UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 0-16132

CELGENE CORPORATION

(Exact name of registrant as specified in its charter)

Delaware		22-2711928
(State or other jurisdiction of incorporation		(I.R.S. Employer Identification
or organization)		Number)
86 Morris Avenue, Summit, NJ		07901
(Address of principal executive offices)		(Zip Code)

(908) 673-9000
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No þ

At July 27, 2009, 458,622,488 shares of Common Stock, par value $.01 per share, were outstanding.

 

 

CELGENE CORPORATION

FORM 10-Q TABLE OF CONTENTS

		Page No.
PART I FINANCIAL INFORMATION
Item 1 Unaudited Consolidated Financial Statements
Consolidated Statements of Operations — Three-Month and Six-Month Periods Ended June 30, 2009 and 2008			1
Consolidated Balance Sheets — As of June 30, 2009 and December 31, 2008			2
Consolidated Statements of Cash Flows — Six-Month Periods Ended June 30, 2009 and 2008			3
Notes to Unaudited Consolidated Financial Statements			5
Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations			29
Item 3 Quantitative and Qualitative Disclosures About Market Risk			44
Item 4 Controls and Procedures			46
PART II OTHER INFORMATION
Item 1 Legal Proceedings			47
Item 1A Risk Factors			47
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds			47
Item 3 Defaults Upon Senior Securities			48
Item 4 Submission of Matters to a Vote of Security Holders			48
Item 5 Other Information			49
Item 6 Exhibits			49
Signatures			50
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

CELGENE CORPORATION AND SUBSIDIARIES

		Three-Month Periods Ended								Six-Month Periods Ended
		June 30,								June 30,
		2009				2008				2009				2008
Revenue:
Net product sales		$	598,154			$	543,165			$	1,174,386			$	974,539
Collaborative agreements and other revenue			2,354				2,789				4,598				7,557
Royalty revenue			28,158				25,510				54,735				51,965
Total revenue			628,666				571,464				1,233,719				1,034,061
Expenses:
Cost of goods sold (excluding amortization of acquired intangible assets)			50,902				75,194				115,201				119,918
Research and development			218,500				144,861				399,747				301,739
Selling, general and administrative			176,311				176,287				349,752				316,737
Amortization of acquired intangible assets			22,667				35,167				46,292				45,009
Acquired in-process research and development			—				—				—				1,740,000
Total expenses			468,380				431,509				910,992				2,523,403
Operating income (loss)			160,286				139,955				322,727				(1,489,342	)
Other income and expense:
Interest and investment income, net			24,072				19,853				41,525				49,603
Equity in (income) losses of affiliated companies			(157	)			1,343				615				6,423
Interest expense			527				1,246				991				3,456
Other income, net			5,176				1,697				37,786				2,493
Income (loss) before income taxes			189,164				158,916				400,432				(1,447,125	)
Income tax provision			46,329				39,033				94,715				74,080
Net income (loss)		$	142,835			$	119,883			$	305,717			$	(1,521,205	)
Net income (loss) per common share:
Basic		$	0.31			$	0.27			$	0.67			$	(3.56	)
Diluted		$	0.31			$	0.26			$	0.65			$	(3.56	)
Weighted average shares (in thousands):
Basic			459,586				442,640				459,584				427,451
Diluted			467,082				466,687				467,759				427,451

See accompanying Notes to Unaudited Consolidated Financial Statements

CELGENE CORPORATION AND SUBSIDIARIES

		June 30,				December 31,
		2009				2008
Assets
Current assets:
Cash and cash equivalents		$	866,843			$	1,092,386
Marketable securities available for sale			1,631,125				1,129,705
Accounts receivable, net of allowances of $9,678 and $9,391 at June 30, 2009 and December 31, 2008, respectively			353,627				312,243
Inventory			76,839				100,176
Deferred income taxes			22,752				16,415
Other current assets			216,980				190,441
Total current assets			3,168,166				2,841,366
Property, plant and equipment, net			266,645				248,971
Investment in affiliated companies			19,476				18,392
Intangible assets, net			384,934				434,764
Goodwill			577,596				588,822
Other assets			332,451				312,955
Total assets		$	4,749,268			$	4,445,270
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable		$	39,246			$	53,859
Accrued expenses			279,452				306,120
Income taxes payable			15,489				51,162
Current portion of deferred revenue			1,973				1,419
Other current liabilities			95,210				114,688
Total current liabilities			431,370				527,248
Deferred revenue, net of current portion			3,876				3,127
Non-current income taxes payable			384,563				358,578
Other non-current liabilities			66,691				64,989
Total liabilities			886,500				953,942
Commitments and Contingencies
Stockholders’ Equity:
Preferred stock, $.01 par value per share, 5,000,000 shares authorized; none outstanding at June 30, 2009 and December 31, 2008, respectively			—				—
Common stock, $.01 par value per share, 575,000,000 shares authorized; issued 464,719,591 and 463,274,296 shares at June 30, 2009 and December 31, 2008, respectively			4,647				4,633
Common stock in treasury, at cost; 6,198,012 and 4,144,667 shares at June 30, 2009 and December 31, 2008, respectively			(243,091	)			(157,165	)
Additional paid-in capital			5,331,128				5,180,397
Accumulated deficit			(1,103,276	)			(1,408,993	)
Accumulated other comprehensive loss			(126,640	)			(127,544	)
Total stockholders’ equity			3,862,768				3,491,328
Total liabilities and stockholders’ equity		$	4,749,268			$	4,445,270

