised our 2018 guidance for Revlimid.

Earlier this week, we announced positive results from the Phase 3 AUGMENT study. Revlimid plus rituximab, the R-squared regimen, achieved a highly statistically significant improvement in the primary endpoint of progression-free survival in patients with relapsed/refractory indolent lymphoma. In addition to achieving the primary endpoint of the study, a favorable trend was also observed for overall survival during this analysis, and follow-up will continue for the mature survival results. We plan to submit global regulatory dossiers in the first quarter of 2019.

We also recently announced that the Phase 3 IMpassion 130 study sponsored by Roche met its co-primary endpoint of progression-free survival. This is the first Phase 3 trial to demonstrate a statistically significant PFS improvement in first-line metastatic triple-negative breast cancer. These results are extremely encouraging for women with this highly aggressive form of breast cancer, for which there are limited options. These data, together with the recent lung cancer readouts, demonstrate the potential role of Abraxane as a preferred chemotherapy partner for immuno-oncology combinations in breast and non-small-cell lung cancers.

We continue to make progress with the advancement and expansion of our pipeline programs, including luspatercept with our partner Acceleron with two highly positive Phase 3 studies in MDS and beta thalassemia. We also continue to advance our leadership position in cellular immunotherapy through updated data presented at ASCO with liso-cel and bb2121. Jay Backstrom will cover the pipeline in more detail later on in the presentation. Revlimid had a very strong second quarter, with global sales growth of 21% year over year.

In the U.S., the brand grew 17% as market share and treatment duration continues to increase. We continue to see a positive impact from the transplant ineligible and post-stem cell transplant maintenance launches, and we expect to see continued increases in duration from the use of triplet combination regimens. Outside of the U.S., Revlimid net sales grew 28% year over year, with 38% volume growth. These results also included some one-off purchases for the quarter, such as an approximately $65 million Russian tender and some clinical trial material purchases.

Revlimid share in frontline non-stem cell transplant patients continues to grow outside the U.S., and we are also seeing duration increases with the impact of Revlimid-based triplets. As I mentioned earlier, we expect the AUGMENT results to be a key future growth driver for Revlimid. In addition, we await the results of the Revlimid/ROBUST trial in first-line diffuse large B-cell lymphoma. Remember, this is an event-driven trial, and we continue to monitor the status of patients.

We also expect multiple Phase 3 data readouts for ongoing studies utilizing Revlimid-based triplet regimens in the frontline setting of multiple myeloma throughout 2018. Pomalyst/Imnovid net sales increased by 30% year over year. In the U.S., Pomalyst net sales grew 41%, with the majority of growth coming from increasing market share and duration. Pomalyst continues to grow rapidly with the adoption of the triplet regimen of Pomalyst, daratumumab, and dexamethasone for relapse refractory myeloma.

Similar to Revlimid, we expect to see additional Pomalyst share and duration gains through the use of triplet regimens. Outside of the U.S., Pomalyst/Imnovid revenue grew 10% year over year, with volume increasing by 15% in spite of competition from new entrants, including daratumumab and Revlimid-based triplet regimens. Abraxane continues to maintain stable demand overall. We saw a 4% decrease year over year in second-quarter revenue, which was impacted by higher Q1 distributor buying patterns as described during the Q1 call.

In the near term, we have very positive data flow for Abraxane. We look forward to the Abraxane data readout later this year for the APAC adjuvant pancreatic cancer trial. We now also have the readout of four positive Phase 3 study demonstrating a potential clinical benefit of Abraxane in combination with checkpoint inhibitors for the first-line treatment of breast and non-small-cell lung cancers. In summary, the hematology-oncology franchise had an excellent second quarter in 2018.

We are very pleased with our sales performance, with strong volume growth across brands and regions. At the same time, we significantly advanced our pipeline with the recent readouts of three highly positive Phase 3 studies for luspatercept in MDS and beta thalassemia and Revlimid in lymphoma. Thank you, and I will now turn the call over to Terrie.

Terrie Curran -- President, Inflammation and Immunology

Thank you, Nadim, and good morning. Quarter 2 2018 was another strong quarter for Celgene I&I, with continued positive momentum in Otezla sales and focused execution on our key strategic priorities. Otezla utilization continued to increase in both the U.S. and internationally as demand and access further improved.

We continue to execute in our core strategy to increase prebiologic access to Otezla for appropriate patients worldwide. Despite increased competitive intensity, the brand's underlying performance metrics remain solid. Otezla and oral therapy has established a unique value proposition, a prebiologic foundation in the treatment paradigm for plaque psoriasis and psoriatic arthritis. We're investing for sustained growth with multiple studies under way for example, scalp psoriasis to reinforce the Otezla-based business and to further expand the post-topical market opportunity, opportunities that will potentially enhance the profile and expand the addressable population for Otezla worldwide.

