The following table summarizes total revenues and earnings for the three-month periods ended March 31, 2009 and 2008:

                                                      Three-Month Periods Ended
                                                              March 31,                                 Percent
(Amounts in thousands, except earnings per share)       2009              2008          Increase        Change

Total revenue                                       $    605,053      $    462,597     $   142,456          30.8 %
Net income (loss)                                   $    162,883      $ (1,641,088 )   $ 1,803,971           N/A
Diluted earnings (loss) per share                   $       0.35      $      (3.98 )   $      4.33           N/A

The increase in revenue for the three-month period ended March 31, 2009 compared to the three-month period ended March 31, 2008 was primarily due to the inclusion of a full three months of sales for VIDAZA® and Thalidomide PharmionTM as well as continued growth of REVLIMID® in both U.S. and international markets. The three-month period ended March 31, 2008 only included VIDAZA® and Thalidomide PharmionTM sales subsequent to the March 7, 2008 acquisition of Pharmion. Net income and diluted earnings per share for the three-month period ended March 31, 2009 reflect the continued growth in sales of our products, partly offset by increased spending from the inclusion of Pharmion's operations and for new product launches, research and development and expansion of our international operations. The net loss in the three-month period ended March 31, 2008 was primarily due to an in-process research and development, or IPR&D, charge of $1.74 billion and amortization of acquisition intangibles related to our acquisition of Pharmion.
Results of Operations:
Three-Month Periods Ended March 31, 2009 and 2008 Total Revenue: Total revenue and related percentages for the three-month periods ended March 31, 2009 and 2008 were as follows:

                                         Three-Month Periods Ended
                                                 March 31,                   Increase         Percent
(Amounts in thousands)                     2009               2008          (Decrease)         Change

Net product sales:
REVLIMID®                              $     362,516       $  286,846      $     75,670            26.4 %
THALOMID®                                    113,964          113,927                37             0.0 %
VIDAZA®                                       75,382           13,820            61,562           445.5 %
ALKERAN®                                      19,862           15,114             4,748            31.4 %
Other                                          4,508            1,667             2,841           170.4 %

Total net product sales                $     576,232       $  431,374      $    144,858            33.6 %
Collaborative agreements and other
revenue                                        2,244            4,768            (2,524 )         -52.9 %
Royalty revenue                               26,577           26,455               122             0.5 %

Total revenue                          $     605,053       $  462,597      $    142,456            30.8 %

REVLIMID® net sales increased for the three-month period ended March 31, 2009 compared to the three-month period ended March 31, 2008 primarily due to increased unit sales in both U.S. and international markets. Increased market penetration and the increase in duration of patients using REVLIMID® in multiple myeloma contributed to U.S. growth. The growth in international sales reflects the expansion of our commercial activities in over 75 countries.

