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Celgene Corp. (NASDAQ:CELG)
Q4 2018 Earnings Conference Call
January 31, 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, Chelsea. Good morning, and welcome to our fourth 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 are Mark Alles, our Chairman and Chief Executive Officer; David Elkins, 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 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 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. You will see on Slides 3 and 4 of today's presentation our legal disclosures. 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 measure 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 thanks, everyone, for joining us this morning. We appreciate the opportunity to review the results from our very good fourth quarter and full-year 2018, and the significant progress made advancing our early, mid, and late stage pipeline. Across our product portfolio and around the world, our operating performance was excellent, exceeding both topline and bottom line guidance.

Compelling value propositions for patients plus outstanding commercial execution drove strong year-over-year growth for each of our flagship products, four of which exceeded $1 billion in sales last year. As we communicated earlier this month, this operating momentum supports our 2019 financial guidance of total revenue of $17-17.2 billion and adjusted diluted earnings per share of $10.60-10.80. We also reaffirming our 2020 outlook of $19-20 billion revenue and greater than $12.50 for adjusted diluted earnings per share. David, Terrie, and Nadim will discuss our financial results, commercial performance, and strategic progress later during the call.

Importantly, our multiyear investment to optimize the potential of our existing products and accelerate the development of several new medicines is delivering. In 2018 alone, we achieved 11 positive Phase III clinical trials spanning hematology, oncology, immunology, and new products. At the end of 2018, our industry leading blood cancer portfolio was featured at the American Society of Hematology meeting, introducing and highlighting additional data and compounds across multiple disease areas and technology platforms.

Our five near term launches remain on track, with US approvals expected by the end of 2020. Dr. Jay Backstrom will provide a detailed update on ozanimod, fedratinib, luspatercept, liso-cel, and bb2121 shortly. Our next wave of innovation is well under way as Dr. Rupert Vessey's Research and Early Development Team continue to advance new programs and novel mechanisms directed at cancer and inflammatory diseases. In 2018, seven new INDs were filed for innovative medicines discovered internally or in collaboration with one of our many partners.

For more than 15 years, our mission to become a preeminent company by discovering, developing, and delivering the most innovative therapy for patients has driven us to constantly explore scientific frontiers and opportunities for sustainable long-term growth. This is the lens by which we evaluate strategic alternatives, and how we became very excited by the proposed combination of Celgene and Bristol-Myers Squibb. Fundamentally, we are two innovation focused companies coming together to build an even stronger organization with virtually the same mission and purpose.

As has been discussed, the strategic rationale for this transaction is clear and compelling. The combination of our highly complementary portfolios creates a world leader in the important specialty areas of oncology and inflammation and immunology. We believe the combined company will have even greater financial strength to further accelerate our research and development engine, continue to invest in external partnerships, and to attract the most talented people in our industry.

For Celgene shareholders, this cash and stock transaction recognizes and unlocks significant value by delivering immediate and substantial cash value and providing meaningful participation in the combined company's future growth. We are working together with our colleagues at Bristol-Myers Squibb to complete this transaction, which is expected in the third quarter of 2019. We believe that Celgene's 2018 operational performance and significant clinical and regulatory progress sets us up very well to deliver on our ambitious 2019 goals. With five near-term product launches and many promising pipeline assets advancing, we are very optimistic about the potential for long-term growth as part of the new Bristol-Myers Squibb.

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. As Mark mentioned, we are pleased to have exceeded our full-year topline and bottom line guidance. 2018's operating results highlights the strength of Celgene's business across the portfolio. Revenues grew 16% and 18% year-over-year in the fourth quarter and full year, which adjusted diluted earnings per share also grew double digits year-over-year at 20% and 19% for the fourth quarter and full year respectively.

We also continued to make significant investments in research and development -- in particular, in our late stage pipeline -- to ensure we're advancing our regulatory submissions and driving toward approvals. We expect double digit growth on our top and bottom line to continue through 2019 and is reflected in our guidance.

Now, turning to Slide 10, total net product sales grew 16% year-over-year, achieving over $4 billion for the first time in Celgene's history, which is almost entirely driven by volume. Growth in our hematology and oncology franchise came primarily from volume drains across multiple brands and geographies. OTEZLA had a very strong quarter, mainly driven by volume increases, as we continue to expand access and utilization, and also benefited from additional stocking in the quarter. Nadim and Terrie will elaborate further on these drivers.

Turning to our full-year 2018 topline performance, net product sales grew about 18% to approximately $15.3 billion, exceeding our guidance of approximately $15.2 billion. Consistent with Q4, our full-year 2018 net product sales was driven primarily by volume, as price was only about 3% of our full-year growth.

On Slide 12, adjusted diluted EPS increased approximately 20% year-over-year, and 4% sequentially, to $2.39. The increase was primarily driven by the strong topline growth partially offset by increased expenses relating to the Juno acquisition as well as our investments in our late stage pipeline. The net impact of these are reflected in the $0.30 of operating improvement seen on the slide.

Other income and expenses was negatively impacted by $0.12 due to increased interest expense from a higher level of debt primarily related to the financing of the Juno acquisition. Lower share count had a favorable impact of $0.25 to adjusted diluted EPS growth for the quarter, bringing adjusted diluted EPS to $2.39. Full year adjusted diluted earnings per share grew 19% year-over-year to $8.87. This was driven by higher operating income of $0.97 and the benefit of $0.81 from lower share count partially offset by higher interest expense and a slightly higher effective tax rate. Note, these outstanding results were achieved despite approximately $0.50 dilution related to Juno post acquisition costs.

Now, turning to the key adjusted P&L line items on Slide 14, you'll see product gross margin was in line with our expectations at 96 % for the fourth quarter and 96.4% for the full year. Product gross margin was slightly decreased versus prior year primarily due to raw material charges incurred in the year. R&D as a percentage of revenue increased to 23% in the fourth quarter and for the full year. The increase in R&D is primarily driven by the inclusion of Juno expenses. Excluding these expenses, R&D as a percentage of revenue decreased about 60 basis points versus prior year.

