Celgene's (CELG +0.00%) earnings release on Thursday didn't come with many surprises since the company announced preliminary fourth-quarter results earlier this month as it usually does at the annual J.P. Morgan Healthcare Conference. Unlike some companies that only release preliminary revenue numbers, Celgene's bean counters work tirelessly through the first week of the year to release preliminary earnings alongside the revenue number.
Nevertheless, the official earnings release is worth paying attention to for a breakdown of the geographical area of where the sales came from as well as management's comments.
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Celgene results: The raw numbers
|
Metric |
Q4 2016 |
Q4 2015 |
Year-Over-Year Change |
|---|---|---|---|
|
Revenue |
$2.98 billion |
$2.56 billion |
16.3% |
|
Income from operations |
$930 million |
$900 million |
3.3% |
|
Adjusted earnings per share |
$1.61 |
$1.18 |
36% |
Data source: Celgene.
What happened with Celgene this quarter?
- Top-selling Revlimid continues to drive sales, with a 16% year-over-year increase in the fourth quarter. Sales in the U.S. contributed most of the growth, with sales in the rest of the world down quarter over quarter. While the latter was expected due to a large order in Russia in the third quarter, rest-of-world sales were flat from the second quarter to the fourth quarter.
- Pomalyst, which goes by Imnovid in Europe, is growing in both places, with sales up 29% year over year and 11% quarter over quarter. The drug is often used as a third or fourth choice, but Celgene is continuing to move it forward in the treatment regimen. It's currently leading in third line and later in the U.S. and fourth line and later in Europe.
- Anti-inflammatory Otezla officially became a blockbuster by just barely breaking the $1 billion mark for sales in 2016. For the fourth quarter, sales were up 67% year over year and 11% quarter over quarter, so it doesn't seem like they're slowing down anytime soon, especially with European sales, which currently only make up around a tenth of sales, set to ramp up in 2017.
- Sales of Celgene's solid tumor drug Abraxane were flat year over year, but the lack of growth isn't a major issue, as Pomalyst and Otezla have overtaken Abraxane in sales.
What management had to say
A lot of has been made of Celgene's potential problem when Revlimid starts to see generic completion in 2022, but Jackie Fouse, Celgene's president and chief operating officer, thinks the biotech's pipeline is deep enough to overcome the future headwinds. She stated, "No matter how you go through it and do risk adjustments and things like this, I think we have a very, very strong chance of growing annually, each and every year throughout the decade beyond 2020."
Speaking to the pipeline of future growth, CEO Marke Alles gave some staggering statistics: "Our clinical research teams and collaborators submitted approximately 400 scientific abstracts to global academic meetings, and they are currently conducting more than 180 clinical trials."
Looking forward
Management's guidance for this year calls for revenue to increase 18% at the midpoint and adjusted earnings per share to increase 21% at the midpoint as Celgene increases its operating margin by 150 basis points.
For sales growth beyond this year, the biotech needs clinical trial successes this year. It'll have plenty of shots to impress, including data from phase 3 trials testing ozanimod in multiple sclerosis, Revlimid in follicular lymphoma, and Abraxane in adjuvant pancreatic cancer and in elderly patients with lung cancer. And Celgene will release data from quite a few phase 2 clinical trials that should drive sales in the 2020 decade if positive data can be confirmed in phase 3.