See accompanying Notes to Unaudited Consolidated Financial Statements

CELGENE CORPORATION AND SUBSIDIARIES

		Six-Month Periods Ended
		June 30,
		2009				2008
Cash flows from operating activities:
Net income (loss)		$	305,717			$	(1,521,205	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation of long-term assets			19,262				15,622
Amortization of intangible assets			46,527				45,209
Allocation of pre-paid royalties			16,553				—
Provision for accounts receivable allowances			2,620				4,078
Deferred income taxes			(21,200	)			(4,804	)
Acquired in-process research and development			—				1,740,000
Share-based compensation expense			68,469				47,421
Equity in losses of affiliated companies			615				6,423
Share-based employee benefit plan expense			6,018				5,136
Unrealized change in value of foreign currency forward contracts			(25,943	)			936
Realized gain on marketable securities available for sale			(17,171	)			(2,239	)
Other, net			2,049				724
Change in current assets and liabilities, excluding the effect of acquisition:
Accounts receivable			(36,536	)			(63,273	)
Inventory			16,822				7,989
Other operating assets			(28,560	)			(8,686	)
Accounts payable and other operating liabilities			(36,818	)			(42,928	)
Income tax payable			(7,660	)			28,270
Deferred revenue			1,276				(71	)
Net cash provided by operating activities			312,040				258,602
Cash flows from investing activities:
Proceeds from sales of marketable securities available for sale			850,274				789,155
Purchases of marketable securities available for sale			(1,334,675	)			(252,094	)
Payments for acquisition of business, net of cash acquired			—				(746,779	)
Capital expenditures			(38,702	)			(34,183	)
Investment in affiliated companies			(1,700	)			(1,339	)
Purchases of investment securities			(10,847	)			(4,762	)
Other			3,333				10,107
Net cash used in investing activities			(532,317	)			(239,895	)
Cash flows from financing activities:
Payment for treasury shares			(100,000	)			—
Net proceeds from exercise of common stock options and warrants			16,569				62,035
Excess tax benefit from share-based compensation arrangements			69,713				34,120
Net cash provided by (used in) financing activities			(13,718	)			96,155
Effect of currency rate changes on cash and cash equivalents			8,452				15,533
Net increase (decrease) in cash and cash equivalents			(225,543	)			130,395
Cash and cash equivalents at beginning of period			1,092,386				1,218,273
Cash and cash equivalents at end of period		$	866,843			$	1,348,668

See accompanying Notes to Unaudited Consolidated Financial Statements

CELGENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS — (Continued)
(Unaudited)
(Dollars in thousands)

		Six-Month Periods Ended
		June 30,
		2009				2008
Supplemental schedule of non-cash investing and financing activity:
Change in net unrealized (gain) loss on marketable securities available for sale		$	(590	)		$	102,928
Matured shares tendered in connection with stock option exercises		$	(597	)		$	(1,981	)
Conversion of convertible notes		$	—			$	196,543
Supplemental disclosure of cash flow information:
Interest paid		$	—			$	1,640
Income taxes paid		$	52,761			$	6,409

See accompanying Notes to Unaudited Consolidated Financial Statements

CELGENE CORPORATION AND SUBSIDIARIES

1. Nature of Business and Basis of Presentation

Celgene Corporation and its subsidiaries (collectively “Celgene” or the “Company”) is a global biopharmaceutical company primarily engaged in the discovery, development and commercialization of innovative therapies designed to treat cancer and immune-inflammatory diseases. The Company’s primary commercial stage products include REVLIMID^®, THALOMID^® (inclusive of Thalidomide Celgene^TM and Thalidomide Pharmion^TM, subsequent to the acquisition of Pharmion Corporation, or Pharmion), VIDAZA^® and FOCALIN^®. ALKERAN^® was licensed from GlaxoSmithKline, or GSK, and sold under the Celgene label through March 31, 2009, the conclusion date of the ALKERAN^® license with GSK. For a period of two years, the Company will continue to earn residual payments based upon GSK’s ALKERAN^® revenues. FOCALIN^® is sold exclusively to Novartis Pharma AG, or Novartis. The Company also derives revenues from a licensing agreement with Novartis, which entitles it to royalties on FOCALIN XR^® and the entire RITALIN^® family of drugs, and sales of bio-therapeutic products and services through the Company’s Cellular Therapeutics subsidiary.

The accompanying unaudited consolidated financial statements have been prepared from the books and records of the Company pursuant to U.S. generally accepted accounting principles for interim information and the rules and regulations of the Securities and Exchange Commission for interim reporting. Pursuant to such rules and regulations, certain information and footnote disclosures normally included in complete annual financial statements have been condensed or omitted. The consolidated financial statements include the accounts of Celgene Corporation and its subsidiaries. All intercompany transactions and balances have been eliminated. Investments in limited partnerships and interests in which the Company has an equity interest of 50% or less and does not otherwise have a controlling financial interest are accounted for by either the equity or cost method. Certain immaterial reclassifications have been made to the prior period consolidated financial statements in order to conform to the current period presentation. The interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008, or the 2008 Annual Report on Form 10-K.

The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect reported amounts and disclosures. Actual results could differ from those estimates. The Company is subject to certain risks and uncertainties related to product development, regulatory approval, market acceptance, scope of patent and proprietary rights, competition, technological change and product liability.

Interim results may not be indicative of the results that may be expected for the full year. In the opinion of management, these financial statements include all normal and recurring adjustments considered necessary for a fair presentation of these interim consolidated financial statements.

CELGENE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

2. Summary of Significant Accounting Policies

The Company’s significant accounting policies are described in Note 1 of the Notes to the Consolidated Financial Statements included in the 2008 Annual Report on Form 10-K.

New Accounting Pronouncements: In September 2006, the Financial Accounting Standards Board, or FASB, issued Statement of Financial Accounting Standards, or SFAS, No. 157, “Fair Value Measurements,” or SFAS 157, which establishes a framework for measuring fair value and expands disclosures about fair value measurements. The FASB partially deferred the effective date of SFAS 157 for non-financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis to fiscal years beginning after November 15, 2008. The Company’s adoption of SFAS 157 related to non-financial assets beginning January 1, 2009 did not have a material impact on the Company’s consolidated financial statements.