THALOMID® net sales totaled $114.0 million for each of the three-month periods ended March 31, 2009 and 2008, respectively. An increase in international sales was mostly offset by a decrease in U.S. sales. The international sales increase was primarily due to the April 2008 full marketing authorization by the European Commission, or EC, of THALOMID® for use in combination with melphalan and prednisone as a treatment for patients with newly diagnosed multiple myeloma. The three-month period ended March 31, 2008 only included THALOMID® sales in international markets formerly supplied by Pharmion for the period subsequent to the March 7, 2008 Pharmion acquisition date to the end of the quarter. The decrease in U.S. sales was primarily due to lower unit volumes resulting from increased use of REVLIMID® and was partly offset by increased prices. VIDAZA® net sales increased for the three-month period ended March 31, 2009 compared to the three-month period ended March 31, 2008 primarily due to the December 2008 full marketing authorization by the EC for the treatment of adult patients who are not eligible for haematopoietic stem cell transplantation with Intermediate-2 and high-risk MDS according to the IPSS, or CMML with 10-29 percent marrow blasts without myeloproliferative disorder, or AML with 20-30 percent blasts and multi-lineage dysplasia, according to WHO classification of VIDAZA®. The three-month period ended March 31, 2008 only including sales subsequent to the March 7, 2008 acquisition of Pharmion. ALKERANâ net sales increased for the three-month period ended March 31, 2009 compared to the three-month period ended March 31, 2008. 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. Total net product sales for the three-month period ended March 31, 2009 increased $144.9 million, or 33.6%, compared to the three-month period ended March 31, 2008. The change was comprised of net volume increases of $144.7 million and price increases of $13.5 million, partly offset by a decrease from the impact of foreign exchange of $13.3 million.
Collaborative Agreements and Other Revenue: Revenues from collaborative agreements and other sources declined by $2.5 million for the three-month period ended March 31, 2009 compared to the three-month period ended March 31, 2008 due to the elimination of license fees and amortization of deferred revenues related to Pharmion subsequent to the March 7, 2008 acquisition date.
Royalty Revenue: Royalty revenue totaled $26.6 million for the three-month period ended March 31, 2009 and was approximately equal to that for the three-month period ended March 31, 2008. Royalty income primarily reflects amounts received from Novartis Pharma AG, or Novartis, on sales of the entire family of RITALIN® drugs and FOCALIN XR®.
Gross to Net Sales Accruals: We record gross to net sales accruals for sales returns and allowances; sales discounts; government rebates; and chargebacks and distributor service fees.
• We base our sales returns allowance on estimated on-hand retail/hospital inventories, measured end-customer demand as reported by third-party sources, actual returns history and other factors, such as the trend experience for lots where product is still being returned or inventory centralization and rationalization initiatives conducted by major pharmacy chains, as applicable. If the historical data we use to calculate these estimates does not properly reflect future returns, then a change in the allowance would be made in the period in which such a determination is made and revenues in that period could be materially affected. Under this methodology, we track actual returns by individual production lots. Returns on closed lots, that is, lots no longer eligible for return credits, are analyzed to determine historical returns experience. Returns on open lots, that is, lots still eligible for return credits, are monitored and compared with historical return trend rates. Any changes from the historical trend rates are considered in determining the current sales return allowance. THALOMID® is drop-shipped directly to the prescribing pharmacy and, as a result, wholesalers do not stock the product. REVLIMID® is distributed primarily through hospitals and contracted pharmacies lending itself to tighter controls of inventory quantities within the supply channel and, thus, resulting in lower returns activity to date. VIDAZA® and ALKERAN® are sold in the United States to pharmaceutical wholesalers, who in turn distribute product to physicians, retail pharmacies, hospitals and other institutional customers.

• Sales discount accruals are based on payment terms extended to customers.

• Government rebate accruals are based on estimated payments due to governmental agencies for purchases made by third parties under various governmental programs. U.S. Medicaid rebate accruals are based on historical payment data and estimates of future Medicaid beneficiary utilization applied to the Medicaid unit rebate amount formula established by the Center for Medicaid and Medicare Services. Certain foreign markets have government-sponsored programs that require rebates to be paid and accordingly the rebate accruals are determined primarily on estimated eligible sales.

• Chargebacks and distributor service fees accruals are based on the differentials between product acquisition prices paid by wholesalers and lower government contract pricing paid by eligible customers covered under federally qualified programs. Distributor services accruals are based on contractual fees to be paid to the wholesale distributor for services provided. On January 28, 2008, the Fiscal Year 2008 National Defense Authorization Act was enacted, which expands TRICARE to include prescription drugs dispensed by TRICARE retail network pharmacies. TRICARE is a health care program of the U.S. Department of Defense Military Health System that provides civilian health benefits for military personnel, military retirees and their dependents. TRICARE rebate accruals reflect this program expansion and are based on estimated Department of Defense eligible sales multiplied by the TRICARE rebate formula.

See Critical Accounting Estimates and Significant Accounting Policies for further discussion of gross to net sales accruals.
Gross to net sales accruals and the balance in the related allowance accounts for the three-month periods ended March 31, 2009 and 2008 were as follows:

                               Returns                                             Chargebacks
(Amounts in thousands)           and                             Government         and Dist.
2009                          Allowances        Discounts         Rebates         Service Fees         Total

Balance at December 31,
2008                         $     17,799      $     3,659      $     10,810      $      23,386      $  55,654
Allowances for sales
during 2009                         1,269            8,278             8,815             22,319         40,681
Credits/deductions issued
for prior year sales               (5,828 )         (2,177 )          (9,349 )           (7,646 )      (25,000 )
Credits/deductions issued
for sales during 2009                  (2 )         (4,281 )          (1,345 )           (8,087 )      (13,715 )

Balance at March 31, 2009    $     13,238      $     5,479      $      8,931      $      29,972      $  57,620




                               Returns                                             Chargebacks
(Amounts in thousands)           and                             Government         and Dist.
2008                          Allowances        Discounts         Rebates         Service Fees         Total

Balance at December 31,
2007                         $     16,734      $     2,895      $      9,202      $       8,839      $  37,670
Pharmion balance at
March 7, 2008                         926              283             1,266              2,037          4,512
Allowances for sales
during 2008                        10,511            8,911            13,775             17,239         50,436
Credits/deductions issued
for prior year sales               (7,415 )         (2,785 )          (6,889 )           (4,016 )      (21,105 )
Credits/deductions issued
for sales during 2008                (495 )         (5,596 )            (151 )          (15,772 )      (22,014 )