We also advanced our next-generation growth catalyst, ozanimod. An update on the relapsing multiple sclerosis regulatory submission will be covered later in the call. In parallel to this regulatory work, we have used the time to gain additional market insight and execute a number of market-shaping activities. I'm very pleased with the team we are building with deep MS experience, have focused on preparing an impactful launch.

Global Otezla net sales for Q2 2018 were $375 million, which represents a 5% increase year on year. On a year-to-date basis, revenue in the first half of the year grew 21%. This is the same period a year ago. The U.S.

showed mid-teen volume growth in the quarter versus a year ago. However, this increase in demand was offset by gross to net and inventory fluctuations versus the previous year. International sales in Q2 climbed 62% year on year propelled by accelerating adoption in key markets. In Japan and France, we've seen record-setting uptick for Otezla in the psoriasis market.

In Japan, after one year, Otezla has taken the lead in new-to-brand systemic share. With strong Otezla performance year to date, we remain on track to achieve our full-year guidance of Otezla sales of $1.5 billion. Subsequent sales growth will be enhanced by gross drivers currently in development. By the end of 2018, we expect to see data readout of the Phase 3 trial in scalp psoriasis, FDA decision on the once-daily formulation, U.S.

and Japan NDA submissions for Behçet's disease and trial initiation activities for development to in mild to moderate plaque psoriasis. With the breadth of life cycle programs we are pursuing in Otezla in dermatology and rheumatology, we've decided to focus our efforts in IBD on the continued development of ozanimod and are reconsidering Otezla Phase 3 program in ulcerative colitis in the context of our overall portfolio. Over time, Otezla has continued to command a leadership position in new-to-brand share, a solid market share position and over 80% post-topical prebiologic source of business. Together, these performance indicators have spurred continued TRx growth, largely driven by uptake in the systemic naive patient segment.

With an increasing number of therapeutic options available, competition and payer management in the psoriasis category has reached new levels. However, by implementing managed care contracts, securing biologic step-free access for Otezla, we have carved out a distinct part of the market to solidify Otezla's competitive advantage for both now and in the years to come. I'd now like to introduce my colleague, Dr. Jay Backstrom.

Jay Backstrom -- Chief Medical Officer

Thank you, Terrie. Good morning. As you heard from Mark, Nadim and Terrie, we continue to make excellent progress in advancing our five near-term pipeline products toward regulatory approvals over the next 18 to 24 months. As we look across the five programs, each has been significantly derisked.

Ozanimod, fedratinib and, more recently, luspatercept all have positive Phase 3 studies, which will form the basis of the regulatory applications. The two CAR T programs, bb2121 and liso-cel, have demonstrated compelling clinical data leading to breakthrough therapy designations, providing the opportunity for accelerated review and approval. Turning to ozanimod. The NDA preparation for the relapsing multiple sclerosis indication is advancing as planned, and the U.S.

and EU applications remain on track for Q1 2019 submissions. Progress is also being made for the GI indications of ulcerative colitis and Crohn's disease. Over two-thirds of the enrollment has been completed for the global Phase 3 TRUE NORTH ulcerative colitis study, which remains on track for completing enrollment by mid-2019. The Phase 3 study in Crohn's disease is open and enrolling.

Moving to fedratinib. We're also making excellent progress in advancing this product toward regulatory approval. As part of our NDA preparation, we held a pre-NDA meeting with FDA and are on track for an end-of-year submission. In addition, we are working to initiate a full-clinical program with fedratinib, including combination studies with luspatercept and other pipeline assets.

Since our earnings call in May, we have reported on a series of positive Phase 3 results, including MEDALIST and BELIEVE studies for luspatercept. As we discussed at ASCO, we had confidence in our assumptions for the MDS and beta thalassemia studies given the Phase 2 data, and we now look forward to advancing the U.S. and EU applications in the first half of 2019 and to advancing the COMMAND study, a Phase 3 trial in ESA naïve low to intermediate risk MDS. Considering the positive results in two distinctly different diseases, MDS and beta thalassemia, luspatercept has the potential to be a platform drug for chronic anemias.

In keeping with our goal to be a global leader in cellular chemotherapy, both bb2121 and liso-cel continued to advance and remain top priorities. For bb2121, the updated dose escalation data from the CRB-401 study were presented at ASCO, highlighting a safety profile that to date has been notable for the low rates of severe cytokine release syndrome and grade 3-4 neurotoxicity. The pivotal KarMMA study continues to enroll rapidly and the randomized Phase 3 study in the third live setting is expected to begin by year-end. Overall, the bb2121 program has excellent momentum and remains on track for an expected 2020 approval.