In December 2007, the FASB ratified EITF Issue No. 07-1, “Accounting for Collaborative Arrangements Related to the Development and Commercialization of Intellectual Property,” or EITF 07-1, which provides guidance on how the parties to a collaborative agreement should account for costs incurred and revenue generated on sales to third parties, how sharing payments pursuant to a collaboration agreement should be presented in the income statement and certain related disclosure requirements. EITF 07-1 was effective for the Company beginning January 1, 2009 on a retrospective basis and did not have any impact on the Company’s consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141R, “Business Combinations,” or SFAS 141R, which replaces FASB Statement No. 141, “Business Combinations,” and requires an acquirer to recognize the assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree at the acquisition date, measured at their fair values as of that date, with limited exceptions. SFAS 141R amended SFAS No. 109, “Accounting for Income Taxes,” or SFAS 109, and FASB Interpretation No., or FIN, 48, “Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109,” or FIN 48. Previously, SFAS 109 and FIN 48, respectively, generally required post-acquisition adjustments to a business combination related deferred tax asset valuation allowance and liabilities related to uncertain tax positions to be recorded as an increase or decrease to goodwill. SFAS 141R does not permit this accounting and generally will require any such changes to be recorded in current period income tax expense. Thus, after SFAS 141R is adopted, all changes to valuation allowances and liabilities related to uncertain tax positions from an acquisition (whether the combination was accounted for under SFAS 141 or SFAS 141R) must be recognized in current period income tax expense. SFAS 141R was effective for the Company beginning January 1, 2009 and the Company will account for future business combinations in accordance with its provisions.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an Amendment of ARB No. 51,” or SFAS 160, which changes the accounting for and reporting of noncontrolling interests (formerly known as minority interests) in consolidated financial statements. SFAS 160 was effective for the Company beginning January 1, 2009 and did not have any impact on the Company’s consolidated financial statements.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities,” or SFAS 161, which is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance and cash flows. SFAS 161 was effective for the Company beginning January 1, 2009. See Note 8 for expanded disclosures required by SFAS 161.

In April 2008, the FASB issued FASB Staff Position, or FSP, No. FAS 142-3, “Determination of the Useful Life of Intangible Assets,” or FSP FAS 142-3. FSP FAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, “Goodwill and Other Intangible Assets.” FSP FAS142-3 was effective for the Company beginning January 1, 2009 and did not have any impact on the Company’s consolidated financial statements.

CELGENE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In May 2008, the FASB issued FSP No. APB 14-1, “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement),” or FSP APB 14-1, which requires separate accounting for the debt and equity components of convertible debt issuances that have a cash settlement feature permitting settlement partially or fully in cash upon conversion. A component of such debt issuances that is representative of the approximate fair value of the conversion feature at inception should be bifurcated and recorded to equity, with the resulting debt discount amortized to interest expense in a manner that reflects the issuer’s nonconvertible, unsecured debt borrowing rate. The requirements for separate accounting must be applied retrospectively to previously issued convertible debt issuances as well as prospectively to newly issued convertible debt issuances, negatively affecting both net income and earnings per share, in financial statements issued for fiscal years beginning after December 15, 2008. Since the Company’s past convertible debt issuance did not include a cash settlement feature, the adoption of FSP APB 14-1 did not have any impact on its consolidated financial statements.

In June 2008, the FASB issued FSP EITF No. 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities,” or FSP EITF 03-6-1. The FSP addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and therefore need to be included in the earnings allocation in calculating earnings per share under the two-class method described in SFAS No. 128, “Earnings per Share.” The FSP requires companies to treat unvested share-based payment awards that have non-forfeitable rights to dividends or dividend equivalents as a separate class of securities in calculating earnings per share. FSP EITF 03-6-1 was effective for the Company beginning January 1, 2009. Since the Company’s past share-based payment awards did not include non-forfeitable rights to dividends or dividend equivalents, the adoption of FSP EITF 03-6-1 did not have any impact on its consolidated financial statements.

In November 2008, the FASB ratified EITF Issue No. 08-6, “Equity Method Investment Accounting Considerations,” or EITF 08-6, which clarifies the accounting for certain transactions and impairment considerations involving equity method investments. EITF 08-6 was effective for the Company beginning January 1, 2009 and did not have any impact on the Company’s consolidated financial statements.

In November 2008, the FASB ratified EITF Issue No. 08-7, “Accounting for Defensive Intangible Assets,” or EITF 08-7, which clarifies the accounting for certain separately identifiable intangible assets which an acquirer does not intend to actively use but intends to hold to prevent its competitors from obtaining access to them. EITF 08-7 requires an acquirer in a business combination to account for a defensive intangible asset as a separate unit of accounting which should be amortized to expense over the period the asset diminishes in value. EITF 08-7 was effective for the Company beginning January 1, 2009 and the Company will account for defensive intangible assets acquired in future business combinations in accordance with its provisions.

In April 2009, the FASB issued FSP FAS 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly,” or FSP FAS 157-4. FSP FAS 157-4 amends SFAS 157 and provides additional guidance for estimating fair value in accordance with SFAS 157 when the volume and level of activity for the asset or liability have significantly decreased and also includes guidance on identifying circumstances that indicate a transaction is not orderly for fair value measurements. This FSP shall be applied prospectively with retrospective application not permitted. This FSP was effective for interim and annual periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. The Company did not early adopt FSP FAS 157-4 and the adoption of FSP FAS 157-4 did not have any impact on its consolidated financial statements.

CELGENE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In April 2009, the FASB issued FSP FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments,” or FSP FAS 115-2 and FAS 124-2. This FSP amends SFAS 115, “Accounting for Certain Investments in Debt and Equity Securities,” SFAS 124, “Accounting for Certain Investments Held by Not-for-Profit Organizations,” and EITF Issue No. 99-20, “Recognition of Interest Income and Impairment on Purchased Beneficial Interests and Beneficial Interests That Continue to Be Held by a Transferor in Securitized Financial Assets,” to make the other-than-temporary impairments guidance more operational and to improve the presentation of other-than-temporary impairments in the financial statements. This FSP will replace the existing requirement that the entity’s management assert it has both the intent and ability to hold an impaired debt security until recovery with a requirement that management assert it does not have the intent to sell the security, and it is more likely than not it will not have to sell the security before recovery of its cost basis. This FSP provides increased disclosure about the credit and noncredit components of impaired debt securities that are not expected to be sold and also requires increased and more frequent disclosures regarding expected cash flows, credit losses, and an aging of securities with unrealized losses. Although this FSP does not result in a change in the carrying amount of debt securities, it does require that the portion of an other-than-temporary impairment not related to a credit loss for a held-to-maturity security be recognized in a new category of other comprehensive income and be amortized over the remaining life of the debt security as an increase in the carrying value of the security. This FSP was effective for interim and annual periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. The Company did not early adopt FSP FAS 115-2 and FAS 124-2 and the adoption of FSP FAS 115-2 and FAS 124-2 did not have any impact on its consolidated financial statements.