SG&A spend was $762 million for the fourth quarter, and $2.7 billion for the full year. SG&A expenses were primarily driven by Juno and prelaunch marketing expenses for our late stage pipeline. The net result was about a 70-basis-point year-over-year decrease in our operating margin to 54.4% in the fourth quarter. This resulted in a 55.5% operating margin for the full year. Excluding the Juno-related expenses, operating margin improved 40 basis points for the full year, and we closed out 2018 with a slightly higher effective tax rate at 16.5%, which is mainly driven by US tax reform.

Now, on to capital allocation. In 2018, we continued our disciplined approach to capital allocation. Overall, we generated significant cash flow of about $5.2 billion. We also invested $9.7 billion in the strategic acquisition of Juno and Impact, and returned $6.1 billion to our shareholders through stock repurchases. We ended the year with a strong cash balance of approximately $6 billion in cash and marketable securities.

Now, turning to our 2019 guidance, 2019 reflects continued strong double-digit topline and bottom line. To summarize, we expect total revenue to be $17-17.2 billion, growing at about 12% year-over-year using the midpoint of our guidance. We expect adjusted operating margin improvement while maintaining a high-level investment in R&D. Our adjusted effective tax rate is expected to be about 17%. As a result, our adjusted diluted EPS is expected to be $10.60 and $10.80, reflecting strong 21% growth year-over-year when using the midpoint.

Lastly, we expect to maintain our share count where we landed at the fourth quarter of about 715 million shares. Finally, as we've discussed and experienced in the past, we want to remind you that we expect the typical seasonality of our business in Q1, as well as the impact of the donut hole payments, which is exacerbated by the manufacturing's responsibility increasing from 50% to 70%. We expect Q1 as a percentage of full-year revenue to be broadly in line with Q1 2018. As a result, you should expect Q1 adjusted diluted EPS to be broadly in line with Q4.

Thank you, and I'd now like to turn the call over to Nadim.

Nadim Ahmed -- President, Global Hematology & Oncology

Thank you, David, and good morning, everyone. The hematology and oncology franchise had another outstanding quarter, with net sales of approximately $3.6 billion and 15% year-over-year growth. For the full-year 2018, net sales revenue was approximately $13.7 billion with 17% year-over-year growth.

For REVLIMID, we met our full-year 2018 guidance with approximately $9.7 billion in revenue and 18% year-over-year growth. For POMALYST/IMNOVID, we also met our full-year guidance of approximately $2 billion in revenue and 26% year-over-year growth. REVLIMID and POMALYST/IMNOVID continue to drive our overall growth with volume gains across brand and geographies. In 2019, we also anticipate additional label expansions that will continue to drive near term growth for our key inline brands. For example, we have now submitted the SNVA and MAA for the chemotherapy free R2 regimen and in relapsed refractory indolent lymphoma, based on the positive AUGEMENT trial, and we expect FDA approval in the second half of 2019.

Finally, we continue to progress our portfolio of novel assets with ASH 2018 showcasing the significant advancement of our pipeline across a wide range of hematologic diseases. The data for luspatercept, a first in class erythroid maturation agent in MDS and beta-thalassemia, were a key highlight of ASH with luspatercept demonstrating a significant impact on disease related anemia across two distinct diseases.

There were also numerous oral presentations that demonstrated our progress with cellular therapy. We saw the first preliminary liso-cel data in CLL patients, demonstrating an approximately 45% complete response rate in patients with heavily pretreated relapsed refractory disease.

In terms of our broad BCMA campaign, we completed recruitment in our pivotal KarMMa study for bb2121 and also saw encouraging data for bb21217 and JCARH125 in relapsed refractory myeloma. We have also now submitted the NDA for fedratinib in myelofibrosis in the US and expect approval by the end of 2019. From a commercial perspective, our teams are now in full launch preparation mode for our key near term launches.

REVLIMID continues to deliver strong quarterly results with 16% year-over-year growth. In the US, REVLIMID grew 17% year-over-year for the quarter as market share and treatment duration continue to increase. We continue to see strong underlying demand growth with solid performance in the non-stem cell transplant and post stem cell transplant maintenance studies. Outside of the US REVLIMID net sales grew 15% year-over-year, with 24% volume growth. This growth is a result of robust underlying demand in ex US markets, driven by REVLIMID shared in both frontline non-stem cell transplant and post stem transplant patients.

Duration also continues to increase with the impact of REVLIMID based triplet regimens. We also expect continued growth for REVLIMID in newly diagnosed multiple myeloma, with the addition of new triple combination regimens, including REVLIMID, daratumumab, dexamethasone in the US, and also RVd outside of the US, based on expected European regulatory approval later this year. The expected FDA approval later this year for R2 in lymphoma will also provide a new growth driver for the brand. Finally, we are awaiting the results of the REVLIMID robust trial in first line diffuse large B-cell lymphoma. This is an event driven trial and we continue to monitor the phases of patients.

POMALYST/IMNOVID net sales for the quarter increased 28% year-over-year. In the US, POMALYST fourth quarter net sales grew 39% year-over-year, driven by the continued adoption of the triplet regiment of POMALYST, daratumumab, and dexamethasone for relapsed refractory myeloma. Outside of the US, POMALYST/IMNOVID revenue grew 9% year-over-year with volume increasing by 17% despite competition from new entrants, which includes REVLIMID based triplet regimens. Similar to REVLIMID, we expect to see additional POMALYST share and duration gains through the use of newer triplet regimens.

We are anticipating approval of the PVd triple combination in relapsed refractory myeloma later this year in Europe and Japan. PVd will provide another important triplet option for patients with relapsed refractory myeloma.

ABRAXANE net sales for the fourth quarter increased by 7% year-over-year, and the brand surpassed the $1 billion mark for the first time. In the US, we saw a 15% increase in net sales year-over-year. Outside of the US, ABRAXANE decreased slightly due to changes in distributor buying patterns. We look forward to the upcoming ABRAXANE data readout for the Phase III apact adjuvant pancreatic cancer trial. This is an event driven trial, and we continue to monitor the status of patients.

