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Celgene Looking Good With Plans for More Growth

By Brian Orelli, PhD - Jan 30, 2018 at 2:35PM

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The biotech's partnerships and acquisitions are about to start paying off.

Celgene's (CELG) fourth-quarter report tends to be unsurprising because the company usually offers -- as it did this year -- preliminary revenue and earnings as well as guidance for the year ahead at the JP Morgan Healthcare conference earlier in the month. Adding to the humdrum nature of the call, management had a call earlier in the week after announcing that it was buying chimeric antigen receptor T-cell (CAR-T) specialist Juno Therapeutics (JUNO).

Nevertheless, the quarterly report offers an opportunity for investors to check in on the individual drugs that boosted revenue and get more details on the plan for growth.

Celgene results: The raw numbers

Metric

Q4 2017

Q4 2016

Year-Over-Year Change

Revenue

$3.48 billion

$2.98 billion

17%

Income from operations

$1.2 billion

$929 million

29%

Earnings per share (EPS)

($0.10)

$0.53

N/A

Adjusted EPS

$2

$1.61

24%

Data source: Celgene.

What happened with Celgene this quarter?

  • Sales of top-selling Revlimid increased 21% year over year with U.S. sales jumping 24% as the drug gets used longer in front-line use and as part of combination treatments. Outside the U.S., sales were up only 15%, but the expanded approvals in other countries are behind the U.S., so there's likely more growth in international markets to come.
  • Pomalyst sales increased 17% year over year as the drug is used in a triple combination with Johnson & Johnson's Darzalex and a generic called dexamethasone for relapsed refractory myeloma.
  • Anti-inflammatory Otezla cruises along with sales up 22% year over year, boosted by sales in international markets, which jumped 84% year over year.
  • Sales of Abraxane remain the one downer with sales down 6% year over year in the fourth quarter. With increased competition from immuno-oncology drugs, there's not much Celgene can do but wait for results from in-progress trials testing the drugs in combination, hoping that the competition can become an ally.
  • With all the deal-making Celgene does, adjusted earnings are definitely the way to compare changes in profits. Celgene continues to be more efficient -- operating margin increased 300 basis points for the year -- allowing adjusted earnings to grow faster than revenue.
A medical professional in a white coat holding a clipboard and talking to another person.

Image source: Getty Images.

What management had to say

Scott Smith, Celgene's president and chief operating officer, highlighted the potential of Celgene's partnerships and acquisitions that brought in cancer drugs JCAR017 from Juno, BGB-A317 from BeiGene, and bb2121 from bluebird bio (BLUE -5.04%), as well as myelofibrosis treatment fedratinib from Impact Biomedicines, anti-inflammatory ozanimod from Receptos, and blood disease treatment luspatercept from Acceleron Pharma:

"JCAR017 together with BGB-A317 and fedratinib represent three late stage products added to the pipeline in the last nine months. Our pending acquisition of Juno Therapeutics and strong ongoing collaboration with bluebird on bb2121 will help Celgene become the preeminent cellular immunotherapy company. These products together with ozanimod, luspatercept, and others could yield over $16 billion in incremental peak revenue through 2030."

With the acquisition of Juno, investors in Bluebird might be a little concerned about the prospects for bb2121, which is also a CAR-T therapy, but from the way CEO Mark Alles reveres the drug, it doesn't sound like there's anything to worry about:

"We're extremely, extremely proud of it, excited about it. We think, as the Nadim [Ahmed] said in his prepared remarks, that 2121 is a disruptive technology and therapy for patients, particularly with relapsed myeloma. And so we will protect it, we will build around it as we need to and are required to, but we see that as a stand-alone dynamic very critical program for our future."

Looking forward

Management guided for 2018 revenue to increase 12% year over year at the midpoint and adjusted earnings per share to jump 18% at the midpoint, continuing the trend of increasing profits faster than revenue.

Further down the line, ozanimod is under FDA review for relapsing multiple sclerosis, which should get approved in the U.S. by the end of the year, and probably in 2019 in Europe. Recently acquired fedratinib has also produced positive phase 3 data and is ready to be submitted to the FDA in the middle of the year, setting up an approval late this year or early next year.

Celgene also has quite a few phase 3 readouts this year, including Revlimid in lymphoma, Pomalyst in second line plus myeloma, Abraxane in adjuvant pancreatic cancer, luspatercept in myelodysplastic syndromes, and beta-thalassemia as well as CC-486 in acute myeloid leukemia. If those are positive, they should help boost revenue, helping Celgene reach its 2020 goal of revenue between $19 billion and $20 billion.

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Stocks Mentioned

Celgene Corporation Stock Quote
Celgene Corporation
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bluebird bio, Inc. Stock Quote
bluebird bio, Inc.
BLUE
$3.39 (-5.04%) $0.18
Juno Therapeutics, Inc. Stock Quote
Juno Therapeutics, Inc.
JUNO

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