After two years of lackluster performances, Celgene Corporation (CELG) appeared to be on a roll in 2017. Then the bottom fell out.
In October, the big biotech stock gave up all of its year-to-date gains, and then some. A massive sell-off resulted from the late-stage clinical failure for GED-0301, and third-quarter headwinds for Otezla. What was once a promising year turned into another disappointment for Celgene shareholders.
Will Celgene have better luck next year? Here's what to expect from the biotech in 2018.
Growing revenue and earnings
Despite Celgene stock's collapse in October, the company still posted a 15% year-over-year revenue increase in the first nine months of 2017, with net income nearly doubling compared to the prior-year period. There's no reason to think that the biotech won't continue to enjoy strong revenue and earnings growth in the year ahead.
Celgene's top drug, Revlimid, continues to fire on all cylinders. The blood cancer drug won two additional regulatory approvals this year, one in the U.S. and the other in Europe as a maintenance treatment for multiple myeloma patients following autologous hematopoietic stem cell transplant (auto-HSCT). Revlimid is on track to become the second-best-selling drug in the world in 2017, with revenue of more than $8 billion. I expect the drug to hold the No. 2 spot in 2018.
Sales for the company's other blockbuster blood cancer drug, Pomalyst, are growing even faster than Revlimid. Celgene reported year-over-year sales growth of nearly 26% for Pomalyst in the first nine months of this year. The drug should continue to be a key component of triplet therapies for treating multiple myeloma, driving even further growth next year.
But what about Otezla? Things won't be terrible next year. Celgene will still face the same headwinds that threw it for a loop in 2017, namely, intensified competition and reimbursement hurdles from managed care organizations. However, Otezla is holding on to its overall U.S. market share in spite of these challenges. Celgene also should see sales growth for the drug in international markets, where full reimbursement is in place.
As for Abraxane, the cancer drug should at least tread water next year. Abraxane continues to lead the U.S. market for first-line pancreatic cancer treatments and is growing in the European market for the indication. Newer therapies for breast cancer and lung cancer, however, will make it difficult for Abraxane to gain additional traction in those indications.
Lots of news from the pipeline
Next year should bring plenty of news from Celgene's pipeline. The biggest story will be ozanimod. Celgene hopes to win Food and Drug Administration (FDA) approval for the drug in the second half of 2018 for treating relapsed multiple sclerosis. Ozanimod holds the potential to become the next major blockbuster for the company.
A new approved indication for Revlimid could also be on the way in 2018. Celgene plans to file for FDA approval of a Revlimid/Velcade/dexamethasone combo as a first-line treatment for multiple myeloma in the first quarter of next year. Data from two late-stage studies of Revlimid in treating relapsed and/or refractory indolent lymphoma and first-line diffuse large B-cell lymphoma are also expected in 2018.
Celgene and partner Acceleron Pharma (XLRN) expect to announce top-line results in mid-2018 from two late-stage studies of what could be the next addition to Celgene's successful blood cancer franchise. The two companies are evaluating luspatercept in treating myelodysplastic syndromes (MDS) and beta-thalassemia. Celgene thinks that luspatercept, which it licensed from Acceleron, could be a huge winner.
And there could be some good news even for Otezla. Celgene plans to file for regulatory approval of the drug in treating Behcet's disease, a rare disease that causes blood vessel inflammation, in early 2018 based on positive late-stage clinical results.
A deal or two?
Don't be surprised if Celgene announces a major acquisition or two next year. The company won praise in 2015 with its purchase of Receptos, which brought ozanimod into its pipeline. The only deal of note this year was Celgene's acquisition of privately held biotech Delinia for an upfront payment of $302 million and up to $475 million in contingent development, regulatory, and commercial milestones.
It's possible that Celgene could look to its extensive partner network for acquisition opportunities. In addition to Acceleron, the big biotech has partnerships with close to 50 companies, many of them small biotechs. Two that could be especially interesting are bluebird bio (BLUE -9.61%) and Juno Therapeutics (JUNO).
Bluebird's lead candidate, bb2121, is generating a lot of excitement after strong early-stage results. Celgene already has licensed the drug and is counting on it to be a blockbuster down the road. Juno's JCAR017 could be the next chimeric antigen receptor T-cell therapy (CAR-T) therapy to win approval. Celgene has already secured commercialization rights to Juno's lead drug.
Because Celgene already has tight relationships with Bluebird and Juno, though, the big biotech could choose to set its sights on other acquisition opportunities. With nearly $11.8 billion in cash, cash equivalents, and marketable securities as of Sept. 30, 2017, and a strong cash flow, Celgene should be in position to make a play for any number of up-and-coming smaller biotechs.
Better days ahead
Celgene's revenue and earnings growth continues to be impressive. Its pipeline is loaded with potential winners. The company has a good track record of making smart acquisitions and has the ability to do more.
There's also the fact that Celgene stands as one of the best biotech bargains on the market right now. Shares currently trade at a little over 12 times expected earnings. With the kind of earnings growth that Celgene should achieve, that price is dirt cheap.
What should you expect from Celgene in 2018? My view is that better days lie ahead.