Celgene Earnings Grow Year Over Year in Q1 - Analyst Blog

Celgene Corporation CELG reported first quarter 2014 adjusted earnings of $1.46 per share, beating the year-ago earnings by approximately 17%. Higher revenues drove earnings in the reported quarter. The Zacks Consensus Estimate was $1.43 per share.

Quarter in Details

Total revenues climbed 18% to $1.73 billion in the first quarter of 2014. Revenues were boosted by the impressive performance of cancer drugs, Revlimid and Abraxane. Net product sales climbed 19% to $1.71 billion. Revenues were short of the Zacks Consensus Estimate of $1.77 billion.

Net sales of Revlimid, the key growth driver at Celgene, came in at $1.14 billion, reflecting an increase of 14% over the year-ago period. The drug did well both in the U.S. (up 13%) and international markets (up 16%).

Market share gains, geographic expansion and increased duration of therapy drove sales in the first quarter of 2014. The drug is approved in many countries across the globe in combination with dexamethasone for treating multiple myeloma MM patients, who have received at least one prior therapy.  Revlimid is also approved in the U.S. in the relapsed refractory mantle cell lymphoma indication.

Revlimid is also available in many countries for treating transfusion-dependent anemia due to low or intermediate-1-risk myelodysplastic syndrome (MDS) associated with a deletion 5q cytogenetic abnormality (with or without additional cytogenetic irregularities). Celgene is looking to expand the drug's label. To attain the objective, it has filed regulatory applications in the U.S. and EU in the newly diagnosed MM indication. Regulatory actions are expected next year.

Net sales of another cancer drug, Abraxane, jumped 50.6% to $184.8 million. The drug did well both in the U.S. (up 51% to $141.5 million) and international markets (up 49.3% to $43.3 million). Sales in the U.S. were boosted by the label expansion of the drug into the non-small cell lung cancer indication in the final quarter of 2012 and the pancreatic cancer indication in Sep 2013. The drug is off to a strong start in the EU for the pancreatic cancer indication (approval gained in Jan 2014).

Net sales of Vidaza declined 27% to $148 million. Soft U.S. sales (down 83%) due to generic competition hurt results during the quarter. U.S. sales of Pomalyst, approved by the U.S. Food and Drug Administration (FDA) in Feb 2013 in combination with low-dose dexamethasone for the treatment of relapsed and refractory multiple myeloma patients, who have received at least two prior therapies, came in at $89 million in the first quarter of 2014, flat sequentially.

The approval of the drug (trade name: Imnovid) in the EU was gained in Aug 2013. Sales of the drug in international markets were $47 million in the first quarter of 2014 as opposed to $32 million in the preceding quarter.

All other product sales (inclusive of Thalomid, Istodax and an authorized generic version of Vidaza in the U.S.) came in at $95 million in the first quarter of 2014, up 33.8%.

Research and development (R&D) expenses (excluding stock-based compensation and other special items) climbed 8.5% to $358 million. The increase was due to Celgene's efforts to develop its pipeline. Selling, general and administrative expenses (excluding stock-based compensation and other special items) in the quarter increased 25.5% to $418 million.

Costs associated with the launches of Abraxane in the pancreatic cancer indication, Pomalyst/Imnovid led to the rise in SG&A expenses. Costs associated with the anticipated launch of apremilast (proposed brand name: Otezla) also pushed up SG&A costs.

Outlook for 2014 Maintained

Celgene re-affirmed the guidance provided by it on Jan 13, 2014. Total revenues in 2014 are projected to increase 15% year over year to $7.5 billion driven by strong product sales.  Net product sales are still expected to grow 16% in 2014 to $7.3–$7.4 billion.

Revlimid is expected to be the major contributor with 2014 sales in the range of $4.9–$5.0 billion, up 16%. Abraxane net sales are projected in the range of $850 million–$900 million, up 35%. Celgene expects 2014 earnings (excluding stock-based compensation and other special items) in the range of $7.0–$7.20 per share. The Zacks Consensus Estimate for 2014 hints at earnings of $6.34 per share on revenues of $7.6 billion.

Celgene Inks Deal

Celgene also announced that it has inked a deal with the privately-held Irish company Nogra Pharma Ltd. for the development and subsequent commercialization of GED-0301, for the treatment of moderate-to-severe Crohn's disease and other indications. The candidate has completed phase II studies for treating Crohn's disease.

Celgene intends to initiate a phase III registration program on the candidate by Dec 31, 2014. According to the deal, Celgene will pay the private entity an upfront payment of $710 million in addition to milestone payments. Furthermore, Celgene will pay Nogra royalties (tiered) on sales of the drug following approval. The deal is aimed at strengthening Celgene's already strong pipeline.

We note Celgene has been constantly inking deals to bolster its pipeline. Late last year, Celgene inked a deal with OncoMed Pharmaceuticals, Inc. OMED for the joint development and commercialization of up to six anti-cancer stem cell candidates from OncoMed's biologics pipeline.

Celgene carries a Zacks Rank #3 (Hold). Better-ranked stocks in the biopharma space include Regeneron Pharmaceuticals REGN and Alexion Pharmaceuticals ALXN. While Regeneron carries a Zacks Rank #1 (Strong Buy), Alexion holds a Zacks Rank #2 (Buy).