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Celgene Corp (CELG)
Q3Â 2018 Earnings Conference Call
Oct. 25, 2018, 9:00 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
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 Nina Goworek, Executive Director of Investor Relations at Celgene.
Nina Goworek -- Executive Director, Investor Relations
Thank you, Crystal. Good morning, and welcome to our third quarter earnings conference call. The press release reporting our financial results in addition to the presentation for today's webcast can be accessed by going to the Investor Relations section of the corporate website at celgene.com.
Joining me on today's call for prepared remarks are Mark Alles, our Chairman and Chief Executive Officer; David Elkins, our Chief Financial Officer; Terrie Curran, Global Head of our Inflammation and Immunology Franchise; Nadim Ahmed, Global Head of our Hematology & Oncology Franchise; and Dr. Jay Backstrom, our Chief Medical Officer. Also available for the Q&A portion of the call are Dr. Rupert Vessey, Global Head of Research and Early Development Group and Jonathan Biller, our General Counsel.
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 results 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 & Chief Executive Officer
Thank you, Nina, and welcome to the Celgene Investor Relations' team, it's great to have you. Good morning everyone, and thank you for joining us. We appreciate the opportunity to review the outstanding results from our third quarter and the sustained progress achieved on critical corporate objectives. Across functions and geographies, Celgene teams produced excellent business momentum, leading to strong financial performance. This includes volume-driven growth across brands and rapid adoption in key markets around the world. David, Terrie and Nadim will describe our commercial performance in detail later during the call.
This momentum gives us increased confidence in our outlook for the full year, which again, supports raising our 2018 guidance. Total revenue has increased from $15 billion to $15.2 billion and adjusted diluted earnings per share is raised from a range of $8.70 to $8.75 to a range of $8.75 to $8.80. We have also generated a series of clinically meaningful data in new settings or combinations for existing products, such as the recently announced Phase III studies for OTEZLA and REVLIMID and Phase III results published in The New England Journal of Medicine for ABRAXANE and REVLIMID. These data are expected to significantly add to the already well-established value propositions of our medicines globally.
Importantly, we are making meaningful progress advancing our late-stage pipeline to high-value inflection points over the next 12 months to 18 months. Later in the call, Dr. Jay Backstrom will provide a regulatory update on these potential blockbusters; ozanimod, fedratinib, luspatercept, liso-cel and bb2121, all expected to launch by the end of 2020. We are excited by the breadth and depth of data featuring our existing products and promising hematology pipeline expected at the American Society of Hematology meeting in early December. During his prepared remarks, Nadim will preview key abstracts we expect to be presented at one of the most diverse and forward-looking ASH meetings in Celgene's history. Led by Dr. Rupert Vessey, our increasingly productive Research and Early Development team, along with our external collaborators are, making significant headway.
In September, members of our senior management team and I met with dozens of scientists working across our major research centers of excellence. They are inflammation, epigenetics, immuno-oncology, protein homeostasis and neurosciences. Important and promising new programs are emerging from these research teams with encouraging signals of activity, which will soon form the basis for our next-generation mid-stage pipeline.
So far this year, we have filed five INDs for molecules with novel mechanisms of action. After multiple years of advancing an average of eight INDs per year, we have identified a group of highly promising agents with the potential for a first-marketing approval as early as 2022. Coupled with the continued growth of our in-line brands and anticipated launches for five key late-stage products, this next wave of innovative compounds gives us renewed confidence in our longer-term outlook. We look forward to sharing more about our progress in Early Research and Development during our Investor Event planned for ASH.
As our growing pipeline advances, exquisite clinical development becomes an even greater strategic imperative. To enhance and ensure success, we have created a dedicated mid-to-late stage clinical development function led by Dr. Alise Reicin. Alise joins us from EMD Serono, where she has outstanding experience in global drug development that spans important indications in cancer and immunology and inflammation. The appointment of Dr. Reicin is part of a deliberate effort to strengthen the executive leadership team and to position Celgene for greater long-term success. Specifically, the structure more (technical difficulty) completely aligns with our strategy and mission to discover, develop and commercialize innovative therapies for patients with unmet medical needs. We are very excited to welcome Dr. Reicin to our team.
In, 2018 industry-leading operational performance has enabled us to continue acquiring high potential programs, advance our portfolio of promising late-stage assets and accelerate our internal discovery and early research pipeline. We are delivering now and investing in the pipeline and people for Celgene's future.
Thanks again for joining us today, and I'll now turn the call over to our Chief Financial Officer, David Elkins.
David Elkins -- Executive Vice President & Chief Financial Officer
Thank you, Mark and good morning everyone. Moving to slide 7. In the third quarter, we saw continued momentum with top line growth of 18% year-over-year. Importantly, 15 of the 18 percentage points of net sales growth came from volume. We continue to drive operating leverage with strong year-over-year adjusted EPS growth of 20%, resulting in an EPS of $2.29. Due to the strong growth and positive momentum of our underlying business, we are raising both our top line and bottom line full-year guidance. Of note, is the strong performance of OTEZLA, which leads us to raise the full-year OTEZLA sales guidance from approximately $1.5 billion to approximately $1.6 billion. We continue to advance the pipeline and prepare regulatory submissions for our next wave of product launches. In 2018, we expect to invest $3.6 billion in Research and Development to support the future growth of Celgene.
As we think about capital allocation going forward, we are prioritizing investment in internal research, while also looking for innovative best-in-class external products and therapies to add to our portfolio.
In summary, based on our solid performance in the business combined with investments in our pipeline, we are reaffirming our 2020 outlook of $19 billion to $20 billion in total revenues and more than $12.50 in adjusted EPS at constant currency.
Turning to our strong Q3 top line performance on slide 8, total product net sales grew 18% year-over-year to $3.9 billion. The growth was primarily driven by a volume increase of 14.7% and price contributing 4.3%, slightly offset by 0.5% negative impact of currency headwinds. As Nadim will share with you later, growth in our Hematology & Oncology franchise came primarily from volume gains across multiple brands and geographies, while Terrie will share that OTEZLA growth was driven by volume increases across multiple geographies as we continue to expand access in utilization.