In April 2009, the FASB issued FSP FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments,” or FSP FAS 107-1 and APB 28-1. This FSP amends SFAS No. 107, “Disclosures about Fair Value of Financial Instruments,” to require disclosures about fair value of financial instruments not measured on the balance sheet at fair value in interim financial statements as well as in annual financial statements. Prior to this FSP, fair values for these assets and liabilities were only disclosed annually. This FSP applies to all financial instruments within the scope of SFAS 107 and requires all entities to disclose the method(s) and significant assumptions used to estimate the fair value of financial instruments. This FSP was effective for interim periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. This FSP does not require disclosures for earlier periods presented for comparative purposes at initial adoption. In periods after initial adoption, this FSP requires comparative disclosures only for periods ending after initial adoption. The Company did not early adopt FSP FAS 107-1 and APB 28-1 and the adoption of FSP FAS 107-1 and APB 28-1 did not have any impact on its consolidated financial statements.

In April 2009, the FASB issued FSP FAS 141R-1, “Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies,” or FSP FAS 141R-1. FSP FAS 141R-1 amends and clarifies SFAS No. 141R to address application issues associated with initial recognition and measurement, subsequent measurement and accounting, and disclosure of assets and liabilities arising from contingencies in a business combination. FSP FAS 141R-1 was effective for the Company beginning January 1, 2009 and the Company will account for assets or liabilities arising from contingencies acquired in future business combinations in accordance with its provisions.

In May 2009, the FASB issued SFAS No. 165, “Subsequent Events,” or SFAS 165, which established general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued. It sets forth the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that occur for a potential recognition or disclosure in the financial statements, the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements and the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. It was effective for financial statements issued for interim and annual periods ending after June 15, 2009 and did not have any impact on the Company’s consolidated financial statements.

CELGENE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In June 2009, the FASB issued SFAS No. 166, “Accounting for Transfers of Financial Assets,” or SFAS 166, and SFAS No. 167, “Amendments to FASB Interpretation No. 46(R),” or SFAS 167. SFAS 166 is a revision to SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,” or SFAS 140. It eliminates the concept of a “qualifying special-purpose entity,” changes the requirements for derecognizing financial assets and requires additional disclosures. SFAS 166 clarifies that the objective of paragraph 9 of SFAS 140 is to determine whether a transferor and all of the entities included in the transferor’s financial statements being presented have surrendered control over transferred financial assets. It also enhances information reported to users of financial statements by providing greater transparency about transfers of financial assets and a company’s continuing involvement in transferred financial assets. SFAS 167 is a revision to FIN 46(R), “Consolidation of Variable Interest Entities,” or FIN 46(R), and changes how a company determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. The determination of whether a company is required to consolidate an entity is based on, among other things, an entity’s purpose and design and a company’s ability to direct the activities of the entity that most significantly impact the entity’s economic performance. FIN 46(R) is amended to require ongoing reassessments of whether an enterprise is the primary beneficiary of a variable interest entity. SFAS 167 will require a company to provide additional disclosures about its involvement with variable interest entities, any significant changes in risk exposure due to that involvement and how its involvement with a variable interest entity affects the company’s financial statements. Both SFAS 166 and SFAS 167 will be effective at the start of a company’s first fiscal year beginning after November 15, 2009. The Company is currently evaluating the impact, if any, that the adoption of SFAS 166 and SFAS 167 will have on its consolidated financial statements.

In June 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards Codification^TM and the Hierarchy of Generally Accepted Accounting Principles,” or SFAS 168, which established the FASB Accounting Standards Codification^TM as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in preparation of financial statements in conformity with generally accepted accounting principles in the United States. All other accounting literature not included in the FASB Accounting Standards Codification^TM will be nonauthoritative. SFAS 168 is effective for financial statements issued for interim and annual periods ending after September 15, 2009 and the Company does not expect the adoption of SFAS 168 will have any impact on its consolidated financial statements.

3. Acquisition of Pharmion Corporation

On March 7, 2008, Celgene acquired all of the outstanding common stock and stock options of Pharmion in a transaction accounted for under the purchase method of accounting for business combinations. Celgene paid a combination of $920.8 million in cash and approximately 30.8 million shares of Celgene common stock valued at $1.749 billion to Pharmion shareholders. The operating results of Pharmion are included in the Company’s consolidated financial statements from the date of acquisition.

The following table provides unaudited pro forma financial information for the six-month period ended June 30, 2008 as if the acquisition of Pharmion had occurred as of the beginning of the period presented. For the six-month period presented, the unaudited pro forma results include the nonrecurring charge for in-process research and development, or IPR&D, amortization of acquired intangible assets, elimination of expense and income related to pre-acquisition agreements with Pharmion, reduced interest and investment income attributable to cash paid for the acquisition and the amortization of the inventory step-up to fair value of acquired Pharmion product inventories. The unaudited pro forma results do not reflect any operating efficiencies or potential cost savings that may result from the combined operations of Celgene and Pharmion. Accordingly, these unaudited pro forma results are presented for illustrative purposes and are not intended to represent or be indicative of the actual results of operations of the combined company that would have been achieved had the acquisition occurred at the beginning of the period presented, nor are they intended to represent or be indicative of future results of operations.