The upcoming ABRAXANE IO combination approvals represent another near-term growth driver for the brand. The first ABRAXANE IO combination regimen was approved in October 2018 in frontline metastatic squamous non-small cell lung cancer, and the producer dates for the ABRAXANE IO combinations in metastatic triple negative breast cancer and frontline metastatic non-squamous non-small cell lung cancer are set for March and September respectively.

In summary, the hematology and oncology franchise had another robust quarter to finish 2018. Underlying demand is strong for our key inline brands. We have multiple label expansions in 2019 to drive near term growth, and our commercial teams are in full preparation mode for the launches of our key near term novel assets.

Thank you, and I will now turn the call over to Terrie Curran.

Terrie Curran -- President, Global Inflammation & Immunology

Thank you, Nadim, and good morning, everyone. The inflammation and immunology franchise had delivered a very strong fourth quarter, and demonstrated outstanding growth in 2018. We exceeded our original revenue target and continued to drive strong demand across geographies. A key growth catalyst has been the successful execution of our strategy to expand market access for appropriate post topical prebiologic patients. We have secured biologic step free access for more than 85% of commercial patients in the US and in key international markets such as France, Germany, and Japan. This expanded access footprint has increased the number of patients eligible for OTEZLA coverage and continues to be an important driver of worldwide growth.

There is a robust life cycle development plan in place for OTEZLA, and in 2018 we advanced multiple programs that have the potential to add substantial value in the years ahead. In the second half of the year, we submitted the regulatory filings for the treatment of oral ulcers associated with Behcet's disease in both the US and Japan, and announced positive Phase III data in scalp psoriasis. We also initiative several Phase III and Phase IV trials in new and complimentary patient populations and look forward to continuing to advance those efforts in 2019.

Moving on to our pipeline compounds, in 2018 we made significant progress on the US and EU regulatory filings for ozanimod in relapsing MS, and remain on track to submit in March 2019. We believe that ozanimod has the potential to be a best in class S1P receptor modulator, and we're currently building out the infrastructure necessary to ensure a world class launch.

We continue to build the platform for ozanimod in IBD through our Phase III trial in ulcerative colitis, which will complete enrollment in the first half of 2019, and the initiation of a Phase III trial in Crohn's disease. My colleague, Dr. Jay Backstrom, will provide a more detailed update on ozanimod regulatory and clinical development activities later in the call.

In 2018, we also presented a positive 52-week Phase II data for RP4046 (sic) in eosinophilic esophagitis, a disease with high unmet need. We continued to advance our other near and late stage pipeline assets and expect to complete the enrollment of the Phase II trial of CC-220 in SLE in 2019.

Now, diving deeper into 2019 OTEZLA performance. Q4 revenue was $448 million, which represents 21% year-over-year growth. For the full year 2018, year-over-year growth was 26% and we raised our revenue guidance of $1.6 billion. These strong results have been driven by our outstanding team that has demonstrated an unwavering commitment to excellence and passion for improving outcomes for the patients we serve. In the almost five years since the launch of OTEZLA, we've experience strong, sustained, volume-based growth in our core indications, which is a tremendous accomplishment and a testament to the unmet need for the existence of a treatment option like OTEZLA.

Despite increased competitive activity, OTEZLA continues to maintain new-to-brand leadership and healthy market share in the US. The newer entrants that have come into this space have primarily taken share away from existing biologic therapies, which we believe further supports our view that OTEZLA has a unique value proposition and is well positioned to deliver future growth.

Outside the US, we've also achieved dynamic market leadership in France and continue to have record breaking success post launch in Japan. As we look forward to what's to come in 2019, we will continue to maximize the OTEZLA opportunities through focus, strategic execution, and the advancement of life cycle development activities.

While we are very pleased with our momentum heading into the year, in Q1 we expect to experience the typical demand softening in the psoriasis markets, which of course has been factored into our 2019 guidance of approximately $1.9 billion in sales.

In terms of upcoming regulatory submission and approvals for OTEZLA, we expect to submit the filing in Behcet's disease to EMA in the first half of 2019 and anticipate approval in the US and Japan in the second half of the year. Excellent progress is also being made on the sNDA for our scalp psoriasis label enhancement, which we plan to submit to the FDA in the second quarter of 2019.

Another important area of focus this year will be to enroll patients in our recently announced Phase III trials for pediatric and mild to moderate plaque psoriasis, and Phase IIIb trial for moderate to severe genital psoriasis. Our combined development activities for OTEZLA represent a potential revenue opportunity of more than $500 million at peak for the brand. We're excited by the prospect of having a positive impact on the lives of these patients. Throughout these efforts, we remain focused on further expanding the post topical prebiologic market opportunity for appropriate patients.

I'm extremely proud of what our team has accomplished in 2018 and look forward to another year of growth in 2019. Thank you, and I'd now like to turn the call over to Dr. Jay Backstrom.

Jay T. Backstrom -- Chief Medical Officer

Thank you, Terrie, and good morning. The clinical and regulatory teams had a strong finish to 2018 and we are well positioned at the start of 2019 to advance our five near term new therapies -- fedratinib, ozanimod, luspatercept, liso-cel, and bb2121 -- toward regulatory approval.

I would like to now provide you with an update on these five key programs, starting with ozanimod on Slide 25. As Terrie indicated, we continue the advance ozanimod NDA that will be based on two randomized controlled Phase III studies, SUNBEAM and RADIANCE. As a reminder, both studies met their primary end point, demonstrating a significant reduction in annualized relapse rate compared to beta interferon.

With respect to safety, ozanimod was generally well tolerated, as reflected in the low incidents of serious adverse events. In addition, less than 5% of patients discontinued treatment due to adverse events. No patient experienced second degree or higher AV block. And the rate of infection was comparable between treatment groups. Together, the efficacy and safety results support a favorable benefit/risk profile.

With respect to our submission date -- July 26 -- we have successfully completed the additional nonclinical and clinical pharmacology studies and plan to submit the relapsing multiple sclerosis applications in the US and Europe in March, with an expected US approval in the first half of 2020.