Moving on to adjusted diluted earnings per share for the quarter on slide 9, EPS increased 20% year-over-year to $2.29. This was driven by the strong top line growth with sales volume contributing $0.48 of the operating income increase, partially offset by increased expenses related to the acquisitions of Juno and Impact, as well as investments in our pipeline and collaboration. These net to the $0.20 operating improvement seen on the slide. Other income and expenses were negatively impacted by increased interest expense due to the higher level of debt primarily related to the Juno acquisition. Lower share count contributed $0.27 to adjusted EPS growth for the quarter, bringing adjusted EPS for the quarter $2.29.
We now turn to our key adjusted P&L line items on slide 10. Product gross margin was in line with our expectations at 96.2%, down 40 basis points year-over-year primarily due to raw material charges incurred in the quarter. R&D as a percentage of revenue increased 320 basis points year-over-year to 24.4%, a $948 million increase. Again, the increase in R&D is primarily due to the acquisitions of Juno and Impact, plus the investments in our projects with the partners BeiGene and bluebird bio as those projects progress, and the acceleration of our investments to prepare fedratinib for regulatory submission. Note that in Q2, we shared that we expected $90 million in potential milestones in Q3. However $30 million of milestone payments are now expected to be incurred in Q4, and has been contemplated in our full-year guidance.
Now turning to SG&A, there is an increase of 60 basis points year-over-year as a percentage of revenue, mainly driven by the addition of Juno and the associated integration cost. The net result is 420 basis point year-over-year reduction in the operating margin to 55.3%, which is contemplated in our updated 2018 financial guidance. And as you will see, the tax rate is broadly in line with our expectations of 16.7%.
Now on to Q3 cash flow on slide 11. We continue to generate significant free cash flow with $1.9 billion in quarter three. We ended the quarter with $4.4 billion in cash and marketable securities. With respect to our share repurchases, we settled the ASR that commenced in the second quarter. The total share repurchases for the ASR was 24 million shares. For quarter three, our average diluted share count is 720 million shares. For the full-year, we continue to expect an average diluted share count of about 735 million as we communicated on our previous guidance.
Lastly on slide 12, to summarize, we are updating guidance to reflect the strong performance that Terrie and Nadim will describe in more detail. Total revenue is being raised by approximately $200 million from $15 billion to approximately $15.2 billion. Based on the strong Q3 results, we are also increasing full-year guidance on OTEZLA sales from approximately $1.5 billion to approximately $1.6 billion. As we continue investment in the progression of the pipeline and fund milestones success payments, our expected operating margin will decrease 50 basis points to 55.5%.
Overall, we are confident in the business outlook and are raising adjusted EPS guidance to $8.75 to $8.80 although the guidance remains unchanged. As we head toward year-end, we want to update you on changes we plan to implement related to pre-announcing earnings at J.P. Morgan Conference. As in the past, we'll be sharing 2019 guidance of the J.P. Morgan Conference. However, due to the tight timelines between year-end and the conference, we will not pre-announce 2018 earnings at the conference.
Thank you. And I'd now like to turn the call over to Terrie.
Terrie Curran -- President, Inflammation and Immunology
Thank you, David and good morning. Inflammation and Immunology franchise had an excellent third quarter with 40% year-over-year OTEZLA sales growth. We're seeing strong momentum driven by worldwide and volume increases as we continue to expand access in pre-biologic utilization. We're committed to investing in future growth product drivers for OTEZLA and has advanced multiple lifecycle development opportunities leading to two recent milestones; the positive data readout of our Phase III STYLE study in Scalp Psoriasis and the sNDA submission of OTEZLA in Behcet's disease, which I'll cover in more detail later in the call. We're actively advancing key launch readiness preparations for ozanimod, as we build out a world-class team with deep multiple sclerosis experience. We've made significant progress in the regulatory filings for ozanimod in the US and Europe and are on track to submit both applications in Q1 of 2019. More information on the regulatory submissions will be provided by my colleague Dr. J Backstrom.
We also announced positive 52-week results to the open-label extension of the Phase II randomized, double-blind placebo-controlled HEROES trial evaluating RPC4046 in eosinophilic esophagitis, a disease for which there are currently no approved treatments.
Now diving deeper into Q3 results. Global net sales for OTEZLA were $432 million representing 40% growth over the same period in 2017 and 58% growth over the previous quarter. In the US, sales also grew by 15% over Q2, driven by volume. While quarterly script growth reflects the typical seasonality over the summer months, we also saw channel inventory build of approximately $30 million to $35 million during the quarter, which contributed to our strong revenue. We have developed a solid position for OTEZLA in the US pre-biologic patient population. Despite new competitive entrants, OTEZLA continues to lead share of new-to-brand treatment naive patients and over 85% of our moderate-to-severe plaque psoriasis business comes from the pre-biologic market. While growth in international markets was flat compared to previous quarter due to expected seasonality, we continue to see strong performance in key international markets such as Japan and France.
We are very pleased with the positive sales momentum and continue uptake with OTEZLA globally. As such we're increasing our guidance for 2018 to $1.8 billion -- $1.6 billion. With respect to lifecycle management activities, as I mentioned earlier, we are pleased to announce this month the positive result from the Phase III STYLE Study in scalp psoriasis. OTEZLA achieved highly statistically significant improvement in the primary endpoints of the Scalp Physician's Global Assessment response. And in the secondary end point, a reduction in the whole-body itch numeric rating. Scalp psoriasis affects up to 80% of plaque psoriasis patients and is considered to be a difficult to treat area, often managed with topical treatments that can be quite burdensome for the patients. The results of the STYLE study have the potential to further solidify our positioning in the post-topical pre-biologic segment. Additionally, consistent with our commitment to provide treatment options for patients in areas of high unmet medical need, we recently submitted the sNDA for ulcers in Behcet disease in the US. And we plan to submit the Japan filing in Q4 of this year.