Finally, turning to liso-cel. Enrollment in the TRANSCEND trial in the third line diffuse large B-cell lymphoma is complete. The BLA preparations are under way, and the program remains on track for an expected 2019 approval. Regarding the full-clinical program for liso-cel, TRANSCEND WORLD continues to advance, and we're in start-up for the transform and pilot studies in second-line transplant eligible and transplant non-eligible diffuse large B-cell lymphoma, respectively.

Finally, TRANSCEND CLL is enrolling, with data expected to be available later this year. Regarding our overarching approach in lymphoma, the recent positive results from AUGMENT supports the potential benefit of the R-squared regimen and helps to solidify our efforts to bring new treatment options to patients with lymphoma. Overall, we continue to make excellent progress toward delivering the next wave of innovative therapies. I'll now turn the call back over to Mark.

Mark J. Alles -- Chairman and Chief Executive Officer

Thank you, Peter, Nadim, Terrie, and thanks very much, Jay. Congratulations on a very good first half of the year. Our commercial performance is strong. Our pipeline is delivering, and we are poised for more potential value inflections over the next 12 to 18 months.

The recent late-stage clinical success we highlighted today is being matched by the continued productivity of our research and early development team. Year to date, Rupert Vessey and his discovery group have filed four unique INDs and CTAs and continue to make meaningful progress with the early clinical development of 15 new molecules or of cellular therapies across 19 indications. As they advance toward late-stage development, these programs represent our next generation of transformative medicines for patients with serious unmet needs. In the first half of 2018, we strengthened our organization and sharpened our focus on operating excellence.

The management team is energized and optimistic about the promise and the potential we have to create long-term value for patients, employees, and shareholders. Thanks for your attention. And operator, please open the call for questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions] And our first question comes from Phil Nadeau from Cowen & Company. Your line is open.

Philip Nadeau -- Cowen & Company -- Analyst

Good morning. Thanks for taking my questions. I guess first just a question on the AUGMENT data and R-squared regimen. I know you've mentioned that that was likely to be a growth driver in the future.

Our academic consultants suggest that they are already using R-squared in this indication in this situation. So can you talk a little bit about where do you think that incremental revenue opportunity is and who will be the adopters once there is a label for the R-squared regimen? Thanks.

Nadim Ahmed -- President, Hematology and Oncology

This is Nadim. Thanks for the question. So I think our observation in the U.S. marketplace is that there is some use of Revlimid currently.

However, we do feel that having the Phase 3 data will actually impact -- and will impact this more so. So we do think there is definitely an opportunity for Revlimid across histologies potentially when considering the ROBUST study also. So we do see incremental growth from Revlimid.

Philip Nadeau -- Cowen & Company -- Analyst

Great. Thank you.

Operator

Thank you. And our next question comes from Umer Raffat from Evercore. Your line is open.

Umer Raffat -- Evercore ISI -- Analyst

Hi. Thanks so much for taking my question. I wanted to ask on ozanimod from a slightly competitor sort of a perspective. And my question was Novartis has a large Phase 3 coming up in the next few weeks comparing a quarter-milligram of Gilenya versus half a milligram, the currently approved dose.

How do you expect the profile of that quarter-milligram Gilenya to compare versus ozanimod? And then separately, does Celgene know at this stage in the ongoing Dr. Reddy's litigation to what extent they're amorphous converts to a crystalline form in a normal environment? Thank you.

Terrie Curran -- President, Inflammation and Immunology

Yes, it's Terrie here. Just to answer the first part of your question, I think as we look at the clinical data of the Phase 3 program for ozanimod, the seeker of large clinical trials, we really do see very clear differentiation from both a linear as well as the low dose, particularly when you look at the cardiovascular profile and the safety profile. So we really think that that will be a very clear differentiation for the compound.

Mark J. Alles -- Chairman and Chief Executive Officer

It's Mark. Thanks for the question. On the ongoing litigation with Dr. Reddy's, your question is really specific and of course, in the context of an ongoing process, we really just can't comment to address what you asked, so thank you.

Umer Raffat -- Evercore ISI -- Analyst

Very well said. Thank you.

Operator

Thank you. And our next question comes from Michael Yee from Jefferies. Your line is open.

Michael Yee -- Jefferies -- Analyst

Hi. Thanks for the question. My question was on BCMA. Of course, there's been some debate since ASCO on bb2121, and I'm sure we look forward to the pivotal data around the corner.