The ozanimod inflammatory bowel disease program, including the Phase III clinical studies in ulcerative colitis, TRUE NORTH, and in Crohn's disease, YELLOWSTONE, also continues to advance. Enrollment for TRUE NORTH, which includes both an induction and maintenance phase, is nearing completion for enrollment, and we expect the last patient to be randomized by the end of the first half of this year with topline results, including the maintenance phase, reporting out in mid-2020. The Phase III randomized trials in Crohn's disease are ongoing and actively recruiting.

Turning to fedratinib, our selective JAK2 inhibitor, on Slide 17. We announced earlier this year, fedratinib NDA for the myelofibrosis indication, which includes both JAKARTA, the Phase III randomized placebo-controlled study, and ruxolitinib-naïve patients in JAKARTA-2, the single arm trial on patients who have failed or are intolerant to ruxolitinib, was submitted as planned and we now look forward to advancing the fedratinib NDA through the regulatory review process with an expected US approval by the end of 2019. We expect to submit the marketing authorization application to the EMA in the first half of this year.

The fedratinib clinical teams continue to execute on the development plan in myelofibrosis, including additional studies in patients that have failed or are intolerant to ruxolitinib, FREEDOM and FREEDOM-2, and a Phase I/II combination study with luspatercept planned for later this year.

Luspatercept, On Slide 28, remains on target for US and EU submissions in the first half of 2019, for both the NDS and beta-thalassemia indications, with an expected US approval in the first half of 2020. The BEYOND trial, a randomized Phase II study in non-transfusion dependent beta-thalassemia is expected to complete recruitment later this year. The COMMAND study in ESA-naïve lower risk MDS is open and ongoing, and we expect to have data available later this year from the Phase II myelofibrosis study that will help inform subsequent trials in myelofibrosis.

Now, turning to our CAR-T programs, both liso-cel and bb2121 remain on target for expected 2020 approvals. For liso-cel, on Slide 29, we remain on track for submitting the BLA in the second half of 2019, with an expected US approval in mid-2020. As we previously mentioned, the BLA will include a robust data package containing substantial follow-up on the relapsed refractory diffuse large B-cell lymphoma cohort, allowing further characterization of the duration of response, and will include a safety database that will approaching 300 treated patients by the time of our submission -- a safety database that will be two to three times that included in the initial submissions for the two approved CD19-directed CAR-Ts.

In addition, we're advancing liso-cel to earlier lines of treatment, with the second line studies, TRANSFORM and PILOT, in diffuse large B-cell lymphoma patients who are transplant eligible or nontransplant eligible respectively. As Nadim mentioned, the data presented at ASH from the Phase I TRANSEND CLL study, patients with relapsed refractory chronic lymphocytic leukemia, who failed or were ineligible to receive a BTK inhibitor, are very promising. And we are initiating a pivotal Phase II trial in this high unmet need population.

Finally, for bb2121, on Slide 30, the enrollment for the pivotal KarMMa study in relapsed refractory myeloma was completed in November, and we are well positioned, pending follow-up, to submit the BLA for this first in class BCMA-direct CAR-T, leading to an expected US approval in the second half of 2020. The clinical teams continue to implement the development plan designed to evaluate bb2121 and earlier lines of therapy, including KarMMA 3, a randomized Phase III study in relapsed refractory multiple myeloma in patients who received at least two prior lines of therapy, and KarMMA 2, a Phase II study, which includes a high-risk cohort who have failed one prior line of treatment. A Phase II study in newly diagnosed myeloma is under development.

In closing, our teams have made excellent progress in advancing our five near term programs. With the NDA submitted for fedratinib, the ozanimod NDA planned for March, the BLA for luspatercept to follow, and the pivotal studies for both CAR-T programs fully accrued, we are well positioned to remain on track for expected US approvals for all five of these innovative products by the end of 2020.

I now will turn the call back over to Mark.

Mark J. Alles -- Chairman & Chief Executive Officer

Thank you, Jay, and thanks, David. Thanks, Terrie and Nadim. I also want to thank our colleagues around the world and across every function for another outstanding year. Really well done. Thanks so much.

2018 was an important year for Celgene, highlighted by strong operating performance and continued investment in the pipeline and people critical for our future. We are excited to accelerate and expand these opportunities by combining with Bristol-Myers Squibb later this year.

Before we open the call for questions, please note that while we look forward to answering any questions you may have about Celgene, we will refer certain questions pertaining to the acquisition of Celgene by Bristol-Myers Squibb to BMS.

...

Thank you. Chelsea, please open the call for questions.

Questions and Answers:

Operator

Certainly. Ladies and gentlemen, if you have a question at this time, please press the * then the number 1 key on your telephone keypad. If you're question has been answered, or you wish to remove yourself from the queue, please press the # key. In the interest of time, we do ask that you please limit yourself to one question and one follow-up question. You may then press *1 again to rejoin the queue for any further questions. And to prevent any background noise, we also ask that you please place your line on mute once your question has been stated. Thank you.

And our first question will come from Geoff Meacham with Barclays. Your line is open.

Geoff Meacham -- Barclays Investment Bank -- Analyst

Hey, guys. Good morning, and thanks for the question. I just had a few. On luspatercept, you guys had initial topline data in June of last year. So, are there studies or analyses that you have yet to do? It just seems like it's a long time from data to filing when it was a pretty clean result. And the second one is on oral azacytidine. There hasn't been much discussion of this asset in the Bristol deal. What, if any, valuation consideration was given is my question? You guys gave out topline data, I think, on two studies. I wasn't sure if little mention of this meant lower probability of success, or how to interpret that. Thanks a lot.

Jay T. Backstrom -- Chief Medical Officer

Hi, Geoff. This is Jay. Let me start with luspatercept. This is the BLA that's going to include both MDS and beta-thalassemia. So, we've been working on that, as you know, since we had the topline results. There are no additional analyses or anything else pending. We're really pushing on that. We're on track for what we declared earlier this year, which is we'll have this in by tap.

And for oral azacytidine, two Phase III studies. Those trials are still ongoing. The second trial, which is maintenance for patients that successfully got through CR and AML, that's an event driven study and we're waiting for those results. Event rates sometimes slow down. That's happening here, so we're waiting to see what happens with that. And the low-risk MDS trial -- that's a time dependent one. And they should read at or near the same time, probably later this year.