Key to our growth strategy is positioning OTEZLA earlier in the treatment paradigm for psoriasis patients. To that end, we are initiating several studies, including a Phase III Advanced Study in mild-to-moderate plaque psoriasis, as well as two studies in moderate psoriasis in Europe and Japan. We're very optimistic that OTEZLA will be able to produce meaningful results and expand in patient population. The combined development activities for OTEZLA are associated with approximately $500 million in revenue uptake.
Now turning to ozanimod. We remain committed to maximizing the compound potential within the context of our overall portfolio. Based upon encouraging results we saw in our Phase II study of ozanimod in Crohn's disease, we've initiated a Phase III trial for this indication. We also continue to enroll patients in our Phase III ulcerative colitis study, which is on track to complete enrollment in mid-2019. We're enthusiastic about ozanimod's potential and continue to assess OTEZLA's lifecycle development opportunities.
We believe that our commercial performance combined with our clinical development program has created a solid foundation for continued growth. The future of the Inflammation and Immunology franchise is bright and we are excited by the outlook for years ahead.
I'd now like to introduce my colleague, Nadim Ahmed.
Nadim Ahmed -- President, Hematology & Oncology
Thank you, Terrie, and good morning everyone. The Hematology and Oncology franchise had a robust third quarter with revenue of $3.5 billion at 16% year-over-year growth. REVLIMID and POMALYST/IMNOVID continue to drive our overall growth with volume gains across brands and geographies. Our in-line brands continue to deliver strong growth and we see many near-term growth drivers. We are on track to make global regulatory submissions in the first quarter of 2019 for the Phase III AUGMENT study with the R-squared regimen in patients with relapsed refractory indolent non-Hodgkin's lymphoma.
We are encouraged by the recent multiple positive Phase III studies of ABRAXANE-based immunotherapy combination regimens, including data presented at ESMO last week. This year's ASH will highlight the significant advancement of our pipeline, which I will cover later in the presentation. Our development plans for bb2121 continue to progress in earlier lines of treatment. Finally, we are advancing our plans for fedratinib as a potentially important therapy addressing a significant unmet need in patients with myelofibrosis, a disease for which there is currently only one approved therapy.
REVLIMID had a very strong third quarter with global sales growth of 18% year-over-year. In the US, the brand grew 22% year-over-year, as treatment duration continues to increase. We saw robust growth driven by continued uptick in the frontline non-stem cell eligible and post-stem cell transplant maintenance segments, as well as the continued increases in duration from the use of REVLIMID-based triplet regimens.
Outside of the US, REVLIMID net sales grew 9% year-over-year with 18% volume growth. Year-over-year growth was impacted by the Russian tender, which occurred in Q3 2017 and did not occur in Q3 of this year. In addition, the combination of the Russian tender and clinical trial revenue, which occurred in Q2 of this year, resulted in a net gain of approximately $100 million in Q2 over Q3. Underlying demand continues to grow outside the US, with growth in REVLIMID's share in both frontline non-stem cell transplant and post-stem cell transplant maintenance patients. Duration also continues to increase with the impact of REVLIMID-based triplets.
POMALYST/IMNOVID net sales increased by 23% year-over-year. In the US, POMALYST net sales grew 34% year-over-year, driven by the continued adoption of the triplet regimen of POMALYST, daratumumab and dexamethasone for relapsed refractory myeloma. Outside of the US, POMALYST/IMNOVID revenue grew 5% year-over-year with volume increasing by 13%, in spite of competition from new entrants, including REVLIMID-based triplet regimens. Similar to REVLIMID, we expect to see additional POMALYST share and duration gains through the use of newer POMALYST-based triplet regimens.
This week, we also announced positive results from the Phase III ECOG E3A06 study in smoldering myeloma, where REVLIMID met the primary endpoint of a significant improvement in progression-free survival. We look forward to seeing the results at an upcoming medical meeting.
In terms of key growth drivers, we expect data readouts of REVLIMID-based triplet regimen in the frontline setting of multiple myeloma through 2018 and 2019, reinforcing the importance of REVLIMID as a standard-of-care in the frontline setting. In addition to the approval of REVLIMID in follicular lymphoma, we await the results of the REVLIMID ROBUST trial in first-line diffuse large B-cell lymphoma.
ABRAXANE net sales increased by 15% year-over-year. In the US, we saw a 17% increase year-over-year in third quarter revenue. Outside of the US, ABRAXANE also had strong year-over-year growth of 12%. Much of the global year-over-year growth for ABRAXANE was driven by customer-buying patterns. Excluding buying patterns, underlying growth was approximately 5%. We look forward to the ABRAXANE data readout for the Phase III APAC adjuvant pancreatic cancer trial. This is an event-driven trial and we continue to monitor the status of patients.
This year, we have seen multiple positive Phase III study of ABRAXANE in combination with checkpoint inhibitors, including last week at ESMO, as well as recent publications in the New England Journal of Medicine. The IMpassion 130 study is the first Phase III study to demonstrate a significant progression-free survival advantage in the 15% of breast cancer patients with triple negative disease. The combination of ABRAXANE and immunotherapy has also shown positive results in multiple Phase III studies for the first-line treatment on non-small cell lung cancer, especially in squamous cell disease.
ASH this year, will highlight the progression of our pipeline across a wide range of hematologic diseases with the first data readouts for many of our assets. With our partner Acceleron, luspatercept will take center stage as we expect to see the results of two highly positive Phase III studies across two distinct diseases; MDS and beta-thalassemia. We continue to advance our position in cellular therapy with multiple first-hand data readouts anticipated from our CAR T pipeline.
Along with our partner bluebird bio, we expect to see the first results of the Phase 1 bb21217 trial in heavily pre-treated patients with the relapsed refractory myeloma. With JCARH125, we anticipate the first results of the Phase I/II EVOLVE trial in heavily pre-treated patients with relapsed refractory myeloma. We expect to see the first liso-cel data in CLL patients with heavily pre-treated relapsed refractory disease.