I guess my question was around the multiple products you have and ultimately how you feel the hurdle is to take additional ones forward. I know it's early, but where the differentiation would be to make go/no-go decisions and particularly is that persistency, is it durability, is there a sponsor, etc., etc.? And then I guess since it's Peter's last call, I guess I have to ask him one question, which was regarding capital allocation and to what extent do you think there would be changes in the aggressiveness of more deals? Do you think you guys are taking a break? Or how do I think about the business development activity going forward? Thanks.

Peter N. Kellogg -- Chief Financial Officer

Michael, it's Peter. Thanks for the question. So I'll go first actually on that one and we'll go back to the BCMA portfolio that we have. First of all, thanks for the question because I just want to make sure it's clear that while we seize the moment, let's say, in Q2 and pull forward a lot of the share repurchase activity that we normally would have done over the next few quarters, you should see it that way.

It's not a change in capital allocation strategy or anything like that. Sometimes you get these work disruptions in the stock price and we just want to take advantage of it, and I think that will pay out nicely over time. But clearly, our top priority remains building the next generation of assets, do any form of BD, whether it's BD or M&A or whatever. And obviously, we also, as Marc highlighted, we have quite a good portfolio, kind of draw on the pipeline.

I want to assure you that we are constantly scanning the environment for all potential assets and doing very rigorous analysis on everything possible. Obviously, we've done a lot of deals already year to date. Probably, on a year-to-date basis, we're probably one of the leaders in the industry right now with $10 billion and two big M&A deals and a lot of smaller BD deals. So you should continue -- expect us to continue to be aggressive.

Now obviously, we work closely with the credit agencies, so from a capital-structure standpoint, we're very cognizant of our credit rating. We want to make sure we're really working within that framework, but I -- we feel very good about the outlook. We meet with the credit agencies regularly. So you should expect us to continue to have as a top priority as we go through this year into '19, into '20 building the pipeline, building the next generation of assets, obviously, delivering the exciting five assets that Jay just talked about, but also continuing to add to that portfolio.

We're working in exciting areas of science. There's a lot of new development and a lot of interesting opportunities.

Nadim Ahmed -- President, Hematology and Oncology

Yes. And I'll pick up the second question, Michael. So first, a reminder that we do actually have two major campaigns in multiple myeloma, both CELMoDs and BCMA. And since the question was specific to BCMA, again, within BCMA, I think we're uniquely positioned because we have both CAR T approaches as well as antibody approaches.

So specifically on the CAR T perspective, especially in the later lines of therapy, response rates, complete response rates are going to be more important because you move earlier up in the treatment sequence, of course, durability, long-term outcomes like progression-free survival, and overall survival are going to be important. So we're going to make sure that we build all of those endpoints into our studies. And the other thing about CAR T, of course, is unique, that it's a one-time treatment versus a lot of the treatments out there where you have to continue to treat patients indefinitely. So I think -- we feel very confident about the expansion of our BCMA campaign, both on the CAR T side and the monoclonal antibody side.

Thanks for your question.

Michael Yee -- Jefferies -- Analyst

Thank you, guys.

Operator

And our next question comes from Geoffrey Porges from Leerink. Your line is open.

Geoffrey Porges -- Leerink Partners -- Analyst

Thanks very much for taking the question. A couple just on -- first on pricing. Could you clarify how much positive price contributed to the top-line result in the quarter? And then, Mark, is the pricing commitment to healthcare inflation, is that per product or for the whole portfolio, in the U.S. or for the whole portfolio globally? And then just on the AUGMENT that you highlighted, Nadim, do you see R-squared being competitive with BR in that second line setting? Specifically, do you think that your -- do you have to show comparable PFS and potentially OS to be competitive there? Or are there other advantages?

Peter N. Kellogg -- Chief Financial Officer

OK. Geoffrey, let me take the first question. So in the second quarter, our revenue grew 16.8%. And so of that, 15.1% was volume -- this is on a global basis, obviously, and 2.3% of the 16.8% was pricing, and that's a blend of all the products that we have globally.

So that's kind of the number for Q2, and I think that's actually been a reasonably consistent pattern for quite some time. So we are getting volume growth in our portfolio.

Mark J. Alles -- Chairman and Chief Executive Officer

Geoff, it's Mark. On pricing, we've been quite specific that we're talking about index to inflation looking at each individual product, not a portfolio approach but a product approach. The other aspect to this is, as I said in my prepared remarks and as we published on our website and provided to HHS, we look at incremental value that could come for an existing drug or in the future higher-value products where we would be thinking about price to value at the moment of launch. So I hope that answered your question.

Thank you.

