DEFA14A

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.     )

 

 

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¨   Definitive Proxy Statement
x   Definitive Additional Materials
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CELGENE CORPORATION

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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Additional 2014 Proxy Materials
Celgene (NASDAQ:  CELG)


Forward Looking Statements
and Non-GAAP Financial Information
2
This presentation contains forward-looking statements, which are generally statements that are not
historical
facts.
Forward-looking
statements
can
be
identified
by
the
words
“expects,”
“anticipates,”
“believes,”
“intends,”
“estimates,”
“plans,”
“will,”
“outlook”
and similar expressions. Forward-looking
statements are based on management’s current plans, estimates, assumptions and projections, and
speak only as of the date they are made. We undertake no obligation to update any forward-looking
statement in light of new information or future events, except as otherwise required by law. Forward-
looking statements involve inherent risks and uncertainties, most of which are difficult to predict and
are
generally
beyond
our
control.
Actual
results
or
outcomes
may
differ
materially
from
those
implied
by the forward-looking statements as a result of the impact of a number of factors, many of which are
discussed in more detail in our Annual Report on Form 10-K and our other reports filed with the
Securities and Exchange Commission.
In
addition
to
financial
information
prepared
in
accordance
with
U.S.
GAAP,
this
presentation
also
contains adjusted financial measures that we believe provide investors and management with
supplemental information relating to operating performance and trends that facilitate comparisons
between
periods
and
with
respect
to
projected
information.
These
adjusted
measures
are
non-GAAP
and
should
be
considered
in
addition
to,
but
not
as
a
substitute
for,
the
information
prepared
in
accordance
with
U.S.
GAAP.
We
typically
exclude
certain
GAAP
items
that
management
does
not
believe
affect
our
basic
operations
and
that
do
not
meet
the
GAAP
definition
of
unusual
or
non-
recurring items. Other companies may define these measures in different ways. Further information
relevant to the interpretation of adjusted financial measures, and reconciliations of these adjusted
financial measures to the most comparable GAAP measures, may be found in the Reconciliation
Tables
at
the
end
of
this
presentation
and
on
Celgene’s
website
at
www.Celgene.com
in
the “Investor
Relations”
section.


Agenda
Celgene Overview
Proposal to Amend the 2008 Equity Plan
Stockholder Proposal on Disclosure of Political Activity
3


We Are a Leading Global Biopharmaceutical Company
4
Operations in >50
countries
Sales in >70 countries
Manufacturing facilities
in US and EU
Key research facilities
in NJ, CA, MA & Spain
~5,000 employees
globally
Global, Fully
Integrated
Portfolio of
Leading Products
Expertise in
hematology, oncology,
and immunology
Diverse technology
platforms
Rich pipeline
30 programs in
preclinical development
22 treatments in
clinical trials
30 pivotal / phase III
programs underway
Unique R&D
Capability


We Have a Strong 5-Year Financial Track Record
5
Notes:
1)
Net
Product
Sales
adjusted
for
2008-2011,
2)
CAGR
calculated
using
2008
to
2013.
*For
purposes
of
this calculation,
cash includes cash and cash equivalents and marketable securities available for sale.
Net
Product
Sales
1
($B)
Adjusted EPS ($)
48.4%
23.4%
5.1%
23.2%
R&D
SG&A
COGS
Adjusted Margins
$2.6
$3.5
$4.7
$5.4
$6.4
2009
2010
2011
2012
2013
~25%
CAGR
$2.08
$2.79
$3.79
$4.91
$5.96
2009
2010
2011
2012
2013
~31%
CAGR
2
41.0%
26.0%
25.4%
8.0%
2
2009
2010
2011
2012
2013


Our Performance Has Led to Significant Value Creation
CELG
NBI
BTK
COMP
SPX
1-year
115%
66%
51%
38%
30%
3-year
186%
144%
80%
57%
47%
5-year
206%
225%
260%
165%
105%
10-year
1406%
227%
376%
108%
66%
6
Note:  Periods are for calendar year; amounts based on quoted market prices and excludes reinvestment
of dividends.
CELG:  Celgene
NBI:  NASDAQ Biotech Index
BTK:  NYSE ARCA Biotech Index
COMP:  NASDAQ Composite
SPX:  S&P 500
Celgene Performance Relative to Key Indices