Geoff Meacham -- Barclays Investment Bank -- Analyst

Thanks.

Operator

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

Brian Abrahams -- RBC Capital Markets LLC -- Analyst

Hi there. Thanks very much for taking my question. I was wondering if you could make any comments on ozanimod in terms of what your learnings have been from the additional nonclinical and clinical work that you've done there. How your interactions with the agency have been, whether you expect any delays in either the filing or the review based on the recent shutdown. Thanks.

Jay T. Backstrom -- Chief Medical Officer

So, hi, Brian. This is Jay. So, from the learnings, it's real interesting, right? We were further characterized in one of the active metabolites. But our prediction going into that is given the selectivity, specificity, etc., that it would look similar. And, in fact, that's exactly what we've seen. So, that's really progressed well. We're on track, as I mentioned, to submit in March. We've had no delays to date with the issue that we had previously with the government shutdown. It's premature to say what will happen. One hopes that it won't shut down, but right now it's full steam ahead. So, we're really -- good engagement with the FDA. We're looking forward to getting that to them for their review.

Brian Abrahams -- RBC Capital Markets LLC -- Analyst

Thanks for the commentary.

Operator

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

Michael J. Yee -- Jefferies, LLC -- Analyst

Hi. Thanks for the question. Question for Mark. The market seems to be a little bit nervous about the transaction -- I guess I'm speaking from high level. Maybe you could just give some context to the market about how this all came about with Bristol and, more specifically, what gives you -- or what can you say to shareholders to give them comfort that this will complete and that nothing else would happen. Thanks so much.

Mark J. Alles -- Chairman & Chief Executive Officer

Michael, thank you for the question. We're extremely excited about this transaction. As we've said from the beginning, and as my colleague Giovanni Caforio has said, we think this is the right transaction at exactly the right time. Both companies, the EMS reported late last week -- we reported today -- have incredibly strong operating momentum. In fact, we come off of the best quarters separately and then collectively using pro forma in the history of both companies. For Celgene shareholders, it's quite clear how this unlocks and recognizes a lot of the value that the market has not assigned to use more recently.

The notion that we would create a new company that would have very dramatic leadership in the high specialty areas of oncology, inflammation, and immunology is again quite clear. I think of the separate companies' immunology and inflammation franchises coming together, where together they become a top five franchise with lots of opportunity including, as BMS has talked about more recently, the prospects for TIP II, which in Phase II looks fantastic and, of course, is moving into later stage development.

I think other aspects of the deal that are probably underappreciated is the scientific prowess of both companies and how, when they come together, we enhance our opportunity to accelerate research and development unlike we think either company alone could do. Obviously, that's the mother's milk for all of us. We've got to have innovation, new medicines, coming through. And I think that combined scientific prowess is underestimated.

I think, on the cultural side, there's also an underestimation about how these companies come together in such a complimentary way, where the mission, the purpose, is quite unique, but at the same time, it overlaps beautifully. So, I think this is a deal that investors weren't expecting. I think investors will get very comfortable with it over time. But we're really excited about it. We're moving along the continuum to close this transaction sooner rather than later. But of course, we all know that we've got to go through the regulatory steps, shareholder approval, etc. But I'm quite excited about it, Mike, and I appreciate the chance to talk about it today.

Michael J. Yee -- Jefferies, LLC -- Analyst

Perfect. Thanks, Mark.

Operator

Thank you. Our next question comes from the line of Phil Nadeau with Cowen & Company. Your line is open.

Phil Nadeau -- Cowen & Co. LLC -- Analyst

Morning. Thanks for taking my question. First, just on the Dr. Reddy's lawsuit. Could you give us an update on the timelines, both for the IPR and the lawsuit? There seems, in particular, to be some controversy about exactly when discovery's going to be done in the lawsuit.

Jonathan Biller -- General Counsel

Sure, Phil. This is Jonathan Biller. The timeline hasn't changed from really the way that we've been discussing it. In fact, discovery has not closed yet. The expert phase will close sometime this quarter. Most recently, in that case, as well as the other cases, you saw publicly that there was -- the judge moved this to mediation. So, all of the cases are now moving to a mediation phase. We're in the process of scheduling that. There's been nothing scheduled on that front.

And with respect to the IPRs, sometime later in February, and then in March, there are three IPRs from Dr. Reddy's. Those are initiation decisions. So, what will be decided there is, the PTAB will decide whether or not to initiate those cases. If they chose to do so, it would be about a year before we'd have a decision. And then, on the Lotus Alvogen, there's some additional IPR initiation decisions that will be made in March. And again, those are just on our method of treatment patents -- MDS, in the case of Dr. Reddy's and multiple myeloma in the case of Lotus.

And so, they're not -- they do not address all of our patents, in particular our polymorph patent. So, even as those things play out, they're not dispositive to the case.

Phil Nadeau -- Cowen & Co. LLC -- Analyst

That's helpful. And then, my follow-up is actually on liso-cel. Can you give us an update on the status of the manufacturing, in particular, is the commercial process ready and do you need to do any manufacturing work prior to submission? Thank you.

Nadim Ahmed -- President, Global Hematology & Oncology

Yes, I think everything is on track from a manufacturing process -- actually, across all of our CAR-T programs, both from the clinical trial perspective and the commercial perspective. So, as I said earlier, both our commercial teams and our manufacturing teams are just getting ready for approval and launch now. So, we feel very good about where we are.

Phil Nadeau -- Cowen & Co. LLC -- Analyst

Great. Thank you.

Operator

Thank you. Our next question comes from the line of Umer Raffat with Evercore ISI. Your line is open.

Umer Raffat -- Evercore ISI -- Analyst

Hi. Thanks so much for taking my question. Nadim, perhaps the first one for you -- or perhaps Terrie. Can you remind us what percentage of REVLIMID sales are in first-line myeloma, and then also in transplant maintenance? And I'm looking to understand that as a percentage of total REVLIMID protected by the 2022 and the 2024 exclusivities that are in place.