Finally, we expect to see the first-time presentation of the AUGMENT Phase III study results of the R-squared regimen and relapsed refractory indolent non Hodgkin's Lymphoma. And we look forward to sharing more of these exciting data with you at the ASH Congress.
In summary, the Hematology/Oncology franchise had a strong third quarter in 2018. We are very pleased with our sales performance with strong volume growth across brands and regions. At ASH this year, we have the opportunity to present multiple first-time data readouts from our pipeline across a wide range of diseases, including several positive Phase III studies, as well as the advancement of our CAR T portfolio.
Thank you, and I will now turn the call over to Jay.
Jay T. Backstrom -- Chief Medical Officer
Thank you, Nadim and good morning. We continue to make excellent progress toward advancing our five near-term programs. Ozanimod, fedratinib and luspatercept remain on target for regulatory submissions starting from the end of this year through the first half of 2019. And we continue to advance the preparation of the BLAs for our two CAR T programs; bb2121 and liso-cel. We're also moving forward with their broader development programs.
I would like to provide an update on our regulatory submission activities starting with ozanimod. Over the past six months, we have systematically advanced the non-clinical and clinical pharmacology plans that we've discussed with health authorities, designed to fully characterize the major active metabolite of ozanimod CC-112273. Included in the clinical pharmacology plan are drug-drug interaction studies to assess if the metabolism of ozanimod is affected by inhibition or induction of cytochrome's 2C8 and 3A and if there are potential interactions with tyramine and pseudoephedrine. None of these drug-drug interaction studies are required at the time of submission, but they will help and form product labeling and enhance the opportunity to include the broadest possible patient population.
We continue to engage with health authorities for ozanimod and look forward to our upcoming health authority interactions in November, as we've progressed submission activities. Overall, the NDA and MAA for the relapsing multiple sclerosis indication are on track for a Q1 2019 submission. And as Terrie highlighted, the TRUE NORTH ulcerative colitis trial is on target for completion of enrollment by mid-2019 and the Crohn's program is under way.
Turning to the fedratinib, we are pleased with the progress that has been made with the fedratinib NDA and remain on track for completing this work by year-end. In addition, we have upcoming European Health Authority meetings that are an important part of our activities leading toward the submission of the MAA planned for next year.
As we previously announced, the enrollment for TRANSCEND, the pivotal study for liso-cel and relapsed refractory diffuse large B-cell lymphoma, completed earlier this summer and we continue to collect follow-up information for this registration study. Duration of response is important information for physicians, patients and health authorities, and will form an essential part of the submission package. We plan to have follow-up information of at least nine months on all patients treated in this study with the intent to characterize duration of response and reflect this inform on labeling.
Given the time needed for this data to mature, we are adjusting the timeline for the expected approval from end of year 2019 to mid-2020. In addition to the longer follow-up for duration of response, the submission package will include efficacy and safety data for relapsed refractory diffuse large B-cell lymphoma, as well as other subtypes, including primary mediastinal B-cell lymphoma, providing the opportunity for a further differentiated label.
As a reflection of the potential of liso-cel in relapsed refractory chronic lymphocytic leukemia, we look forward to sharing data from the ongoing Phase I/II trial at ASH. The luspatercept program continues to move forward nicely. Our regulatory and clinical teams are well under way with the preparation of the regulatory submission for the MDS and beta-thalassemia indications, and we remain on track for a submission in the first half of 2019.
The front-line COMMANDS study evaluating luspatercept and ESA-naive, very low, low and intermediate risk MDS is open for enrollment and we look forward to sharing the results of the two pivotal Phase III studies MEDALIST and BELIEVE at ASH.
Finally, with respect to bb2121, the program remains on track for a potential 2020 approval with KarMMA study expected to complete enrollment later this year. In addition, the bb2121 team continues to advance the broader myeloma program to earlier lines of treatment, including KarMMA III, a randomized Phase III study in relapsed refractory multiple myeloma and patients who have received at least two prior lines of therapy, and the MM-002 Phase II study, which includes a high-risk cohort who have failed one prior line of treatment.
In closing, our teams have excellent momentum and remain dedicated and focused on advancing the next wave of innovation starting with these five near-term program.
I now will turn the call back over to Mark.
Mark J. Alles -- Chairman & Chief Executive Officer
Thank you, David. Thanks, Terrie, Nadim and thank you very much Jay. As my colleagues have shared, Celgene's fundamentals are strong, including robust commercial performance, a broad transformative pipeline and a strengthened management team. We look forward to reporting on and realizing the benefits of several near-term catalysts starting with an extremely promising ASH Meeting in just a few short weeks.
Thanks again for joining us today. And operator, please open the call for questions.
Questions and Answers:
Operator
Thank you. (Operator Instructions) And our first question comes from Geoff Meacham from Barclays. Your line is open.
Geoff Meacham -- Barclays -- Analyst
Good morning, guys. Thanks for the question and congrats on the quarter. Jay on the JCAR017 filing, was waiting for duration response data based on regulatory feedback or was it a strategy just to have more differentiation at launch? And could you add less mature data in earlier lines of DLBCL in the filing? And then a bigger picture question for Mark. When you think about diversifying REVLIMID concentration risk, that's obviously one of the most important questions with investors. On slide 24, you have five new products expected to launch, the question is how many additional new assets do you feel like you need to help diversify REVLIMID? I guess, more of a question of pace of BD versus expanding the indication base of what you have today. Thank you.
Jay T. Backstrom -- Chief Medical Officer
You know -- so hi, this is Jay, I will start. You know I think from FDA feedback and other health authorities feedbacks there is a minimum expectation for duration. Often that's six months or greater. You know as we looked at our program, the nine-month duration is both -- obviously facilitates the FDA review, but also I think does provide some competitive advantage to that information. And as we gather data, we will continue to have, frankly, quite a strong safety database which will go into the submission as well.