Recent Operational Achievements Are Expected
to Sustain Our Growth Profile Through 2017
7
$13-$14
$6.4
$8.5-$9.5
~$15
$5.96
$9-$9.50
Adjusted EPS ($)
Key Operational Achievements
Launched
2
New
Products
POMALYST
®
/IMNOVID
®
for
3  -line+
multiple myeloma in the U.S. and Europe
OTEZLA
®
for psoriatic arthritis in the U.S.
Received key label expansions
REVLIMID
®
approvals
for
non-del
5(q)
MDS in Europe and mantle cell lymphoma
in the U.S.
ABRAXANE
®
approvals
in
the
U.S.
for
pancreatic and non-small cell lung cancers
and in Europe for pancreatic cancer
Achieved >10 positive phase III data
readouts
with
POMALYST
®
,
OTEZLA
®
,
REVLIMID
®
and
ABRAXANE
®
Advanced pipeline:
>30 pivotal / phase III programs underway
22 treatments in over 100 clinical trials in
over 50 diseases
2013
2015E
2017E
Net Product Sales ($B)
~21%
CAGR
2013
2015E
2017E
rd
~26%
CAGR


Our Equity Plan Is a Critical Tool
to Delivering on Our 2017 Financial Targets
The primary purpose of the Plan is to enable us to attract, retain, and motivate key
employees who are important to our success by aligning their interests with those of
our stockholders.
Approximately 5% of equity awards are granted to NEO’s and Directors
Employees at all levels are eligible to participate in the plan
Approximately 60% of granted equity awards are options vs. the peer average of 23%
Stock options represent a minimum of 50% of the total equity awarded in the Equity Choice program
Stock
options
are
intended
to
align
our
broad
employee
base
with
the
performance
of
the
stock
High performing employees are eligible to receive additional incentive equity awards
Performance-based equity grants are part of the Long-term Incentive Plan (LTIP) and are granted to senior
executives as part of their compensation packages
We are building a global Inflammation & Immunology franchise that is a significant portion of the 2017 financial
targets and is expected to contribute to growth beyond 2017
We
are
hiring
thought
leaders
and
innovators
in
key
functions
in
our
existing
Hematology
Oncology
franchise
who are critical to our long-term success
The value of future broad-based equity grants are planned to be reduced post-split (provided stockholders
approve
Proposal
Three
to
amend
the
Certificate
of
Incorporation
and
split
the
stock)
In
the
Equity
Choice
program,
the
option
to
RSU
conversion
ratio
changed
to
4:1
from
3:1
in
2013
8
Our Plan has broad participation across the employee base
Our Plan is more option centric relative to our peer group
Our Plan is critical in retaining employees who provide the greatest value creation
Our Plan is essential in attracting top talent in a highly competitive marketplace
Our Plan is evolving to further minimize dilution


The Plan Has Several Stockholder-Friendly Features
The Plan has several features designed to protect stockholder interests
and promote effective corporate governance, including:
9
The
Plan
is
administered
by
the
Compensation
Committee
comprised
solely
of
independent directors
Stock options have a term set by the Compensation Committee up to a maximum of ten
years
The
exercise
price
of
a
stock
option
cannot
be
granted
below
the
fair
market value of a
share of common stock on the date of grant
Re-pricing of stock options is not permitted without prior stockholder approval
A minimum
three-year
vesting
period
is
required
for
all
full-value
awards,
including
time-vested and performance-vested awards, subject to limited exceptions
Grants of awards to eligible employees in any given year are subject to certain limits
“Double-trigger”
requirements, upon certain limited termination events, must be met to
accelerate vesting of equity awards granted on or after July 1, 2011 in the event of a
change in control