CELGENE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

		Six-Month Period
		Ended
		June 30, 2008
Total revenue		$	1,086,415
Net loss		$	(1,530,660	)
Net loss per common share: basic and diluted		$	(3.58	)

Prior to the acquisition, Celgene had licensed exclusive rights relating to the development and commercial use of THALOMID^® and its distribution system to Pharmion, and also maintained a THALOMID^® supply agreement with Pharmion. The Company accounted for these arrangements in accordance with EITF Issue No. 04-1, “Accounting for Preexisting Relationships between the Parties to a Business Combination.” The effective settlement of these arrangements resulted in no settlement gain or loss as the contractual terms were deemed to be at market rates due to several factors including, but not limited to, the continued absence of European marketing authorization for THALOMID^® since the agreements were executed by unrelated entities in December 2004, the review of similar recent agreements entered into by pharmaceutical and biotechnology companies containing similar economic terms and the lack of a termination penalty for either party to the agreements. In addition, the Company has valued the reacquired THALOMID^®-related rights when valuing the developed product rights acquired. Any assets and liabilities that existed between Celgene and Pharmion as of the acquisition date have been eliminated in the accompanying consolidated financial statements.

4. Restructuring

The March 7, 2008 acquisition cost of Pharmion included $58.6 million in restructuring liabilities primarily related to the planned exit of certain business activities, involuntary terminations and the relocation of certain Pharmion employees. The remaining balance of these restructuring liabilities totaled $27.6 million and $15.9 million as of December 31, 2008 and June 30, 2009, respectively. The following table summarizes changes to the restructuring liabilities during the six-month period ended June 30, 2009:

		Balance												Balance				Cumulative
		December 31, 2008				Payments				Adjustments				June 30, 2009				Payments
Severance costs		$	1,654			$	(1,635	)		$	—			$	19			$	(17,419	)
Contract termination fees			22,485				(2,859	)			(6,100	)(1)			13,526				(11,525	)
Facility closing costs			2,664				(660	)			—				2,004				(3,591	)
Other			834				(459	)			—				375				(4,075	)
Total restructuring costs		$	27,637			$	(5,613	)		$	(6,100	)		$	15,924			$	(36,610	)

The Company expects to finalize the contractual terms of the remaining arrangements being restructured during 2009.

CELGENE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

5. Earnings Per Share (EPS)

Basic earnings per share is computed by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income adjusted to add back the after-tax amount of interest recognized in the period associated with any convertible debt issuance that may be dilutive by the weighted-average number of common shares outstanding during the period increased to include all additional common shares that would have been outstanding as if the outstanding convertible debt was converted into shares of common stock and assuming potentially dilutive common shares, resulting from option exercises, had been issued and any proceeds thereof used to repurchase common stock at the average market price during the period. The assumed proceeds used to repurchase common stock are the sum of the amount to be paid to the Company upon exercise of options, the amount of compensation cost attributed to future services and not yet recognized and, if applicable, the amount of excess income tax benefit that would be credited to paid-in capital upon exercise. As of their maturity date, June 1, 2008, substantially all of the Company’s convertible notes were converted into shares of common stock.

		Three-Month Periods Ended								Six-Month Periods Ended
		June 30,								June 30,
		2009				2008				2009				2008
Net income (loss)		$	142,835			$	119,883			$	305,717			$	(1,521,205	)
Interest expense on convertible debt, net of tax			—				456				—				—
Net income (loss) for diluted computation		$	142,835			$	120,339			$	305,717			$	(1,521,205	)
Weighted average shares:
Basic			459,586				442,640				459,584				427,451
Effect of dilutive securities:
Options, restricted stock units, warrants and other incentives			7,496				13,528				8,175				—
Convertible debt			—				10,519				—				—
Diluted			467,082				466,687				467,759				427,451
Net income (loss) per share:
Basic		$	0.31			$	0.27			$	0.67			$	(3.56	)
Diluted		$	0.31			$	0.26			$	0.65			$	(3.56	)

The total number of potential common shares excluded from the diluted earnings per share computation because their inclusion would have been anti-dilutive was 21,040,000 and 9,778,698 shares for the three-month periods ended June 30, 2009 and 2008, respectively. The total number of potential common shares excluded for the six-month periods ended June 30, 2009 and 2008 was 19,911,123 and 33,827,167, respectively. All of the potentially dilutive securities for the six-month period ended June 30, 2008 were determined to be anti-dilutive as a result of the net loss for the period. Substantially all of the Company’s convertible debt had been converted into shares of common stock as of June 30, 2008.

On May 26, 2009, the Company entered into an agreement to purchase shares of its common stock from Morgan Stanley & Co. Inc., for an aggregate purchase price of $100.0 million under an Accelerated Share Repurchase, or ASR, program. The Company entered into this agreement as part of a $500.0 million share repurchase program approved by its Board of Directors in April 2009. The amount paid was reflected in the Company’s Consolidated Balance Sheet at June 30, 2009 as a reduction to Stockholders’ Equity.

On May 27, 2009, the Company received an initial delivery of 1.2 million shares, representing approximately 50% of the shares that could have been purchased, based on the closing price of its common stock on May 27, 2009. An additional 1.0 million shares were delivered on May 29, 2009, in accordance with the terms of the agreement. The Company expects all ASR program purchases to be completed no later than August 26, 2009. The total number of shares to be repurchased will be determined at the completion of the ASR program based on the volume weighted-average-price of the Company’s stock during the term of the agreement.

On a year-to-date basis, share repurchases totaled $100.0 million as of June 30, 2009.

CELGENE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

6. Comprehensive Income (Loss)

The components of comprehensive income (loss) consist of net income (loss), changes in pension liability, changes in net unrealized gains (losses) on marketable securities classified as available-for-sale, net unrealized gains (losses) related to cash flow hedges and changes in foreign currency translation adjustments.