Nadim Ahmed -- President, Hematology and Oncology

I'll take the AUGMENT question, Geoff. So I think our view on R-squared is, obviously, we haven't presented a full dataset yet, so we'll do that in an upcoming meeting, but very encouraged by the top-line results that we see. And I think with follicular lymphoma, given again this is a chronic indolent disease, I think the opportunity to have a chemo-free option versus something like bendamustine/rituximab would be attendant side effects, potential long-term impacts with second degree malignancy, I think we feel very, very good about the profile of R-squared being a completely chemotherapy-free option. Thanks.

Geoffrey Porges -- Leerink Partners -- Analyst

Thanks very much.

Operator

Thank you. And our next question comes from Geoff Meacham from Barclays. Your line is open.

Jason Zemansky -- Barclays -- Analyst

Good morning, everyone. This is Jason Zemansky on the call for Geoff. Thank you so much for taking the question and congrats on the quarter. Just a few quick questions.

In terms of RELEVANCE specifically, I mean, stemming from our comments from ASCO, has there been much of a bump in that kind of first line kind of off-label setting for a chemo-free option? Has it been in line with your expectations? And then secondly, in terms of Otezla, do you have a sense of when the gross to net and inventory issues will sort of become steady moving forward? Can you provide any color on that? Thank you so much.

Nadim Ahmed -- President, Hematology and Oncology

Maybe I'll take the RELEVANCE question first. So I think we continue to have very good feedback from the KOLs in the space in terms of, again, having this chemotherapy-free option. And I think, of course, you have the data and you have the results, and it takes time to kind of see and observe the impact on clinical practice. So certainly encouraged by the feedback so far.

We'll continue to monitor this space. And also, of course, we'll monitor the NCCN Compendium guidelines to see when this would be added based on the review of the panel. So very encouraging so far, but we'll continue to monitor the changes and the practice. Thanks for your question.

Terrie Curran -- President, Inflammation and Immunology

Thanks, Jason, it's Terrie. So just regarding the inventory as well as the gross to net. As noted, we did see some drawing down of inventory in Quarter 2. And so when you compare that particularly for 2017, we see some fluctuation.

I think importantly as we head into 2018, 80% of our business is contracted. So from a GTN perspective, we'll see a much more stable year moving forward. And as we look to Quarter 3, we've also seen some stabilization of the inventory. So I think if you're looking at your modeling moving forward throughout the year, I think we'll see less of that lumpiness that we saw in 2017.

That won't play out in 2018.

Mark J. Alles -- Chairman and Chief Executive Officer

Jason, it's Mark. I just wanted to come back a moment to your very appropriate characterization of the RELEVANCE data, and for that matter, the AUGMENT data that we've talked about in the call as being off-label. These our market circumstances, as Nadim points out perfectly well, that third-party endorsement, for example, the NCCN guidelines, which is independent of anything that we do, the way physicians would think about a chemo-free option, these are things that we cannot promote and aren't marketing. These are clinical choices based on data and endorsements by academia.

So I just want to make it clear that you are correct in pointing out that it's off-label. So to the extent that there is utilization, it's really on the back of the value the datasets represent, not a typical commercial environment. So I just wanted to highlight what you said and close out that point by agreeing with you.

Jason Zemansky -- Barclays -- Analyst

Great. Thanks so much for the color.

Operator

Thank you. And our next question comes from Cory Kasimov from JPMorgan. Your line is open.

Cory Kasimov -- J.P.Morgan -- Analyst

Hey. Good morning, guys. Thanks for taking my question. So, the first one I have is it's increasingly looking like you'll have quite a few regulatory filings going into the first half of 2019.

By our count, there could be at least six of them. So clearly, a good high-class problem to have. But could you just talk about how the regulatory organization is structured at this point and whether you have any concerns about capacity constraints? And then since people are starting to ask more than one question, I'll squeeze one other in and that's just, how should we think about potential timing of KarMMa data for 2121, given the protocol amendment to add the 450 dose? Thanks.

Jay Backstrom -- Chief Medical Officer

This is Jay. Let me start on regulatory. We've been aligned and continue to be aligned around, not only therapeutic area but products. And we have anticipated and planned for success, so the teams are poised, focused, and so at this juncture, we have no capacity issues.

We're just continuing to focus on getting these applications in. So that's quite good. With respect to increasing the 450 dose, as we have the good fortune, this is such an interesting product. We have very much engaged investigators, and they continue to move amendments through.

I was actually awaiting this for patients, and that trial continues to accrue. So we'll continue to update as data go. But right now, the clinical trials are really moving nicely.

Cory Kasimov -- J.P.Morgan -- Analyst

Thanks.

Operator

Thank you. Our next question comes from Matthew Harrison from Morgan Stanley. Your line is open.

