Tell your story clearly
Title: Executive Vice President and Chief Financial Officer
When Celgene CEO Bob Hugin told investors at the J.P. Morgan Healthcare Conference that the company intended to double revenues to $12 billion by 2017, CFO Jacqualyn Fouse felt neither surprise nor pressure. She and her team had laid the groundwork for that message and sold the exec team on the need to explain to investors just what the biotech is capable of achieving.
"When you give some targets to the outside world and it resonates well with investors, then hopefully you are explaining your story well," said Fouse, a straight-talking exec who retains just a touch of her native Texas in her voice. She was born in Fort Worth and got her three degrees in economics--including a Ph.D. last year at age 51--all from the University of Texas at Arlington. She comes from a family that puts an emphasis on education. Her mother is a mathematician, her father is a mechanical engineer and her sister is a pianist with a doctorate in music. Her parents also have a goat farm in Texas; she likes to visit because the goats couldn't care less about her degrees, her title or her $3.5 million in total compensation last year.
In fact, plain talk and financial transparency are part of the strategy that Fouse has cultivated since Hugin brought her to Celgene ($CELG) in 2010 from agribusiness giant Bunge, shortly after he was named CEO. Before that she was CFO at Alcon Laboratories and group treasurer of Nestle. At Celgene, the corporate strategy group reports to her, and she sees a big piece of her role as helping executives and employees understand the arch of Celgene and then making sure that investors can comprehend the vision as well as the insiders do.
In many ways, the Celgene picture is pretty clear on the surface. Revenues last year were $5.5 billion, up 31% in compound annual growth over 5 years. The company has raised its earnings forecast three times this year and now says earnings should range from $5.90 to $5.95 per share in 2013.
As Fouse sees it, the financials flow from the science and then set you up to do even more, creating a virtuous cycle. And if investors understand that, then they will reward you.
"It is keeping the discussion flowing on what are the different ways to do things, what will this really look like if everything fires on all cylinders and what does that mean in terms of resource creation (revenues and profits) that will then allow us to do even more things," Fouse said. "That is what you really want to be doing in this business. You want to be very creative. You want to take bets on the science side, hopefully well-educated bets, but more bets, and really trying to come up with those breakthroughs that will continue to differentiate you in this space."
Actually, the financials will flow from good science, and in Celgene's case, the science has been good. Revlimid, its first-line treatment for multiple myeloma, had sales of about $3.8 billion last year and is projected to reach $6.6 billion by 2018. It does make up two-thirds of the company's revenues, but Celgene also has some up-and-comers like Abraxane. The company got control of the breast cancer drug with its $2.9 billion buyout of Abraxis BioScience in 2010. Abraxane notched an FDA approval for non-small cell lung cancer at the end of 2012, then for pancreatic cancer in September. The FDA approved Pomalyst in February for the treatment of refractory multiple myeloma. That drug is projected to break the blockbuster barrier in 2018.
Much of the revenue it reaps is funneled back into the business. There's the virtuous cycle at play again. Celgene is one of the biggest R&D spenders in biotech, having pumped $1.1 billion, about 33% of its revenues, into research and development last year. That means a flowing pipeline. Celgene's late-stage prospects include apremilast for psoriasis and psoriatic arthritis. There's an ambitious slate of Phase II studies for PDA-001 and a stem cell treatment for Crohn's disease, along with other trials.
Fouse says the company wants to "tap into the best science whether inside of Celgene or outside," which has led to some creative business development deals. It has pursued prospects in its areas of emphasis: cancer, inflammation and hematology. She points out that a number of the companies Celgene has done deals with, including Acceleron Pharma ($XLRN), bluebird bio ($BLUE) and Epizyme ($EPZM), have floated IPOs in recent months, indicating others share Celgene's view that its partners are working on something of value.
"I think that we got even more credit for all of those successes because we found a way to explain what makes us different on the research and development side, the business model that we've got and what that creates for investors now and in the future," Fouse said.
And investors have been rewarding Celgene royally for doing that. At about $153 a share recently, the stock price has essentially doubled in the last 12 months and tripled in the three years she has been there.
Fouse is into endurance sports and competitive long-distance running, and so understands going the distance. In biotech, particularly as a company grows from upstart to big dog, "everyone is always looking at you and saying, 'Are you guys going to become too big?,' and 'Are you going to lose your edge?,' and all of those sorts of things."
So going the distance means sustaining innovation. Fouse explains that solid financials and good products can carry a company for years, but without the breakthroughs, eventually the hotshot becomes the has-been. Fouse believes she is at Celgene to help it maintain its edge, test its endurance and press further. While some other CFOs come from a perspective of cost controls, Fouse believes she must use her skills to be additive to the business. "I am supposed to be able to say 'yes.' I am here to say 'yes' to more investment in the right science and research, to look ahead, plan investments and help us stay ahead of the curve."
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-- Eric Palmer (email | Twitter)