		Three-Month Periods Ended								Six-Month Periods Ended
		June 30,								June 30,
		2009				2008				2009				2008
Net income (loss)		$	142,835			$	119,883			$	305,717			$	(1,521,205	)
Other comprehensive income (loss):
Marketable securities:
Net unrealized gains (losses) on marketable securities available for sale, net of tax			5,105				(6,862	)			6,932				104
Reversal of unrealized gains on Pharmion investment, net of tax			—				—				—				(62,806	)
Reclassification adjustment for gains included in net income (loss)			(12,204	)			(951	)			(17,171	)			(2,239	)
Total other comprehensive losses related to marketable securities available for sale, net of tax			(7,099	)			(7,813	)			(10,239	)			(64,941	)
Net unrealized gains (losses) related to cash flow hedges, net of tax			(25,917	)			—				26,843				—
Currency translation adjustments			31,066				2,455				(15,700	)			28,179
Total other comprehensive income (loss) items			(1,950	)			(5,358	)			904				(36,762	)
Comprehensive income (loss)		$	140,885			$	114,525			$	306,621			$	(1,557,967	)

7. Financial Instruments and Fair Value Measurement

The table below presents information about assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2009 and the valuation techniques the Company utilized to determine such fair value. In general, fair values determined based on Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. The Company’s Level 1 assets consist of marketable equity securities. Fair values determined based on Level 2 inputs utilize observable quoted prices for similar assets and liabilities in active markets and observable quoted prices for identical or similar assets in markets that are not very active. The Company’s Level 2 assets consist primarily of U.S. Treasury fixed rate securities, U.S. government-sponsored agency fixed rate securities, U.S. government-sponsored agency mortgage-backed fixed rate obligations, Federal Deposit Insurance Corporation, or FDIC, guaranteed fixed rate corporate debt, non-U.S. government issued fixed rate securities, non-U.S. government guaranteed fixed rate securities, forward currency contracts and warrants for the purchase of equity securities. Fair values determined based on Level 3 inputs utilize unobservable inputs and include valuations of assets or liabilities for which there is little, if any, market activity. The Company’s Level 3 securities at June 30, 2009 consist of warrants for the purchase of equity securities in a non-publicly traded company in which the Company has invested and which is party to a collaboration and option agreement with the Company.

CELGENE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

						Quoted Price in				Significant				Significant
						Active Markets for				Other Observable				Unobservable
		Balance at				Identical Assets				Inputs				Inputs
		June 30, 2009				(Level 1)				(Level 2)				(Level 3)
Available-for-sale securities		$	1,631,125			$	510			$	1,630,615			$	—
Warrants			830				—				—				830
Cash equivalents			15,687				—				15,687				—
Forward currency contracts			(3,780	)			—				(3,780	)			—
		$	1,643,862			$	510			$	1,642,522			$	830

						Quoted Price in				Significant				Significant
						Active Markets for				Other Observable				Unobservable
		Balance at				Identical Assets				Inputs				Inputs
		December 31, 2008				(Level 1)				(Level 2)				(Level 3)
Available-for-sale securities		$	1,129,705			$	407			$	1,118,244			$	11,054
Forward currency contracts			(57,486	)			—				(57,486	)			—
		$	1,072,219			$	407			$	1,060,758			$	11,054

The following table is a roll-forward of the fair value of Level 3 securities (significant unobservable inputs):

		Six-Month Periods Ended
		June 30,
		2009				2008
Balance at beginning of period		$	11,054			$	37,038
Net gains (losses) (realized and unrealized)			2,436				—
Net purchases, issuances and settlements			(12,660	)			(21,542	)
Transfers in and/or out of Level 3			—				—
Balance at end of period		$	830			$	15,496

8. Derivative Instruments and Hedging Activities

Foreign Currency Forward Contracts: Effective January 1, 2009, the Company adopted SFAS 161 and enhanced its disclosures for derivative instruments and hedging activities by providing additional information about its objectives for using derivative instruments, the level of derivative activity the Company engages in, as well as how derivative instruments and related hedged items affect its financial position and performance. Since SFAS 161 requires only additional disclosures concerning derivatives and hedging activities, the adoption of SFAS 161 did not affect the presentation of the Company’s financial position or results of operations.

The Company uses foreign currency forward contracts to hedge specific forecasted transactions denominated in foreign currencies and to reduce exposures to foreign currency fluctuations of certain assets and liabilities denominated in foreign currencies.

CELGENE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company enters into foreign currency forward contracts to protect against changes in anticipated foreign currency cash flows resulting from changes in foreign currency exchange rates, primarily associated with non-functional currency denominated revenues and expenses of foreign subsidiaries. The foreign currency forward hedging contracts outstanding at June 30, 2009 and December 31, 2008 had settlement dates within 24 months. These foreign currency forward contracts are designated as cash flow hedges under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended, or SFAS 133, and, accordingly, to the extent effective, any unrealized gains or losses on them are reported in other comprehensive income (loss), or OCI, and reclassified to operations in the same periods during which the underlying hedged transactions affect operations. Any ineffectiveness on these foreign currency forward contracts is reported in other income, net. Foreign currency forward contracts entered into to hedge forecasted revenue and expenses were as follows:

		Notional Amount
Foreign Currency		June 30, 2009				December 31, 2008
Euro		$	688,650			$	704,198
Yen			15,311				—
Total		$	703,961			$	704,198

The notional settlement amounts of the foreign currency forward contracts outstanding as of June 30, 2009 and December 31, 2008 were $704.0 million and $704.2 million, respectively. The Company considers the impact of its own and the counterparties’ credit risk on the fair value of the contracts as well as the ability of each party to execute its obligations under the contract. As of June 30, 2009 and December 31, 2008, credit risk did not materially change the fair value of the Company’s foreign currency forward contracts.

The Company recognized reductions in net product sales for the settlement of certain effective cash flow hedge instruments of $5.8 million and $6.6 million for the three- and six-month periods ended June 30, 2009, respectively, and no reductions for each of the three- and six-month periods ended June 30, 2008. These settlements were recorded in the same period as the related forecasted sales occurred. The Company recognized reductions in research and development expenses for the settlement of certain effective cash flow hedge instruments of $0.6 million and $1.6 million for the three- and six-month periods ended June 30, 2009, respectively, and no reductions for each of the three- and six-month periods ended June 30, 2008. These settlements were recorded in the same period as the related forecasted research and development expenses occurred. Changes in time value, which the Company excluded from the hedge effectiveness assessment for the three- and six-month periods ended June 30, 2009, were included in other income, net.

The Company also enters into foreign currency forward contracts to reduce exposures to foreign currency fluctuations of certain recognized assets and liabilities denominated in foreign currencies. These foreign currency forward contracts have not been designated as hedges under SFAS 133 and, accordingly, any changes in their fair value are recognized in other income, net in the current period. The aggregate notional amount of the foreign currency forward non-designated hedging contracts outstanding at June 30, 2009 and December 31, 2008 were $361.2 million and $56.6 million, respectively.