Matthew Harrison -- Morgan Stanley -- Analyst

Hey, great. Good morning. Thanks for taking the question. I was just wondering if you could give us a little bit more detailed on the pre-NDA meeting that you had on fedratinib, and it sounds like your plan is still the same time that you outlined when you acquired the asset at the beginning of the year and then maybe just talk a little bit about the combination studies and the timelines associated with those that you might pursue.

Thanks.

Mark J. Alles -- Chairman and Chief Executive Officer

Yes. So the pre-NDA meeting, those are always very good meetings to get aligned with what we anticipate and what FDA is expecting. So really, it was that formality, get -- generally get good ideas from FDA and that's being incorporated in the application, but no change in strategy. The basis for that submission is going to Quarter 1 into Quarter 2, and so we're framing that and we'll get that in.

And in terms of the combination studies, we really have an interest. We are exporting certainly luspatercept with fedratinib, and I look to Rupert and his team as we have other assets. So those are kind of either in flight or soon to be started.

Operator

Thank you. Our next question comes from Brian Abrahams from RBC Capital Markets. Your line is open.

Brian Abrahams -- RBC Capital Markets -- Analyst

Hi there. Thanks for taking my question and congrats on your progress on the quarter. A question maybe for Jay and/or Terrie. Just wondering if you could give us any additional color on what you're seeing coming out of the ongoing characterization and bridging work for ozanimod? And how much should we read through to the deprioritization of Otezla in IBD as an endorsement of your confidence and maybe how things are going with this ozanimod work? Thanks

Jay Backstrom -- Chief Medical Officer

Hey, Brian, this is Jay. What I could say and what I tried to state in my prepared remarks is that our work is proceeding as planned, as expected. We anticipated what we would see and no surprises as we're pushing on, and we're still on track for Q1. And with respect to deprioritization in ozanimod, we like ozanimod.

And you see, we're waiting for that to finish enrolling. We start at Crohn's. I think this has a profile and activity that really lends itself well, so that's what we're doing. But beyond that, yes, confident in ozanimod at this juncture for sure.

Mark J. Alles -- Chairman and Chief Executive Officer

Brian, it's Mark. Maybe just to add, I think it's important that we think about the scope and the breadth of what the team is talking about today across the five near-term opportunities that we were very specific about but also how our pipeline is progressing and then growing. So let's just, for example, look at luspatercept. On the two studies that we highlighted the day and that we look forward to being presented, hopefully, very soon academically, that opens up a whole question about how to develop something that now has a proven mechanism of action and as Jay points out -- Nadim points out, is a potential platform approach for chronic anemia.

So when we think about the portfolio, I think it should be a conscious discussion for analysts and us that we've got lots of opportunity. And so we're not vertically just looking at portfolio prioritization in a particular franchise or disease category. Increasingly, the company has to look across all of its opportunities and make rational choices about best opportunity, unmet need consistent with the mission of the company. So I'm not suggesting that that's not the case with Otezla.

You see, I think exactly what Jay talked about and Terrie talked about is important. But as we look forward into the next three-, five-year window, we have a lot of robust opportunities to think about investing in, and we will prioritize off and on and shift as we see, perhaps, differentiated value drivers across the portfolio, not just in a vertical.

Brian Abrahams -- RBC Capital Markets -- Analyst

Very helpful. Thanks.

Operator

Thank you. And our next question comes from Ying Huang from Bank of America Merrill Lynch. Your line is open.

Ying Huang -- Bank of America Merrill Lynch -- Analyst

Hey, good morning. Thanks for taking my question and congrats on the quarter. First one on JCAR017. I didn't see in the milestones that you're going to present the data for JCAR017 in the diffuse large B-cell.

Can you just clarify whether we'll see updated data from that? And then secondly on bb2121, one of their competitors, GSK, mentioned recently that they're starting a second-line trial for their BCMA ADC. Do you have any plans to start a second-line trial in the near term for myeloma? Thanks.

Nadim Ahmed -- President, Hematology and Oncology

Thanks for the question, Ying. So I think with JCAR017, we, of course, have been presenting data from the TRANSCEND U.S. study, not the pivotal cohort because we want to make sure that we're protecting the regulatory submission, so we'll present that at the time that we feel is appropriate to present, so that's the JCAR017. And I think with the BCMA question, I'll go back to what we covered in the previous question.

We're uniquely positioned because, again, we have both antibodies and CAR Ts. And of course, we've talked about going from late line settings all the way up to the frontline setting. So we have a very ambitious plan across our BCMA assets. Thanks for your question.

Ying Huang -- Bank of America Merrill Lynch -- Analyst

Thanks, Nadim.

Operator

Thank you. Our next question comes from Robyn Karnauskas from Citi. Your line is open.