Mark J. Alles -- Chairman & Chief Executive Officer
Thanks, Jay. So Geoff, it's Mark thank you for the question. On the bigger picture, I'm glad you picked up on the big five that we're talking about because the combined peak revenues of those five as we look at them, largely offset what would be the complete loss of REVLIMID's revenue. So not just a peak in a given year, but over time it would replace most of what REVLIMID contributes in a year. Remember how the settlement that exists for REVLIMID works. It erodes from early '22 through then full generic in '26. So this overlap of these five assets, the slow erosion of what would be REVLIMID's current profile in the settlement with Allergan and Teva, of course it's Teva now, we see a nice replacement of those revenues from the big five. And that's why the end of 2020 is such an important window for these five assets to be approved for their first indications. In addition, you heard us refer today to a wave of innovative products coming out of Rupert's talk in Early Research and Development. We're getting very excited about a small group of those assets where we think we have a first approval opportunity by the year 2022. If we're really careful and specific, one or more of those might be able to come out even before then, but we'll wait and inform you about that later.
On the BD front, we'll continue to look for opportunity. At the start of the year, as you all know, we did two transactions to bring in fedratinib and, of course Juno, as we talked about today. Not only do we have JCAR017 for diffuse large B-cell lymphoma and other subsets of lymphoma, but here it is coming forward in CLL. So we think that the Juno transaction is more about a portfolio approach as opposed to just a drug, a pipeline approach. So we will continue to be opportunistic on the BD front. I think the combination of our existing products, not just REVLIMID, the next five, the next wave of organic R&D and then ongoing BD, should put us in a very, very good position to manage what is the REVLIMID concentration risk. Thanks, Geoff.
Geoff Meacham -- Barclays -- Analyst
Thank you.
Operator
Thank you. Our next question comes from Terence Flynn from Goldman Sachs. Your line is open.
Terence Flynn -- Goldman Sachs -- Analyst
Hi, great. Thanks for taking the question. Was just wondering if you could comment on thoughts on longer-term margins here. Obviously, you've highlighted a lot of the newer products coming on board over the next several years. Some of these are partnered, some of these are cell therapy drugs. And so just wondering as you think about the kind of mix shift on your margins, could you maybe just give us your high-level thoughts on that? Thank you.
David Elkins -- Executive Vice President & Chief Financial Officer
Yeah, I mean, overall, we don't guide margins longer-term. As you can see though with the pipeline that we have, both mid-stage and late-stage, we continue to invest from a research and development perspective, and you saw those increases come through. And in the nearer-term, as you saw with our cost of goods sold pretty much staying in line with our expectations. But generally speaking, we don't guide our margins over the longer-term.
Mark J. Alles -- Chairman & Chief Executive Officer
I just would add that, of course, we reaffirmed 2020 on the basis of top line and EPS again today. So at least through the window that we have spoken about, margins remain very good.
Operator
Thank you. Our next question comes from Alethia Young from Cantor Fitzgerald. Your line is open.
Alethia Young -- Cantor -- Analyst
Hey, guys. Thanks for taking my question. Congrats on the quarter. I had a question on fedratinib. Basically, if you can just kind of walk through for us what's left with the things that you have to do until the filing, and then maybe discuss how you think about a regulatory package in Europe versus the United States. Thanks.
Jay T. Backstrom -- Chief Medical Officer
Yeah, hi. This is Jay. So your typical preparation of the NDA is putting all the summary documents together, so we're working to complete that work. The data will be based on both JAKARTA-1 and JAKARTA-2. We plan to include that in the submission and we look forward to health authority interactions, which ultimately will determine what the final labeling will look like.
Alethia Young -- Cantor -- Analyst
Do you have any theory on maybe how the conversations with the US versus Europe will go? Are there certain things that we should think differently about with those two regions?
Jay T. Backstrom -- Chief Medical Officer
No, you know the regions have a lot of similarities and some differences. We've obviously already engaged in FDA, and as I mentioned in my prepared remarks, we're looking forward to our upcoming interactions with the European Health Authority.
Alethia Young -- Cantor -- Analyst
Great. Thanks.
Operator
Thank you. Our next question comes from Umer Raffat from Evercore. Your line is open.
Umer Raffat -- Evercore -- Analyst
Hi. Thanks so much for taking my question. First, you reaffirmed 2020 guidance, and my question is, is it fair to assume that you're reaffirming the top-line guidance as well? And I don't know if you're getting even more granular by the line item in top line, so just wanted to add that -- ask that first. Second, ozanimod DDI trials, I'm just trying to understand why are they not relevant for an upcoming resubmission? And then finally, am I correct in hearing that the tone is a bit guarded on fedratinib on this call?
David Elkins -- Executive Vice President & Chief Financial Officer
So I'll take the first question regarding the longer-term guidance. All we're doing is reaffirming the guidance that was already out there. Top line, $19 billion to $20 billion, as I said earlier and then on EPS, greater than $12.50 at constant currency. So we don't guide individual line items. We're just reaffirming the guidance that was out there.
Jay T. Backstrom -- Chief Medical Officer
Yeah, and this is Jay. So maybe I'll start with fedratinib. There's no lack of confidence for that. The confidence is high. We have a positive Phase III study; JAKARTA-2 data is exceedingly interesting. So we're moving forward as quickly as we can to get the NDA in as I mentioned. And then with respect to the DDI, what we're just trying to clarify is that all information is relevant, right. So these drug interaction studies are important to inform labeling. They often can guide toward whether dose adjustments are needed. But they're not necessarily required for the submission to accept for filing for FDA to begin their review. And so our plan through our engagement with the agencies would be to provide as much as we can upfront and have the opportunity during the review to contribute to the labeling discussions with those additional data. So that's part of the strategy which we're working tirelessly to implement.
Umer Raffat -- Evercore -- Analyst
Thank you.