And then, Mark, question for you. Should the Street expect additional REVLIMID settlements prior to the close of transaction? I know it's a hard question to answer, but would be curious about your thoughts and priority.

Nadim Ahmed -- President, Global Hematology & Oncology

Umer, thanks for the question. Nadim first. So, we don't necessarily get specifically granular. But what I will say is that the majority of our share and use for REVLIMID, especially in the US, is the in the frontline setting -- both nontransplant and transplant settings. And that's where we're seeing continued growth in Europe also. So, most of our use is coming from the frontline setting.

Mark J. Alles -- Chairman & Chief Executive Officer

Umer, thanks for the question about IP. And we already have settled, so I think our view about settlements is under the right conditions we've already demonstrated we're willing to settle. That's the Natco settlement that's in place. But it remains to be seen what those circumstances would be with additional filers. We're very confident in our patent state. We've been at this for a very long time and will continue to defend it in a very confident straightforward way. As we've said many times, and even presented more recently at ASH, as you'll recall, we think it is an unlikely scenario that there would be an at-launch risk prior to the timeline that we've outlined that is out to 2022. But we're engaged, we're working through the process, we stay confident in our position and, without doubt, under the right circumstances, we would be willing to engage in settlements.

Operator

Thank you. Our next question comes from the line of Salim Syed with Mizuho. Your line is open.

Salim Syed -- Mizuho Securities USA LLC -- Analyst

Yeah, hi, guys. Thanks for taking the question. Just one on CAR-T, just long-term thinking here. So, there's some discussion in the marketplace that an allo-CAR-T can be actually more efficacious because an auto because you are taking the cells from a healthy donor. So, the debate here is not just about convenience, but about efficacy. I was wondering what Celgene has done to prepare for that -- if you agree with that statement -- and what the company has done to prepare for that so that, when you do hand the company over to Bristol, what do they exactly get on the allo front? Thank you.

Dr. S. J. Rupert Vessey -- Global Head of Research and Early Development Group

Hi, Salim. It's Rupert Vessey here. So, all-CAR-T is still a theoretical prospect, and there are a number of hurdles that need to be overcome in order to achieve that objective, that will include extensive gemedicine strategies so that both the CAR-T itself is not detrimental to the patients, and the patients' immune system does not attack the CAR-T. So, those are problems that need to be solved from a scientific point of view. There are also a number of manufacturing issues that need to be solved as well.

On the auto-CAR-T side, obviously we know that works very well. And we know that there are a many manufacturing improvements that can be put in place over time that we will see, that I think will close the gap between these different approaches. That doesn't mean, though, that we're not really well aware of the allo approach. And we have an allo strategy that we're putting in place, including some agreements that we already have that are in the public domain. So, we're on top of that as well as it emerges.

Salim Syed -- Mizuho Securities USA LLC -- Analyst

Great. Thanks so much.

Operator

Thank you. Our next question comes from the line of Ying Huang with Bank of America Merrill Lynch. Your line is open.

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

Hi, and good morning. Thanks for taking my questions. Just a couple quick ones for me. First of all, can you talk about the ex US version of the US pricing contribution to the growth in the year of 2018, and what's your outlook for pricing overall for net product sales in 2019? And then, secondly, on the KarMMa 3 trial, the protocol calls for a security agent in the triplets. Can you tell us whether it's a request on regulators or it's probably coming from your commercial consideration? Thank you.

Jay T. Backstrom -- Chief Medical Officer

Yeah, hi, this is Jay. I'll take the question on KarMMa 3. No, that design was a combination of what we thought would be a very good comparator to show the benefit of CAR-T moving forward with the triplet. We certainly have discussed it with agencies, so there's agreement and consistency with that. But that was a design as we thought about moving forward.

David Elkins -- Executive Vice President & Chief Financial Officer

On the question around price, as we talked about for the full year prices around 3%, and the net impact of price increases in the US being offset by price declines in rest of world.

Operator

Thank you. Our next question comes from the line of Ronny Gal with Bernstein. Your line is open.

Aharon "Ronny" Gal -- Sanford C. Bernstein & Co. LLC -- Analyst

Good morning and thank you for taking my questions. Two of them, if you don't mind. First, on luspatercept, if you can give us a bit of your feeling about what are the right benchmarks to think about when we think about luspatercept pricing, given the safety. Is this more EPOGEN or given to ability and efficacy more like the first line drugs we're seeing in MDS today, or another benchmark?

And the second question is about the timing of the CVR. You're progressing quite well on those programs, but if I look at the timeline that Jay has given us today, it looks like you're going to have a six months window between the first potential approval and the time the CVR expires. And you've got to think about a typical review cycle by FDA, if there's a need for further answers, to be at least six months. But with innovative oncology drugs it might be faster. Can you just give us a little bit of your thinking about the safety margin you've built into those -- into the CVR to ensure that, if there's extra questions by the FDA we're not going to lose the value of that? Thanks.

Nadim Ahmed -- President, Global Hematology & Oncology

Thanks for your question. So, obviously we're early in the game when it come to pricing for luspatercept. And I think, what you can expect is we're going to make sure that the price matches the value proposition for the brand. So, we're not going to talk about analogues today, but we'll continue to look at the data and make sure we price the value of luspatercept at launch.

Mark J. Alles -- Chairman & Chief Executive Officer

Ronny, on the CVR -- this is Mark -- thanks for the observations. And of course, many of the variables that you described you can imagine were part of our thinking and discussions through the negotiation. I can just tell you, we're very confident and comfortable with the timing and the probability that we achieve the CVR. So, thanks for that.

Operator

Thank you. Our next question comes from the line of Alethia Young with Cantor Fitzgerald. Your line is open.

Alethia Young -- Cantor Fitzgerald & Co. -- Analyst

Hey, guys. Thanks for taking my questions. Just two quick ones. One, Mark, I just wanted you to -- or team -- opine on just -- do you think that there will be more industry consolidation in the future? Obviously, you have a unique perspective in this question. Then, for Terrie, just -- can you talk a little bit about, with OTEZLA, the growth year-over-year has been very good. And again, just break down for us maybe where you're seeing this coming from. Is it indication or is certain geographies? And where will the future growth come from? Thanks.

