Celgene (CELG) Q4 Earnings & Sales Beat On Solid Revlimid

Celgene Corporation (NASDAQ:CELG) reported encouraging fourth-quarter 2017 results wherein both earnings and sales topped expectations.

The company reported adjusted earnings of $2.00 per share which beat the Zacks Consensus Estimate of $1.95, up from $1.61 in the year-ago quarter.

Total revenues grew 16.7% to $3.48 billion in the quarter and beat the Zacks Consensus Estimate of $3.47 billion. Revenues were boosted by consistent performance of the company’s key growth driver, Revlimid.

Revlimid – A Key Catalyst

Net product sales increased 17% year over year to $3.48 billion. Net sales of Revlimid came in at $2.2 billion, reflecting 21% year-over-year growth. The drug performed well in the United States (up 24%). Growth in the quarter was driven by increased volume as a result of increases in duration of treatment and market share.

Net sales of another cancer drug, Abraxane decreased 6% to $251 million as sales declined the United States. Sales of oncology drug, Pomalyst/Imnovid, came in at $442 million, up 17%. Sales were driven by increased volume due to increases in market share and duration.
Otezla reported sales of $371 million in the quarter, up 22%.

All other product sales (including Istodax, Thalomid, Vidaza and an authorized generic version of Vidaza in the United States) totaled $227 million in the quarter, up from $220 million from the year-ago quarter.

Adjusted research and development expenses increased 13.8% to $766 million due to increased spending related to drug discovery and clinical trial activity while adjusted selling, general and administrative expenses decreased 28.9% to $687 million.

Earlier in the week, Celgene announced that it will acquire Juno Therapeutics, Inc. (NASDAQ:JUNO) for $87 per share in cash, or a total of approximately $9 billion, net of cash and marketable securities acquired. The former already owns approximately 9.7% of outstanding shares of Juno. Celgene also announced that it will acquire Impact Biomedicines for an upfront amount of $1.1 billion. The acquisition will add a late stage candidate, fedratinib, a highly selective JAK2 kinase inhibitor, to Celgene’s pipeline.

In December 2017, Celgene and partner bluebird bio (NASDAQ:BLUE) presented updated data from the phase I trial evaluating bb2121 in patients with relapsed and/or refractory multiple myeloma (RRMM). The candidate was granted Breakthrough Therapy Designation by the FDA and PRIority MEdicines eligibility by the European Medicines Agency. The companies also initiated the KarMMa trial evaluating bb2121 in RRMM was initiated.

2017 Results

Sales came in $13.0 billion, up from $11.3 billion in 2016 and beat the Zacks Consensus Estimate of $12.98 billion. Earnings per share came in at $7.44 in 2017, up from $5.94 in 2016 and beat the Zacks Consensus Estimate of $7.37.

2018 Outlook

Celgene anticipates earnings in the range of $8.70-$8.90. The Zacks Consensus Estimate for earnings is $8.78 per share. Net revenues are projected to be in the range of $14.4-$14.8 billion, while the Zacks Consensus Estimate for the same is pegged at $14.90 billion.

Revlimid sales are projected around $9.4 billion. Abraxane sales are estimated to be around $1 billion. Pomalyst’s revenues are projected around $1.9 billion. Otezla sales are now projected at $1.5 billion.

Our Take

Celgene’s fourth-quarter results were encouraging as the company beat on both sales and earnings. While Revlimid sales were impressive yet again, Abraxane sales declined in the United States. Sales of Otezla have picked up too after a slowdown in the third quarter.

Celgene’s stock has declined 21.4% in the last six months as against the industry’s loss of 0.5%. Shares of the company are up in the pre-market trading due to earnings beat. Celgene suffered a series of setbacks over the last few months. The company suffered a setback when a late stage study on its lead cancer drug Revlimid in combination with Rituxan failed. The threat of generic competition is also looming large on Revlimid which loses patent protection in 2022 forcing Celgene to look for acquisitions. The stock was hit earlier after a phase III trial, REVOLVE, (CD-002) on pipeline candidate GED-0301 in Crohn’s disease and the extension trial, SUSTAIN (CD-004) was discontinued.

Celgene was on the look-out of new deals and acquisitions given a lacklustre 2017 and the announcement of Juno’s acquisition was on the same track.

We note that the slowdown in mature products compelled prominent biotechs to acquire smaller ones with promising pipelines. Gilead Sciences, Inc. (NASDAQ:GILD) acquired Kite Pharma and subsequently obtained FDA approval of Yescarta (axicabtagene ciloleucel), the latter’s chimeric CAR-T therapy candidate.

The CAR-T therapy space was in the spotlight in 2017 as the FDA approved the first CAR-T therapy, Kymriah for the treatment of patients upto 25 years of age with B-cell precursor acute lymphoblastic leukemia that is refractory or in second or later relapse stage. Given the immense potential of the therapy, Celgene too wants to go the Gilead way.

Zacks Rank

Celgene is a Zacks Rank #4 (Sell) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here..

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