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. I guess questions -- I have two questions on CAR T related. So just first, we're hearing still there's some pushback in the Medicare space, even with the NTAP on reimbursement and some doctors preferring, saying that you really need to lower the price and have a lower price and have more uptake there. And that's my first question, if you think that's going to happen or that could happen realistically, that you can get lower price and can penetrate that Medicare population? And then the other part of the CAR T question is there's a lot of other BCMA CAR T -- CAR Ts being developed that could have longer durability, could have a different safety profile and they're happening fast. And just how do you stay ahead of that, the competitive landscape, with your programs? How do you think about that? Thanks.
Nadim Ahmed -- President, Hematology & Oncology
Robyn, thanks for your question. This is Nadim. So let me start with the second question first. So in terms of the BCMA approach, I would remind, again, that we -- in terms of BCMA, we have both a CAR T approach as well an antibody approach. So I think we feel good that we have a multi-modality play here in a target that now has become very well validated. In terms of bb2121, we're ahead, first in class, and the plan is to be best-in-class. So as you heard from Jay earlier, we're rapidly expanding into earlier lines of development. At the same time, 269, our T-cell engager, is in the clinic. So we feel, across our multi-modality play, we're in a very strong position as it pertains to CAR T. Now your question around CMS, of course, there's a macro level of making sure we respond to an environment where we continue to provide the value of our medicines and the challenges that are out there on cost and pricing, but I think CMS has been very actively engaged in the CAR T space and they've looked at creative ways to whether you use NTAP or other mechanisms. And so I feel very good about moving forward, how CMS is actually contemplating reimbursing in the CAR T space, as well as the commercial payers. So we're feeling very good about this space in the future.
Mark J. Alles -- Chairman & Chief Executive Officer
Robyn, it's Mark. If I could just add one comment to what Nadim very, very nicely laid out in terms of our multi-modality approach, the other reality is that we think with bluebird bio, bb2121 is markedly ahead in its development in relapsed myeloma and collectively, we are working with them to aggressively move to earlier lines of therapy. So I think data will always dictate what happens in the clinical trial landscape and then ultimately what shapes markets, as you all know. So we continue to feel great about what's happening with bb2121 and we're doing what we can along with our partner, to move it to earlier segments of myeloma, which once the data would be established, once labeling would occur, if one assumes success, it becomes very difficult for follow-on approaches in the absence of head-to-head trials. It is a strategy to be first with what we think is currently best-in-class.
Operator
Thank you. And our next question comes from Geoffrey Porges from Leerink. Your line is open.
Geoffrey Porges -- Leerink -- Analyst
Thank you very much for the question. Maybe David, since you've sort of been in the position now for a few months, I'm wondering if you could talk a little bit about your views on capital allocation. Looks like there's been over $20 billion in share buybacks over the last five years and most -- much of that price is significantly above the current stock price. So first, could you give us your views on how you assess the value of that share buyback and then how you think about that going forward, particularly in the context of a dividend? And then perhaps you could also give us a sense of how you're viewing the $4 billion in R&D spend that you're effectively tracking toward now. How do you assess the value of that and decide on whether that should continue to grow at the pace that it's been growing? Thanks.
David Elkins -- Executive Vice President & Chief Financial Officer
Well, thank you for the very comprehensive question, but let me try and take those in order. The first one, capital allocation, how we approach that. First and foremost, as I know Peter (ph) previously had said and Mark has said, is our number one priority is investing in the business, both our internal research and development programs, as well as looking for the best science externally and funding our collaborations as well, which has been extremely successful for us if you look at the next five products that we talked about on the call today, but most of those are coming from our external collaborations. So, it's a very important part because we're agnostic on where the science comes from. We're just looking for the best science. At the same time, however, we're not looking to build up excess cash reserves. And if opportunities aren't present, then we'd look to return that cash to our shareholders through the form of share repurchases. Today, we still believe that it's the most efficient way for us to return cash to shareholders. And currently, we have no intention of beginning a dividend. So, hopefully, I answered those couple of questions.
As far as research and development is concerned, we go through a very rigorous process both on early stage, but as well as on late stage evaluating our projects, looking at the probability of success, as well as the return on invested capital that we get for those. And that's a continuous process. We engage in that process through our annual strategic planning process, as well and share that with our Board, and we constantly look back on our successes and whether or not they're delivering to our expectations. So very robust process from that perspective and I think you've seen the successes in the pipeline, particularly the next stage of products.
Geoffrey Porges -- Leerink -- Analyst
Okay. Thank you very much.
Operator
Thank you. Our next question comes from Michael Yee from Jefferies. Your line is open.
Michael Yee -- Jefferies -- Analyst
Hi, there. I have two quick ones. One was expanding on BCMA not just CAR T, but perhaps comment on your perspective of comparing CAR T to other modalities such as bispecifics, which has obviously made a bit of a splash recently and just perhaps give us your perspective about how you're thinking where each of that fits in or particularly, when will you have some of your bispecific data to compare? And then, my second question was more financial. Now that we have a new CFO in place, perhaps has there been any thought about the 2020 guidance? And I think everyone feels quite comfortable with that, but at what point does the Company think about longer-term guidance, or what are the steps or what are the things that have to happen to think about when that's even a scenario? Thanks so much.
Nadim Ahmed -- President, Hematology & Oncology
Michael, thanks for your question. Nadim here. I think an important point to point out, which is why we've taken the multi-modality approach to BCMA, I think we feel very strongly that both modalities can co-exist together. So, there'll be patients for whom a CAR T approach will be first and foremost. But remember, there'll also be patients that continue to relapse. So, I think when you think about relapsed patients, when you think about more frail patients, then an antibody approach may be ideal for those patients. So we feel that both approaches can tackle a broad range of patient segments. So, we feel very good about that. And in terms of your question around our bispecific, it's currently in Phase I. And then once we reach a dose and we feel comfortable with the data, of course, we'll present the data as the opportunity presents itself.
David Elkins -- Executive Vice President & Chief Financial Officer
Thank you. Yes. And thank you for the question on long-term guidance. Look, long-term guidance and the way we look at that is it's the exception and normally you would not provide that because there's too many external factors, whether they be political, economic, currency, that create problems for everybody, make it very difficult seeing beyond one year. There are exceptions where that is made. And once that guidance is out there from my perspective, you deliver against that guidance. But as you look going forward, I would not expect us to do long-term guidance, because there's not a need right now. We have the 2020 guidance out there that we reaffirmed today that we feel confident in being able to deliver. But going forward, we would just do normal annual guidance.