Robyn Karnauskas -- Citi -- Analyst

Hi, guys. Thanks for taking my question and a great quarter. Mark, I just want to ask a follow-up question about some of your statements around pricing. Two parts.

Help us understand -- I know Obamacare is changing the rules for the government hole next year, and how that might influence Celgene and their part given that there is less being paid out-of-pocket for -- by the manufacturers and by drug manufacturers. And second, you talked about limiting price increasing, and you never rebated. Do you think that will ever have to happen? It seems like the headlines are we want to see price discounts, we want to see greater discounts given. Give us your thoughts on whether that's ever going to be a reality and then how to think about that doughnut hole next year.

Thanks.

Mark J. Alles -- Chairman and Chief Executive Officer

Thanks, Robin. So on some of the fundamentals, like the doughnut hole liability that is in the current DBA of 70% versus what was 50% and then as we looked at our pricing approach going forward, all of those variables have been factored into our outlook for '19, '20 and beyond. And so we would be reaffirming our 2020 outlook on the basis of those variables. And so thank you for asking that because it's very clear that we've looked at that.

And whether they change or not, meaning how the government looks at rebates, whether it's within a program like Medicare Part D or -- sorry, Part B, or they update Medicare Part D in some way, we've put in a number of conservative assumptions about that, including our new pricing approach. For us, working with the government with HHS, we really think about three fundamental things that are important. And that is, first, dealing with patient out-of-pocket costs so that access and affordability will be improved. And we're engaged on that routinely with Secretary Azar and his team.

The second area is this the development of new very clear value-based payment approaches, and that would come from modernizing Part D and then let's see what happens in Part B. There was an announcement last night about how a demonstration project would likely begin in Part B as in boy. And then the last area that you know that we've been involved in for a very long time is this notion of the virtuous cycle where patented medicines run their course and then access to samples for generics to do bioequivalence testing would happen as appropriate. So we want to make sure that the Hatch-Waxman provisions that have been so powerful at creating value for patients and healthcare, that we don't shortcut that or undercut that in some way that puts patients at some risk.

And the safety systems that have been created over a long period of time are not somehow modified in the spirit of creating easier access as opposed to safer access. So those are places where we're working. But I'd just close my comment and tell you what you already know. There are so many moving parts, there are so many considerations with the president's blueprint and how to think about that, that what we're trying to do is make sure that the different scenarios in a conservative way would be built into our shorter and longer-term financial profile.

After that, if it's a little better, that's great, but we're preparing for a lot of these things as if they would happen so that we know what our position will be and how to operate in an environment that is very fluid.

Operator

Thank you. Our next question comes from John Newman from Canaccord. Your line is open.

John Newman -- Canaccord Genuity -- Analyst

Hi, guys. Thanks for taking my question. Kind of a broad-based question here. You've talked a lot at some of your focused R&D days about your next-generation CELMoDs.

What I'm curious about is, is there potentially a way to incorporate those next-generation CELMoDs into treatment where you either combine or sequence with bb2121? Thanks.

Rupert Vessey -- President, Research and Early Development

It's Rupert Vessey here. So you're talking about CELMoDs as applied to multiple myeloma. And I just want to remind you that, of course, we have a very broad CELMoD program that goes far beyond just multiple myeloma and looks at a range of other tumors as well, and we've talked about some of that previously in our protein homeostasis day back in 2016. But yes, absolutely, I think that all of the modalities that we have in our myeloma portfolio could be looked at as different types of induction, maintenance combinations, and we're certainly exploring the latest CELMoD we have in -- or we will be exploring it in earlier lines of therapy for multiple myeloma as well as the initial trials that we're conducting now.

So I think your supposition is accurate.

John Newman -- Canaccord Genuity -- Analyst

Great. Thank you.

Operator

Thank you. Our next question comes from Yatin Suneja from SunTrust Bank. Your line is open.

Yatin Suneja -- SunTrust Robinson Humphrey -- Analyst

Hey, guys. Thanks for taking my question and congrats on the progress. Maybe I'll ask a question on the partner program or the partner compound that is being launched, IDHIFA. Can you comment and give us a little bit more detail on how the launch is progressing? Are you seeing any uptake in the frontline setting as the NCCN guidelines suggest? Also, it seems like there was some uptake in -- outside the U.S.

territories. Can you tell us where those or which territory was that and how those discussions are ongoing with the European regulatory body on that front? Thanks.

Nadim Ahmed -- President, Hematology and Oncology

Thanks for the question, Yatin. So we'll do this in two parts and Jay will address the regulatory part. So I think firstly, I want to congratulate our partner, Agios Pharmaceuticals on the approval and launch of the ID H1 molecule. I think it's a great day for patients when that happens, so that's really great news.