Balance at March 31, 2008    $     20,261      $     3,708      $     17,203      $       8,327      $  49,499

A comparison of allowances for sales within each of the four categories noted above for the three-month periods ended March 31, 2009 and 2008, respectively, follows:
Returns and allowances decreased by $9.2 million for the three-month period ended March 31, 2009 compared to the three-month period ended March 31, 2008 primarily due to reserve decreases resulting from the completion of an inventory centralization and rationalization initiative conducted by a major pharmacy chain during the current quarter, partially offset by a reserve increase for ALKERAN® in the current quarter for returns anticipated in the second quarter of 2009 following the conclusion of the license with GSK. In addition, the 2008 period includes an increase in THALOMID® returns resulting from the anticipated increase in use of REVLIMID® in multiple myeloma.
Discounts decreased by $0.6 million for the three-month period ended March 31, 2009 compared to the three-month period ended March 31, 2008 primarily due to a decrease in discounts occurring outside the United States.
Government rebates decreased by $5.0 million in the three-month period ended March 31, 2009 compared to the three-month period ended March 31, 2008 primarily due to reduced international government rebates. Certain international government rebate programs were modified from 2008 to 2009 resulting in lower rebates in the 2009 period.
Chargebacks and distributor service fees increased by $5.1 million in the three-month period ended March 31, 2009 compared to the three-month period ended March 31, 2008 primarily due to the new TRICARE rebate program.
Operating Costs and Expenses: Operating costs, expenses and related percentages for the three-month periods ended March 31, 2009 and 2008 were as follows:

                                         Three-Month Periods Ended
                                                 March 31,                                    Percent
(Amounts in thousands)                     2009              2008            Increase          Change

Cost of goods sold (excluding
amortization of acquired intangible
assets)                                $     64,299       $    44,724      $     19,575            43.8 %
Percent of net product sales                   11.2 %            10.4 %

Research and development               $    181,248       $   156,877      $     24,371            15.5 %
Percent of total revenue                       30.0 %            33.9 %

Selling, general and administrative    $    173,440       $   140,451      $     32,989            23.5 %
Percent of total revenue                       28.7 %            30.4 %

Amortization of acquired intangible
assets                                 $     23,625       $     9,842      $     13,783           140.0 %

Acquired in-process research and
development                            $          -       $ 1,740,000      $ (1,740,000 )           N/A

Cost of Goods Sold (excluding amortization of acquired intangible assets): Cost of goods sold increased by $19.6 million for the three-month period ended March 31, 2009 compared to the three-month period ended March 31, 2008 primarily due to increased unit volume for REVLIMIDâ and VIDAZAâ and a charge of $3.3 million related to the write-down of ALKERANâ inventories to net realizable value as we concluded the ALKERAN® license with GSK on March 31, 2009. As a percent of net product sales, cost of goods sold (excluding amortization of acquired intangible assets) increased to 11.2% in the 2009 three-month period from 10.4% in the 2008 three-month period primarily due to the inclusion of a full three-month's sales of VIDAZAâ, which carries a higher cost compared to the other major products and the charge related to the write-down of ALKERANâinventories to net realizable value.

Research and Development: Research and development expenses increased by $24.4 million for the three-month period ended March 31, 2009 compared to the three-month period ended March 31, 2008, primarily due to increases in spending related to clinical research and development in support of multiple programs, including REVLIMIDâ, other IMiDsâ and other compounds across a broad range of diseases and increased spending for medical grants.
The following table provides an additional breakdown of research and development expenses:

                                            Three-Month Periods Ended
                                                    March 31,                  Increase
 (Amounts in thousands)                       2009               2008         (Decrease)

 Human pharmaceutical clinical programs   $      94,715       $   49,423     $     45,292
 Other pharmaceutical programs                   64,584           87,862          (23,278 )
 Drug discovery and development                  18,605           15,727            2,878
 Placental stem cell and biomaterials             3,344            3,865             (521 )

 Total                                    $     181,248       $  156,877     $     24,371