Michael Yee -- Jefferies -- Analyst
I agree with you, and I think a lot of us should agree with you. Appreciate that.
Operator
Thank you. Our next question comes from Cory Kasimov from J.P.Morgan. Your line is open.
Cory Kasimov -- J.P. Morgan -- Analyst
Hey. Good morning, guys. Thanks for taking my question. I also have a two-part question following up on BCMA. So given that you're expecting to provide a first look at JCARH125 at ASH this year, curious about your latest thoughts regarding the path forward for having three CAR T BCMA programs, this and the two with bluebird. Do you see space for two or more in your portfolio? And then, the follow-up is along these lines of your updated plans for JCAR017 or liso-cel, how much do you plan to wait on duration for the pivotal bb2121 KarMMa study, given the obvious different competitive dynamics here where you're clearly well in the lead on the BCMA front? Thanks.
Nadim Ahmed -- President, Hematology & Oncology
Okay. Thanks, Cory, for your questions. So, I think, again, reiterating in the space of BCMA CAR Ts, bb2121 is the furthest ahead in terms of our program. And so, we're going to make sure we continue to accelerate the development, move it into earlier lines as we discussed before. We have both JCARH125 and bb21217 at ASH. Of course, we're excited that those data will be at ASH, but the data are very early. Both of those assets are in Phase I. So, our efforts at the moment are really focused on developing and accelerating bb2121. Once we have a further idea of how the profile for JCARH125 and bb21217 emerges, I think we can talk about positioning at that point in time. But, right now, our efforts are focused on bb2121.
Jay T. Backstrom -- Chief Medical Officer
Yeah, and this is Jay. With respect to sort of the regulatory submission and duration of response and follow-up, we're going to follow a similar path with that. I think the longer duration is important. If you think if we complete our enrollment this year and we're targeting 2020 approval, that'll give us the opportunity to have at least nine months or more for those patients as well. And again, that's really meaningful. Durable CR is really important for these submissions.
Cory Kasimov -- J.P. Morgan -- Analyst
Okay. Thank you.
Operator
Thank you. Our next question comes from Brian Abrahams from RBC Capital Markets. Your line is open.
Brian Abrahams -- RBC -- Analyst
Hi, there. Thanks for taking my questions and congrats on the quarter as well. A question on smoldering myeloma. Should we expect any meaningful impact of that data on REVLIMID uptake? And could we foresee that becoming standard of care in a certain subset of individuals? What would be the timeline for inclusion in NCCN guidelines and the reimbursement dynamics there? And then, on OTEZLA lifecycle plans, it looks like maybe there was a setback with the once-a-day formulation. Can you speak to that a little bit? And then, how important are other combinations with other targeted meds or other initiatives for extending exclusivity of the OTEZLA franchise longer term? Thanks.
Nadim Ahmed -- President, Hematology & Oncology
Thanks for your question, Brian. So, I'll take the one for REVLIMID in smoldering myeloma. So, a couple of things to point out. So of course, we had the Spanish PETHEMA study that was published a couple of years ago in the New England Journal of Medicine. So this high-risk group of smoldering myeloma, a lot of physicians now are tending to treat these as active myeloma patients. So, some of these patients already clinically are falling into the active disease space and are being treated as such. The other important aspect of this specific study was these patients were treated without dexamethasone, which is meaningful from a quality of life perspective in this group of patients. So overall, smoldering myeloma represents a relatively small opportunity compared to overall all of myeloma, but these data are clinically meaningful for these patients.
Terrie Curran -- President, Inflammation and Immunology
Yeah, thanks for the question regarding once-a-day or QD Yes, you're correct. We have withdrawn the QD formulation submission and this decision was taken by Celgene to allow additional time for us to really evaluate our manufacturing strategy and really reassess the plan for the formulation. I think, importantly, it's really critical to note that in the time that we've been working on the QD formulation, we've initiated another -- really, a lot of additional kind of lifecycle studies that I outlined in my kind of spoken comments, scout, pediatric, mild to moderate PSO that we really believe have a much greater upside to deliver revenue beyond 2020. In terms of the combination, we're looking at earlier combinations with ozanimod for multiple indications.
Brian Abrahams -- RBC -- Analyst
Thanks very much.
Operator
Thank you. 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. Thanks for taking my question. I have one question for Nadim on the MDS data at ASH. What is considered clinical meaningful response difference between luspatercept and the control, in your mind? And then, secondly, I want to ask a question about the donut hole (ph) rule change in 2019, because as a company you have to pay for 70%, while the patients in donut hole for Medicare Part D. Can you help us quantify the financial impact to REVLIMID in 2019? Thank you.
Nadim Ahmed -- President, Hematology & Oncology
Thanks, Ying. So, with the MDS data, obviously I'm not going to disclose the data, because the abstracts will be released next week. But I do think we've publicly stated what the hypothesis for the Phase III study was and that was looking at a difference of 10% versus 30%.
Mark J. Alles -- Chairman & Chief Executive Officer
Yeah, hi. It's Mark. David may want to comment as well on the second part of your question. You're right that the current conditions call for the donut hole liability for manufacturers to go from what historically was 50% to 70%. I think that, that's still under consideration by many of our legislators as that change was really a consequence of a scoring difference that happened in other spending legislation. So I think there's still a window here where that could be reviewed and in other must-pass legislation before the end of the year, there may be a consideration for that to be changed. That said, we've modeled very carefully what a change like that would look like because it is current law and that has been built into our outlook, as David described earlier today. Thank you.
Ying Huang -- Bank of America Merrill Lynch -- Analyst
Thanks, Mark.
Operator
Thank you. Our next question comes from Carter Gould from UBS. Your line is open.