We Are Requesting 9 Million Additional Shares
for the Equity Plan
10
Stockholders
are
being
asked
to
approve
an
amendment
to
our
2008
Stock
Incentive Plan that includes the following key modifications:
Total
Stock Options Outstanding, all plans (1)
40,525,585
Full-Value Awards Outstanding, all plans
5,061,794
Shares Available for Awards, all plans (2)
13,953,023
Dilution and Burn Rate:
1)
As of April 21, 2014, the range of the exercise prices of stock options outstanding under all of our equity compensation plans was
$12.59 to $171.94, with a weighted-average exercise price of $82.03.  The closing price of a share of our Common Stock on such
date was $143.83.  The weighted-average remaining contractual life of stock options outstanding under all of our equity
compensation plans as of April 21, 2014 was 7.0 years.
2)
Represents
shares
of
our
Common
Stock
reserved
for
future
awards
under
all
of
our
equity
compensation
plans
as
of
April
21,
2014.
Existing Stock Options Outstanding & Shares Available for Grant
Increase the current share reserve by 9,000,000 shares (pre-split) of our Common Stock
Extend the term of the Plan by one-year to April 16, 2024
Including the additional shares requested, the maximum dilution from our equity compensation
program would be 14.6% of our market value on a fully-diluted basis
If in-the-money stock options with life of 3 years or less had been exercised, dilution would drop to
approximately 13.9% of our market value on a fully-diluted basis
Over the past three years, we have granted an average of 3.37% of the outstanding stock per year
(using the ISS methodology for option equivalents)


Our Strong Performance Has Created a Significant
Overhang with In-the-Money Options
Year Granted
(Calendar Year)
Options
Outstanding
Options
Exercisable
Weighted Avg.
Exercise Price
Weighted Avg.
Contractual Term
(in years)
Options Held by
Current NEO’s
2013
9,287,455
445,727
$132.48
9.17
441,825
2012
8,180,393
2,016,717
$72.91
8.08
397,694
2011
7,078,393
3,000,829
$59.27
7.02
230,658
2010
4,893,561
3,705,439
$57.40
6.00
405,392
2009
2,546,394
2,546,394
$48.21
4.98
112,942
2008
2,586,478
2,586,478
$62.75
4.00
121,852
2007
1,489,401
1,489,401
$62.25
3.10
108,581
2006
159,234
159,234
$43.93
2.16
0
2005
1,584,618
1,584,618
$28.27
1.44
372,200
2004
293,508
293,508
$14.68
0.36
0
Total
38,099,435
17,828,345
$77.72
6.84
2,191,144
11
Outstanding Stock Option Awards at Record Date
Celgene employees have a history of holding onto their awards, creating a pool of
exercisable options that are significantly in-the-money


Proposal Six:  Stockholder Proposal for Increased
Disclosure on Political Contributions
American Federation of State, County and Municipal Employees, AFL-CIO,
(AFSCME) submitted Proposal Six requesting the Board to authorize the
preparation of an annual report disclosing:
1.
Company policy and procedures governing lobbying, both direct and indirect, and grassroots lobbying
communications
2.
Payments by Celgene used for (a) direct or indirect lobbying or (b) grassroots lobbying
communications,
in
each
case
including
the
amount
of
the
payment
and
the
recipient
3.
Celgene’s membership in and payments to any tax-exempt organization that writes and endorses
model legislation
4.
Description of management’s decision making process and the Board’s oversight for making
payments described in sections 2 and 3 above 
12