Other pharmaceutical programs for the three-month period ended March 31, 2008, includes $45.0 million for the Acceleron Pharma Inc., or Acceleron, collaborative research and development arrangement, in addition to spending for toxicology, analytical research and development, quality and regulatory affairs. Research and development expenditures support ongoing clinical progress in multiple proprietary development programs for REVLIMIDâ and other IMiDsâcompounds; VIDAZAâ; amrubicin, our lead compound for small cell lung cancer; apremilast (CC-10004), our lead anti-inflammatory compound that inhibits PDE-4, which results in the inhibition of multiple proinflammatory mediators such as TNF-? and which is currently being evaluated in Phase II clinical trials in the treatment of psoriasis and psoriatic arthritis; CC-4047 and CC-11050, which are currently either being evaluated in Phase I clinical trials or for which Phase II clinical trials are planned or ongoing; our kinase and ligase inhibitor programs; as well as the placental stem cell program. Selling, General and Administrative: Selling, general and administrative expenses increased by $33.0 million for the three-month period ended March 31, 2009 compared to the three-month period ended March 31, 2008, primarily reflecting increases in marketing of $21.6 million, sales operations of $11.0 million and donations to non-profit foundations of $3.9 million, which were partly offset by a reduction in the provision for doubtful accounts. Marketing and sales related expenses in the three-month period ended March 31, 2009 include ongoing product launch activities for REVLIMIDâ, VIDAZAâ and THALOMID® in Europe, Canada and Australia, in addition to VIDAZAâ relaunch expenses in the United States upon receipt of an expanded FDA approval to reflect new overall survival data. The increase in expense also reflects the continued expansion of our international commercial activities. Amortization of Acquired Intangible Assets: The $13.8 million increase in amortization of acquired intangible assets for the three-month period ended March 31, 2009 compared to the three-month period ended March 31, 2008 was due to the inclusion of a full three months amortization related to Pharmion intangible assets, partly offset by the elimination of amortization related to Penn T Limited intangible assets.
Acquired In-Process Research and Development: Acquired IPR&D for the three-month period ending March 31, 2008 represents compounds under development by Pharmion at the date of acquisition that had not yet achieved regulatory approval for marketing in certain markets or had not yet been completed and have no future use. The $1.74 billion estimated fair value of these intangible assets was derived using the multi-period excess-earnings method, a form of the income approach. The IPR&D primarily related to development and approval initiatives for Vidazaâ IV in the E.U. market, the oral form of azacitidine in the U.S. and E.U. markets and THALOMID® in the E.U. market. The projected cash flows for valuation purposes were based on key assumptions such as estimates of revenues and operating profits related to the programs considering their stages of development; the time and resources needed to complete the regulatory approval process for the products; and the life of the potential commercialized products and associated risks, including the inherent difficulties and uncertainties in obtaining regulatory approvals.

Interest and Investment Income, Net: Interest and investment income was $17.5 million for the three-month period ended March 31, 2009, representing a decrease of $12.2 million from the $29.6 million recorded for the three-month period ended March 31, 2008. The decrease was due to reduced yields on invested balances as well as slightly lower average cash, cash equivalents and marketable securities available for sale balances. The decrease in cash, cash equivalents and marketable securities available for sale in the 2009 quarter versus the 2008 quarter was primarily due to the net payment of $746.8 million relating to the March 7, 2008 Pharmion acquisition and the October 3, 2008 prepayment of our royalty obligation under the June 7, 2001 5-azacytidine license in full for $425.0 million, which was partly offset by increased cash generated from operations.
Equity in Losses of Affiliated Companies: Under the equity method of accounting, we recorded losses of $0.8 million and $5.1 million for the three-month periods ended March 31, 2009 and 2008, respectively. The loss in the three-month period ended March 31, 2008 included an impairment charge of $4.4 million, which related to an affiliate company investee based on a decrease in fair value below our cost, along with our evaluation of several other factors affecting the investee.
Interest Expense: Interest expense was $0.5 million and $2.2 million for the three-month periods ended March 31, 2009 and 2008, respectively. The $1.7 million decrease in expense reflects the conversion of convertible debt into our common stock which was completed in June 2008.
Other Income, Net: Other income, net was $32.6 million and $0.9 million for the three-month periods ended March 31, 2009 and 2008, respectively. The $31.7 million increase in other income was primarily due to hedging and realized and unrealized foreign exchange gains.
Income Tax Provision: The income tax provision for the three-month period ended March 31, 2009 was $48.4 million and reflects an effective tax rate of 22.9%. The effective tax rate reflects the growth of our low tax manufacturing operations and our overall global mix of income. Tax expense also includes a net tax benefit of $5.3 million related to the settlement of tax examinations in the first quarter. The income tax provision for the three-month period ended March 31, 2008 was $35.0 million with an effective tax rate of negative 2.2%. The effective tax rate was impacted by non-deductible IPR&D charges incurred in connection with the acquisition of Pharmion. The effective tax rate, excluding the impact of the IPR&D charges, was 26.2% which reflects the growth of our low tax manufacturing operations and our overall global mix of income.

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