Carter Gould -- UBS -- Analyst
Good morning. Thanks for taking the questions. Had a couple quick ones on luspatercept and liso-cel you featured more prominently in your comments. So, I guess, first on COMMANDS, I know the study's been delayed once. It seems like it's taking a little while to get started. Just looking for some more color there. And then, Nadim, you mentioned, obviously, abstracts next week. Should we expect quantitative details from MEDALIST in the abstracts or is that something we'll have to wait till December for? Thank you.
Nadim Ahmed -- President, Hematology & Oncology
So let me take the last question first, Carter. So, the abstracts will contain some information, of course. Of course, not all the information in a presentation, if the abstracts were being accepted as a presentation. So, I'd say, look out for the abstracts next week.
Jay T. Backstrom -- Chief Medical Officer
Yeah, and for COMMANDS, this is Jay. It's up and running. It's there.
Carter Gould -- UBS -- Analyst
Okay. I believe the slide said not yet enrolling, so I'm just -- was following up on that.
Jay T. Backstrom -- Chief Medical Officer
Yeah, no. The study's open. Sites are open. So, we're here -- it's in that start mode.
Carter Gould -- UBS -- Analyst
Okay.
Jay T. Backstrom -- Chief Medical Officer
So we're moving. Yes.
Carter Gould -- UBS -- Analyst
Good to hear.
Operator
Thank you. Our next question comes from John Newman from Canaccord. Your line is open.
John Newman -- Canaccord Genuity -- Analyst
Hi, guys. Good morning. Thanks for fitting me in. So, it's been kind of a recurring theme or question over time as to how you're going to address REVLIMID going generic, and you've put forth several products on this call that will address that gap when they contribute additional revenues. My question is, given that the BCMA programs, especially your CAR T, could essentially change the standard of care for the treatment of multiple myeloma, even beyond what you've accomplished for REVLIMID. Can you plan to run combination studies or perhaps sequence studies with some of your new IMiD agents in order to establish a new standard of care and at the same time pull revenue forward with new agents to offset the loss of REVLIMID? Thank you.
Nadim Ahmed -- President, Hematology & Oncology
Thanks, John, for your question. So, absolutely. So, we spoke earlier about our multi-pronged BCMA approach but our overall approach to multiple myeloma actually has a couple of key core strands. One is the BCMA approach. The other approach is our new CELMoDs, of which we have at least two in the clinic currently, and that's without even contemplating the combination of the two classes of agent. So, we feel very good about the overall multi-modality play and we also feel very good about the timelines of delivery of those agents. So, two of the CELMoDs are both in the clinic already and we have at least one antibody in the clinic targeting BCMA. And, of course, you heard earlier from bb2121, where we are first and best-in-class at the moment. So, we absolutely intend to make sure we continue to have great product offerings for patients with multiple myeloma. Thank you for your question.
John Newman -- Canaccord Genuity -- Analyst
Thank you.
Mark J. Alles -- Chairman & Chief Executive Officer
Hey, Crystal, I think we have time for one last caller.
Operator
Thank you. And our final question comes from Salim Syed from Mizuho. Your line is open. Please check that your line is currently not on mute.
Mark J. Alles -- Chairman & Chief Executive Officer
Okay, let's go ahead and go to the next caller, please.
Operator
Thank you. And our final question will now come from Joseph Thome from Cowen & Company. Your line is open.
Joseph Thome -- Cowen & Company -- Analyst
Hi, there. Thank you for taking my question. Maybe just one for Terrie. You did outline those different opportunities going forward for OTEZLA. Maybe specifically for scalp psoriasis and genital psoriasis, do these patients have more widespread disease so that they would already be under the umbrella of patients that are being treated currently on OTEZLA or would these be substantial new opportunities? And obviously the mild indication would be excellent. Is there currently any off-label treatment with OTEZLA in the mild patients or is it sticking mainly to moderate to severe? Thank you.
Terrie Curran -- President, Inflammation and Immunology
So thanks for the question. I think if you look at scalp psoriasis, of moderate to severe patients, about 60% to 80% have scalp involvement. However, many of them are not treated. About 60% of patients that have scalp involvement are not treated and not even on a topical. Topicals are very burdensome for patients, so there really is a high unmet need for scalp psoriasis and also genital psoriasis. So we really see that a product like OTEZLA that's oral with a very significant risk benefit profile really plays to that patient population.
Mark J. Alles -- Chairman & Chief Executive Officer
Okay. Thank you, everyone for your interest in Celgene. And as today's call demonstrates, our organization continues to deliver outstanding operational performance. We're making meaningful progress advancing our five late-stage products and our early stage pipeline has also advanced this year with the five INDs filed for molecules with novel mechanisms of actions. I'd like to conclude the call by thanking the thousands of Celgene employees around the world dedicated to improving human health through the pursuit of novel science. We look forward to seeing all of you at ASH in a few weeks. Thank you, everyone.
Operator
Well, ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. You may all disconnect. Everyone, have a wonderful day.
Duration: 61 minutes
Call participants:
Nina Goworek -- Executive Director, Investor Relations
Mark J. Alles -- Chairman & Chief Executive Officer
David Elkins -- Executive Vice President & Chief Financial Officer
Terrie Curran -- President, Inflammation and Immunology
Nadim Ahmed -- President, Hematology & Oncology
Jay T. Backstrom -- Chief Medical Officer
Geoff Meacham -- Barclays -- Analyst
Terence Flynn -- Goldman Sachs -- Analyst
Alethia Young -- Cantor -- Analyst
Umer Raffat -- Evercore -- Analyst
Robyn Karnauskas -- Citi -- Analyst
Geoffrey Porges -- Leerink -- Analyst
Michael Yee -- Jefferies -- Analyst
Cory Kasimov -- J.P. Morgan -- Analyst
Brian Abrahams -- RBC -- Analyst
Ying Huang -- Bank of America Merrill Lynch -- Analyst
Carter Gould -- UBS -- Analyst
John Newman -- Canaccord Genuity -- Analyst
Joseph Thome -- Cowen & Company -- Analyst
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