CELGENE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table summarizes the fair value and presentation in the consolidated balance sheets for derivative instruments as of June 30, 2009 and December 31, 2008:

		June 30, 2009
		Asset Derivatives								Liability Derivatives
		Balance Sheet								Balance Sheet
Instrument		Location				Fair Value				Location				Fair Value
Foreign currency forward contracts designated as hedging instruments under SFAS 133		Other current assets				$	1,054			Other current liabilities				$	28,455
Foreign currency forward contracts not designated as hedging instruments under SFAS 133		Other current assets				$	26,589			Other current liabilities				$	2,968
Total						$	27,643							$	31,423

		December 31, 2008
		Asset Derivatives								Liability Derivatives
		Balance Sheet								Balance Sheet
Instrument		Location				Fair Value				Location				Fair Value
Foreign currency forward contracts designated as hedging instruments under SFAS 133		Other current assets				$	1,552			Other current liabilities				$	50,000
Foreign currency forward contracts not designated as hedging instruments under SFAS 133		Other current assets				$	30			Other current liabilities				$	9,068
Total						$	1,582							$	59,068

CELGENE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following tables summarize the effect of derivative instruments designated as hedging instruments under SFAS 133 on the consolidated statements of operations for the three- and six-month periods ended June 30, 2009 and 2008:

For the Three-Month Period Ended June 30, 2009

Location of

Amount of

Gain/(Loss)

Gain/(Loss)

Location of

Amount of

Recognized in

Recognized in

Amount of

Gain/(Loss)

Gain/(Loss)

Income on

Income on

Gain/(Loss)

Reclassified from

Reclassified from

Derivative

Derivative

Recognized in OCI

Accumulated OCI

Accumulated OCI

(Amount Excluded

(Amount Excluded

on Derivative

into Income

into Income

From Effectiveness

From Effectiveness

Instrument

(Effective Portion)

(Effective Portion)

(Effective Portion)

Testing)

Testing)

Foreign currency forward contracts

$

(31,141

)(1)

Net product sales

$

(5,810

)

Other income, net

$

374

(2)

Research and development

$

586

For the Three-Month Period Ended June 30, 2008

Location of

Amount of

Gain/(Loss)

Gain/(Loss)

Location of

Amount of

Recognized in

Recognized in

Amount of

Gain/(Loss)

Gain/(Loss)

Income on

Income on

Gain/(Loss)

Reclassified from

Reclassified from

Derivative

Derivative

Recognized in OCI

Accumulated OCI

Accumulated OCI

(Amount Excluded

(Amount Excluded

on Derivative

into Income

into Income

From Effectiveness

From Effectiveness

Instrument

(Effective Portion)

(Effective Portion)

(Effective Portion)

Testing)

Testing)

Foreign currency forward contracts

$

—

N/A

$

—

N/A

$

—

CELGENE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the Six-Month Period Ended June 30, 2009

Location of

Amount of

Gain/(Loss)

Gain/(Loss)

Location of

Amount of

Recognized in

Recognized in

Amount of

Gain/(Loss)

Gain/(Loss)

Income on

Income on

Gain/(Loss)

Reclassified from

Reclassified from

Derivative

Derivative

Recognized in OCI

Accumulated OCI

Accumulated OCI

(Amount Excluded

(Amount Excluded

on Derivative

into Income

into Income

From Effectiveness

From Effectiveness

Instrument

(Effective Portion)

(Effective Portion)

(Effective Portion)

Testing)

Testing)

Foreign currency forward contracts

$

21,884

(1)

Net product sales

$

(6,560

)

Other income, net

$

(4,236

)(2)

Research and development

$

1,602

For the Six-Month Period Ended June 30, 2008

Location of

Amount of

Gain/(Loss)

Gain/(Loss)

Location of

Amount of

Recognized in

Recognized in

Amount of

Gain/(Loss)

Gain/(Loss)

Income on

Income on

Gain/(Loss)

Reclassified from

Reclassified from

Derivative

Derivative

Recognized in OCI

Accumulated OCI

Accumulated OCI

(Amount Excluded

(Amount Excluded

on Derivative

into Income

into Income

From Effectiveness

From Effectiveness

Instrument

(Effective Portion)

(Effective Portion)

(Effective Portion)

Testing)

Testing)

Foreign currency forward contracts

$

—

N/A

$

—

N/A

$

—

The following table summarizes the effect of derivative instruments not designated as hedging instruments under SFAS 133 on the consolidated statements of operations for the three- and six-month periods ended June 30, 2009 and 2008:

		Location of
		Gain/(Loss)
		Recognized in				Amount of Gain/(Loss) Recognized in Income on Derivative
		Income on				Three-Month Periods Ended June 30,								Six-Month Periods Ended June 30,
Instrument		Derivative				2009				2008				2009				2008
Foreign currency forward contracts		Other income, net				$	1,607			$	486			$	17,555			$	(94	)

CELGENE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

9. Cash, Cash Equivalents and Marketable Securities Available-for-Sale

Money market funds of $456.7 million and $691.0 million at June 30, 2009 and December 31, 2008, respectively, were recorded at cost, which approximates fair value and are included in cash and cash equivalents.