We
Recommend
Voting
Against
Proposal
Six
Our Board believes that this proposal is unnecessary and would not serve the
interests of Celgene stockholders because our Company already makes
extensive disclosures about our lobbying activities and the additional
information requested by this proposal would be burdensome without providing
meaningful additional information.
Our
annual
“Celgene
Responsibility
Report”
includes
a
“Public
Policy”
section
A description of our policies and practices regarding public policy activities and the reporting of
those activities to the Board’s Nominating, Governance, and Compliance Committee
A detailed description of our policies and practices concerning political contributions, lobbying
activities, and our memberships in trade associations
A link
to
quarterly
reports
of
our
federal
lobbying
activity
and
biannual
contribution
reports
A list of the Company’s trade association memberships
A description and report of the Celgene PAC, which is updated biannually to report all political
contribution amounts and recipients
13
We are a member of several trade associations and industry groups that occasionally may be
involved in lobbying activities and use a portion of the membership dues to fund such activities. 
Celgene does not specifically direct how these funds are used and may not agree with all positions
supported by these organizations.  As a result, disclosure of Celgene’s dues to these organizations
could misrepresent Celgene’s position and advocacy on certain legislative issues.
Our website contains extensive information regarding our public policy advocacy and political
participation:


Conclusion
We are a leading biopharmaceutical company with an exceptional track
record of value creation resulting in strong stock price outperformance
Based on operational achievements we expect to sustain our growth profile
through 2017 and beyond
Our Equity Plan is a critical component in our ability to attract and retain key
employees responsible for delivering on our long-term financial targets
Our
strong
performance
and
employee
confidence
in
the
future
has
resulted
in an overhang of in-the-money options that may penalize the Company in
certain dilution and stockholder valuation transfer models
We recommend stockholders VOTE FOR Proposal Four to amend our Stock
Incentive Plan
We believe Stockholder Proposal Six is unnecessary as we provide
significant
disclosure on our lobbying activities and the additional information requested
by this proposal would not provide meaningful additional information. 
We recommend stockholders VOTE AGAINST Proposal Six
14


Additional 2014 Proxy Materials
Celgene (NASDAQ:  CELG)


Reconciliation Tables
16


Reconciliation Tables
17
Explanation of adjustments:
(1)
Exclude sales related to non-core former Pharmion Corp., or Pharmion, and Abraxis BioScience Inc., or Abraxis products to be divested.
(2)
Exclude the estimated impact of activities arising from the acquisition of Abraxis that are not related to core nab technology and
  were divested in 2011, including other miscellaneous revenues, cost of goods sold (excluding amortization of acquired intangible assets), operating
  expenses and other costs related to such activities.  Exclude the net (benefit) cost of activities arising from the acquisition of Pharmion that
  are planned to be exited.
(3)
Exclude acquisition-related inventory step-up adjustments to fair value which were expensed for Abraxis in 2011 and 2010 and Pharmion in 2009 and 2008.
(4)
Exclude the Company's share of EntreMed, Inc. THALOMID royalties and equity losses.
(5)
Exclude upfront payments for research and development collaboration arrangements and purchases of intellectual property for unapproved products.
(6)
Exclude in-process research and development, or IPR&D, impairments.
(7)
Exclude the purchase of VIDAZA royalty obligations related to unapproved forms.
(8)
Exclude pricing settlement with the Patented Medicine Prices Review Board of Canada related to sales of THALOMID.
(9)
Exclude acquisition related charges and restructuring, including changes in the fair value of contingent consideration, related to the acquisitions of
   Gloucester, Abraxis and Avila.
(10)
Exclude the IPR&D write-off related to the acquisition of Pharmion Corp. in 2008.
(11)
Exclude impairment of royalty receivable asset that was received in 2011 as partial consideration in the sale of the non-core assets obtained by Celgene in the
  acquisition of Abraxis.
(12)
Net income tax adjustments reflect the estimated tax effect of the above adjustments and the impact of certain other non-operating tax adjustments,
  including one-time effects of changes in tax law, acquisition related matters, adjustments to the amount of unrecognized tax benefits and deferred
  taxes on unremitted foreign earnings.
Celgene Corporation and Subsidiaries
Reconciliation of GAAP to Adjusted Net Income


ROIC Calculation
18


Important Notice Regarding the Availability of Proxy Materials for the

Annual Meeting of Stockholders to be held on June 18, 2014:

The Proxy Statement, a sample of the form of proxy card sent or given to stockholders by Celgene

Corporation, and the Annual Report to Stockholders are available at http://www.proxyvote.com or on the

Investor Relations page of Celgene Corporation’s website at www.celgene.com.