Secondly, with IDHIFA in the U.S., the launch is going very well. And in fact, what we're seeing is continued increase in testing for IDH2, which I think is very, very encouraging. So I think we continue to be pleased with the progress of this subset of patients that really seems to be benefiting from this unique and novel molecule. So things are going very well in the U.S.

And I'll pass on the regulatory question to Jay.

Jay Backstrom -- Chief Medical Officer

Yes. And we continue to advance through other markets or other reasons of Europe, etc. So we're continuing to advance the IDHIFA.

Mark J. Alles -- Chairman and Chief Executive Officer

Hey, Crystal, we have time for one last caller.

Operator

Thank you. And our final question comes from Carter Gould from UBS. Your line is open.

Carter Gould -- UBS -- Analyst

Good morning, guys. Thanks for filling me in and taking the question. Questions for Nadim and Jay. It was encouraging to hear Mark emphasize luspatercept as a platform for chronic anemias.

Any color on the specific additional indications you might be looking at beyond sort of MDS, beta-thal and MS and when might we get some -- when we might hear on that front? And I guess given that importance, should we be thinking about those efforts starting post-approval or potentially earlier?

Nadim Ahmed -- President, Hematology and Oncology

Thanks for the question. So actually, a couple of things. So one, again I think I'm going to reemphasize a point we made earlier in the call. The fact that we now have very impactful impact in anemia from distinct diseases, this -- because it's very, very exciting, but of course, lifecycle management was going on way before we got results from the Phase 3 study.

So I think the team is working up all the potential scenarios and indications that we could be looking at. So we'll keep you updated as that progresses. But clearly, this has the opportunity to be a platform molecule in the chronic anemia space. Very exciting.

Thank you.

Jay Backstrom -- Chief Medical Officer

And as we work to define that further, we are going to continue to advance as I mentioned, in COMMANDS, so moving this up front. So we've got a lot of motion going now, and we'll have more to come.

Peter N. Kellogg -- Chief Financial Officer

OK. So thank you very much for the question. This is Peter. I'm just going to wrap up.

I think, obviously, you take away from this Q&A and the discussion of the slides and the financials, this has been an exciting quarter. Obviously, a lot of momentum building. We're pretty excited about having three sets of great clinical data, luspatercept in MDS, luspatercept in beta thalassemia, AUGMENT. In addition, all the Abraxane work that's been going on, also very exciting.

Jay and his team, as highlighted earlier, has got a really rich agenda going forward on a regulatory front, and the teams, I know, are fully engaged on that. That's pretty exciting. We did seize the moment in the first half of this year from a share-repurchase standpoint and pulled forward. What we saw was a great opportunity.

So hopefully, the guidance helps you think through how that plays out, but think of it clearly as a pull forward, and so you should expect lower levels of share repurchase going forward. And then, obviously, we've done over $10 billion of M&A and BD already year to date, so we are building the pipeline aggressively. We're seeing success in the pipeline. We're very excited about the future.

So as was highlighted in one of the questions, 2019 and 2020 are shaping up to be very event-driven and eventful years ahead, so that's really exciting. And I guess I'd like to wrap up by thanking Mark but also welcoming, again, David to Celgene. I think we're -- we're very excited to have David on board, and I'm looking forward to my role from a strategic standpoint, continuing the momentum at Celgene. So thank you very much.

Operator

[Operator signoff]

Duration: 61 minutes

Call Participants:

Patrick Flanigan -- Senior Vice President, Investor Relations

Mark J. Alles -- Chairman and Chief Executive Officer

Peter N. Kellogg -- Chief Financial Officer

Nadim Ahmed -- President, Hematology and Oncology

Terrie Curran -- President, Inflammation and Immunology

Jay Backstrom -- Chief Medical Officer

Philip Nadeau -- Cowen & Company -- Analyst

Umer Raffat -- Evercore ISI -- Analyst

Michael Yee -- Jefferies -- Analyst

Geoffrey Porges -- Leerink Partners -- Analyst

Jason Zemansky -- Barclays -- Analyst

Cory Kasimov -- J.P.Morgan -- Analyst

Matthew Harrison -- Morgan Stanley -- Analyst

Brian Abrahams -- RBC Capital Markets -- Analyst

Ying Huang -- Bank of America Merrill Lynch -- Analyst

Robyn Karnauskas -- Citi -- Analyst

John Newman -- Canaccord Genuity -- Analyst

Rupert Vessey -- President, Research and Early Development

Yatin Suneja -- SunTrust Robinson Humphrey -- Analyst

Carter Gould -- UBS -- Analyst

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