Mark J. Alles -- Chairman & Chief Executive Officer

Alethia, it's Mark. I'll start with the broader macro question about consolidation. I really don't know. I think it's an interesting thing to think about in the context of Bristol and Celgene coming together. I think we've gone through these episodic windows where it makes sense or it doesn't make sense at the macro level. I think a lot of other companies have been in the media through their earnings, talking about their strategic outlook. I think there is a very common theme, though, and that is that we have to search for innovation wherever it comes from, whether that's small cap, mid-cap, or in some cases -- which is how BMS and Celgene think about this, we see ourselves as innovators of the first order and are happy to come together.

So, this certainly makes sense for us. I think every other company has to decide for themselves what makes sense for them long-term. But it's -- as I answered the question Michael asked me -- this is clearly the right transaction at the right time for Bristol-Myers Squibb and Celgene.

Terrie Curran -- President, Global Inflammation & Immunology

Yeah, thanks for the question. It's Terrie here regarding OTEZLA. We're very pleased with the momentum heading into 2019. And the growth is really coming from a number of places. Firstly, the US is continuing to really perform exceptionally well. Our strategy has been, from the beginning of the launch, to really secure that positioning for first line post topical pre-biologic. And that was why we implemented the contracts to secure that position, so that 85% of our business is coming from patients that have just been on topical treatment. Importantly, the ex US business now is really growing very quickly. It took us a little longer to secure investment outside of the US, and so core markets like Japan and France are preforming exceptionally well.

I think, heading into 2019, I think the growth will continue to come from that pre-biologic segment in the psoriasis market. Importantly, about 60% of patients in that segment remain untreated. So, there remains a really -- a fairly large opportunity for us to continue to grow in that segment. And then, we've got the life cycle opportunities, as I mentioned, that will also deliver growth into the future. So, mild to moderate psoriasis, scalp psoriasis, Behcet's disease, and genital psoriasis. Those additional, either label enhancing or additional indications, will generate an additional $500 million at peak. So, it's really a great position heading into 2019 for OTEZLA.

Operator

Thank you. Our next question comes from the line of Carter Gould with UBS. Your line is open.

Carter Lewis Gould -- UBS Group -- Analyst

Good morning, guys. Thanks for taking the questions. Two from me. I guess, first, just to real quick -- can you remind us again, beyond what -- the nonclinical bridging data and the PD data for ozanimod -- any other incrementally new information that will go into this filing versus the last one? And then, just real quick on fedratinib. Any indication from FDA if there will be an ad comm and/or do you expect one?

Jay T. Backstrom -- Chief Medical Officer

This is Jay. So, let's start with ozanimod. I think one other piece that's going in, which is substantial, is we've had another year of data to follow-up for safety. So, I think we're really putting in a very, very strong safety data package. Data looks really very, very consistent with what we've seen early. So, I think that really strengthens it. So, I think for ozanimod -- and for fedratinib, we -- I think it's a class of drug that's known to the agency. We'll learn during the review whether or not they'll invite us to an advisory. At this point, I would have to say what I'm predicting. But I think the application's fairly straightforward. So, if we learn that later, we'll certainly let folks know.

Carter Lewis Gould -- UBS Group -- Analyst

All right. Thank you.

Operator

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

John Lawrence Newman -- Canaccord Genuity Group, Inc. -- Analyst

Hey, good morning. Thanks very much taking my question. Maybe a question for maybe Jay, Mark, and Nadim all together. I wondered if you could give us an update on the current status of debate at the FDA with respect to MRD negativity for multiple myeloma. And the reason I'm curious is because you've obviously got a very aggressive and efficient clinical program moving forward for bb2121. And I'm wondering if there's a chance that perhaps some of these later studies, like the newly diagnosed study, could shift toward that MRD negativity endpoint over time. Thanks.

Jay T. Backstrom -- Chief Medical Officer

Yeah, this is Jay. I mean, the FDA certainly is interested in the MRD negativity to be applied in clinical trials. And they're actually encouraging sponsors to come forward and find ways to include that. To me, if I look at it from the regulatory framework, the ultimate place that they'd want to take this is to be using that as a recognized end point that they could use to action. That requires a little bit of additional work. There's an ongoing effort, I think, across the industry to get data in front of the FDA for that to occur. But I think you're spot on. I think, as we look forward into these particularly frontline trials, given the improvement that's been made with current available therapies, FDA is very interested in finding ways to get surrogate endpoints built into that, such as an MRD negative.

So, today yes, we're including in our trials. FDA's encouraging such action by sponsors to engage and discuss with them. So, it's definitely something to watch.

John Lawrence Newman -- Canaccord Genuity Group, Inc. -- Analyst

Great. Thank you.

Operator

Thank you. Our next question comes from the line of Michael Schmidt with Guggenheim Securities. Your line is open.

Michael Schmidt -- Guggenheim Securities, LLC -- Analyst

Hey, good morning, and thanks for taking my questions. I had one around your CAR-T program. So, the question is what work have you done at this point around pricing and access for bb2121? And last is to what degree, for example, are you considering outcome space pricing strategies, as opposed to using a traditional one-time payment option for those types of products? And then, the second question would be on the market dynamics in multiple sclerosis. I was just wondering how you see the market and opportunity for oral drugs like ozanimod to be potentially impacted by the increased use of infused drugs like others?

Nadim Ahmed -- President, Global Hematology & Oncology

Michael, I'll take the CAR-T question first and then hand over to Terrie. So, in terms of the access reimbursement environment, we continue to work with both our government affairs team and our market access team to work with payers, both commercial and CMS, to look at a range of ways to make sure patients get access to these treatments. So, in answer to your question, you're looking at the full range of spectrum of options, including innovative approaches as well. So, that's very much on our radar. Thanks for your questions.