The amortized cost, gross unrealized holding gains, gross unrealized holding losses and estimated fair value of available-for-sale securities by major security type and class of security at June 30, 2009 and December 31, 2008 were as follows:

						Gross				Gross				Estimated
		Amortized				Unrealized				Unrealized				Fair
June 30, 2009		Cost				Gain				Loss				Value
U.S. Treasury securities		$	377,853			$	1,157			$	(673	)		$	378,337
U.S. government-sponsored agency securities			486,652				5,422				(224	)			491,850
U.S. government-sponsored agency MBS			467,595				6,177				(1,039	)			472,733
FDIC guaranteed corporate debt			213,697				1,032				(230	)			214,499
Non-U.S. government issued securities			12,462				—				—				12,462
Non-U.S. government guaranteed securities			61,045				109				(420	)			60,734
Marketable equity securities			407				103				—				510
Total available-for-sale marketable securities		$	1,619,711			$	14,000			$	(2,586	)		$	1,631,125

						Gross				Gross				Estimated
		Amortized				Unrealized				Unrealized				Fair
December 31, 2008		Cost				Gain				Loss				Value
U.S. Treasury securities		$	263,541			$	8,394			$	—			$	271,935
U.S. government-sponsored agency securities			571,072				16,985				(212	)			587,845
U.S. government-sponsored agency MBS			229,847				3,241				(429	)			232,659
FDIC guaranteed corporate debt			25,546				265				(6	)			25,805
Private cash fund shares			11,054				—				—				11,054
Marketable equity securities			407				—				—				407
Total available-for-sale marketable securities		$	1,101,467			$	28,885			$	(647	)		$	1,129,705

U.S. government-sponsored agency securities include general unsecured obligations of the issuing agency. U.S. government-sponsored mortgage-backed securities, or MBS, include fixed rate asset-backed securities issued by the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation and the Government National Mortgage Association. FDIC guaranteed corporate debt includes obligations of bank holding companies that meet certain criteria set forth under the Temporary Liquidity Guaranty Program, or TLGP, and are unconditionally guaranteed by the FDIC. Non-U.S. government issued securities consist of direct obligations of highly rated governments of nations other then the United States. Non-U.S. government guaranteed securities consist of obligations of agencies and other entities that are explicitly guaranteed by highly rated governments of nations other then the United States. Net unrealized gains in U.S. Treasury fixed rate securities, U.S. government-sponsored agency fixed rate securities, U.S. government-sponsored agency mortgage-backed fixed rate obligations and FDIC guaranteed corporate fixed rate debt primarily reflect the impact of decreased interest rates at June 30, 2009 and December 31, 2008.

CELGENE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Duration periods of available-for-sale debt securities were as follows at June 30, 2009:

		Amortized				Fair
		Cost				Value
Duration of one year or less		$	361,447			$	365,196
Duration of one through three years			1,222,555				1,230,131
Duration of three through five years			25,940				25,915
Duration of over five years			9,362				9,373
Total		$	1,619,304			$	1,630,615

10. Inventory

A summary of inventories by major category at June 30, 2009 and December 31, 2008 follows:

		June 30,				December 31,
		2009				2008
Raw materials		$	13,287			$	16,910
Work in process			41,390				33,170
Finished goods			22,162				50,096
Total		$	76,839			$	100,176

11. Investment in Affiliated Companies

A summary of the Company’s equity investment in affiliated companies follows:

		June 30,				December 31,
Investment in Affiliated Companies		2009				2008
Investment in affiliated companies(1)		$	16,606			$	14,862
Excess of investment over share of equity (2)			2,870				3,530
Investment in affiliated companies		$	19,476			$	18,392

		Three-Month Periods Ended								Six-Month Periods Ended
		June 30,								June 30,
Equity in (Income) Losses of Affiliated Companies		2009				2008				2009				2008
Affiliated companies (income) losses (1)		$	(157	)		$	1,343			$	615			$	6,423

Additional equity investments totaling $1.7 million were made during the six-month period ended June 30, 2009. The six-month period ended June 30, 2008 included other-than-temporary impairment losses of $4.4 million. These impairment losses were based on an evaluation of several factors, including a decrease in fair value of the equity investment below its cost.

CELGENE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

12. Intangible Assets and Goodwill

Intangible Assets: The Company’s intangible assets consist of developed product rights from the Pharmion acquisition, contract-based licenses, technology and an acquired workforce. Remaining amortization periods related to these categories range from one to eleven years. A summary of intangible assets by category follows:

		Gross								Intangible				Weighted
		Carrying				Accumulated				Assets,				Average
June 30, 2009		Value				Amortization				Net				Life (Years)
Acquired developed product rights		$	530,000			$	(148,622	)		$	381,378				6.5
License			4,250				(1,075	)			3,175				13.8
Technology			290				(69	)			221				12.6
Acquired workforce			331				(171	)			160				5.0
Total		$	534,871			$	(149,937	)		$	384,934				6.5

		Gross								Intangible				Weighted
		Carrying				Accumulated				Assets,				Average
December 31, 2008		Value				Amortization				Net				Life (Years)
Acquired developed product rights		$	533,339			$	(102,331	)		$	431,008				6.5
License			4,250				(922	)			3,328				13.8
Technology			290				(59	)			231				12.6
Acquired workforce			337				(140	)			197				5.0
Total		$	538,216			$	(103,452	)		$	434,764				6.5

The decrease in gross carrying value of intangibles at June 30, 2009 compared to December 31, 2008 was primarily due to elimination of the $3.3 million intangible related to RIMIFON^®, which was obtained in the Pharmion acquisition and sold in March of 2009.

Amortization of intangible assets was $22.8 million and $35.3 million for the three-month periods ended June 30, 2009 and 2008, respectively. Amortization for the six-month periods ended June 30, 2009 and 2008 was $46.5 million and $45.2 million, respectively. Amortization expense for the six-month period ended June 30, 2008 included amortization of the intangible assets related to the Pharmion acquisition only for the period subsequent to the March 7, 2008 acquisition date. Assuming no changes in the gross carrying amount of intangible assets, the amortization of intangible assets for the next five years is estimated to be approximately $83.8 million for the year ending December 31, 2009 and approximately $64.3 million for each of the years ending December 31, 2010 through 2013.

Goodwill: At June 30, 2009, the Company’s goodwill related to the March 7, 2008 acquisition of Pharmion and the October 21, 2004 acquisition of Penn T Limited. The goodwill related to the Pharmion acquisition reflects the allocation of the Pharmion purchase price.

CELGENE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The change in carrying value of goodwill is summarized as follows:

Balance at December 31, 2008		$	588,822
Tax benefit on the exercise of Pharmion converted stock options			(848	)
Adjustments to Pharmion assets acquired			(444	)
Adjustments to Pharmion restructuring liabilities			(6,100	)
Foreign currency translation			(3,834	)
Balance at June 30, 2009		$	577,596