Terrie Curran -- President, Global Inflammation & Immunology

Yeah, just in terms of the MS market dynamics, I think what we see is a large market. It's a chronic market where there's a need for physicians to have a range of treatment options. I think, if you look at the segmentation of the market and the movement toward oral, there is an opportunity for ozanimod in the market. Clearly, as Jay talked to, the clinical data is very well differentiated and we see an oral for ozanimod in the first line -- first switch -- segment of the market.

Mark J. Alles -- Chairman & Chief Executive Officer

Chelsea, I think we have time for two last callers.

Operator

Okay. Our next question comes from the line of Dane Leone with Raymond James. Your line is now open.

Dane Leone -- Raymond James & Associates, Inc. -- Analyst

Hi. Thank you for taking the questions and congratulations on the strong quarter. Just two for me on this whole therapy space. One, for bb2121, with the newly diagnosed plans in the second half, could you elaborate whether this would be as a lead into transplant, or for those patients who would not qualify for transplant, and whether there will be some sort of combination therapy with bb2121? And the second one is just any general update on plans to develop JCARH125 this year? Thank you.

Nadim Ahmed -- President, Global Hematology & Oncology

Thanks for the question. So, let me start with bb2121. And just, again, to emphasize, this is our first in class, best in class, asset. And so, we're accelerating it as rapidly as possible and building out a strong development program around it, which is what leads us to the frontline setting. So, I think -- if you think about how Jay outlined the relapsed setting, we're looking at high-risk patient populations. And that's the approach we'll take in newly diagnosed multiple myeloma, across both nontransplant and transplant eligible patient populations.

So, definitely interested in that space, and these Phase II studies will allow us to determine early activity in high-risk patient populations, which will then allow us to build a rapid development program around the frontline setting. So, you can see them as proof of concept studies.

As for JCARH125, you saw the early data at ASH. So, we continue to enroll patients, so we continue to have follow-up for both JCARH125 and bb21217. And as the data emerge, we'll assess the clinical profiles and make those data available. Thanks for your questions.

Dane Leone -- Raymond James & Associates, Inc. -- Analyst

Thank you.

Operator

Thank you. And our last question will come from the line of Asthika Goonewardene with Bloomberg Intelligence. Your line is open.

Asthika Goonewardene -- Bloomberg Intelligence -- Analyst

Hi, good morning, all. And thanks for squeezing me in. Two quick ones and a slightly bigger picture one for me. Can you give us an update on the expected completion of enrollment for YELLOWSTONE? And then, to build on Umer's question, will the timeline specifically with Dr. Reddy's litigation permit a settlement before the deal closed? And for the big picture, we noted a flurry of deal activity, even after the Bristol-Myers deal -- prior to the Bristol-Myers bid. Could you maybe tell us a little bit more about what your overall strategy is with these included deals you plan on accomplishing before the Bristol deal closed? And if Bristol's getting involved in these -- in the decision-making process or not. Thank you.

Jay T. Backstrom -- Chief Medical Officer

Yep. Yeah, so this is Jay. YELLOWSTONE is a program. We've got two inductions in the maintenance in Crohn's, so those all up and running, actively accruing. So, we're continuing with that. So, at this point, we won't be able to tell you the projected timeline. But, we're actively moving and progressing.

Jonathan Biller -- General Counsel

So, I'll just jump in on the timeline with Dr. Reddy's. As you can appreciate, I'm sure, every piece of litigation has its own cadence. So, there's nothing between now and closing that would prevent two parties reaching a settlement, but there's also nothing that would impact it the other way either. So, it's just as Mark said earlier. In this process, subsequent to the Natco settlement, we have -- everything's been as we expected. There's been no surprises to us. These cases are moving along the way that we would've imagined and we remain very confident in our position.

Mark J. Alles -- Chairman & Chief Executive Officer

Just before I had it off to David, the three deals that were referred to were deals with Kyn, Obsidian, and Triphase that we signed through the month of January. These are expansions of our efforts to look at protein degradation, to look at controllable CAR-T function, and mitigating certain side effects. In the case of Triphase, this is classic Celgene, where we look for novel mechanisms, new therapeutics, and in the case of Triphase, they have a molecular target that we think is important across a number of cancer cell lines. But it's very early. The upfront was $40 million. And of course we would love for this to pay out over time on success. David?

David Elkins -- Executive Vice President & Chief Financial Officer

Yeah, thanks, Mark. And we remain open for business. We're going to continue to follow the science, continue working with our collaborators, and we'll do that in consultation with BMS as well. So, for everyone out there, very much we remain open. With that, as we close out this call, we want to thank you again for everyone's interest in Celgene. We also want to thank all the Celgene employees around the world for another excellent year of operating results and commercial execution while making significant progress on advancing our pipeline.

As we progress into 2019, we look forward to continuing our strong momentum, executing against all of our regulatory milestones, and coming together with Bristol-Myers Squibb to create a leading and focused biopharmaceutical company.

Operator, you may now end the call.

...

Operator

Thank you. Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may all disconnect. Everyone, have a great day.

Duration: 63 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, Global Inflammation & Immunology

Nadim Ahmed -- President, Global Hematology & Oncology

Jay T. Backstrom -- Chief Medical Officer

Dr. S. J. Rupert Vessey -- Global Head of Research and Early Development Group

Jonathan Biller -- General Counsel

Geoff Meacham -- Barclays Investment Bank -- Analyst

Alethia Young -- Cantor Fitzgerald & Co. -- Analyst

Umer Raffat -- Evercore ISI -- Analyst

Michael J. Yee -- Jefferies, LLC -- Analyst

Michael Schmidt -- Guggenheim Securities, LLC -- Analyst

Brian Abrahams -- RBC Capital Markets LLC -- Analyst

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

Carter Lewis Gould -- UBS Group -- Analyst

John Lawrence Newman -- Canaccord Genuity Group, Inc. -- Analyst

Dane Leone -- Raymond James & Associates, Inc. -- Analyst

Phil Nadeau -- Cowen & Co. LLC -- Analyst

Asthika Goonewardene -- Bloomberg Intelligence -- Analyst

Aharon "Ronny" Gal -- Sanford C. Bernstein & Co. LLC -- Analyst

Salim Syed -- Mizuho Securities USA LLC -- Analyst

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