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Celgene Starts the Year With a Bang

By Brian Orelli, PhD - May 14, 2018 at 2:03PM

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A solid first quarter and some acquisitions to boot.

Celgene ( CELG ) started the year off with a solid first quarter, leading management to raise its 2018 guidance already.

Celgene results: The raw numbers

Metric

Q1 2018

Q1 2017

Year-Over-Year Change

Revenue

$3.54 billion

$2.96 billion

19%

Income from operations

$218 million

$1,113 million

(80%)

Earnings per share (EPS)

$1.10

$1.15

(4%)

Adjusted EPS

$2.05

$1.67

23%

Data source: Celgene.

What happened with Celgene this quarter?

  • The GAAP income and earnings numbers were wonky with acquisitions affecting the operating income and the new accounting standards resulting in a large gain that made almost all of it back at the EPS line. Long story short, adjusted EPS are definitely the best way to compare earnings year over year.
  • About three-quarters of the revenue growth is coming from volume increases -- as opposed to price increases -- which is good news with all the political talk of pricing pressure on drugs.
  • Sales of Revlimid were up 19% year over year, with sales in the U.S. benefiting from increased use in non-stem cell transplant and post-stem cell transplant maintenance therapy. Outside the U.S., sales are coming from frontline therapy and non-stem cell transplant patients, as well as some use of the drug in triplet combinations.
  • Pomalyst, which goes by Imnovid in some countries, had great growth in the U.S. with sales up 39%, but elsewhere sales were only up 3% because of price concessions in other countries where the blood cancer drug has plenty of competition.
  • Otezla continues its solid launch, with sales up 46% year over year. International sales drove the overall growth, with overseas sales up 79% year over year, but the U.S. is still going strong with growth of 39% year over year.
  • Even Abraxane, which has been a laggard, had a solid quarter with sales up 11% year over year.
  • During the quarter, Celgene closed on its acquisition of CAR T expert, Juno Therapeutics. It also picked up a JAK2 inhibitor, fedratinib, which is ready to be submitted to the Food and Drug Administration later this year.
  • After receiving a refuse to file letter for ozanimod to treat relapsing multiple sclerosis and talking with the FDA, Celgene needs to do more work to characterize a metabolite -- a compounds the patient's body breaks the drug down into -- which will delay the resubmission of the marketing application to the first quarter of next year.
Doctor talking to patient at a table

Image source: Getty Images.

What management had to say

While the ozanimod delay is disappointing, Celgene Chairman and CEO Mark Alles pointed out the acquisition of Juno, which came with JCAR017 among many other drugs, and fedratinib will make up for the pain. "Just the expected launched of fedratinib and JCAR017 in 2019 will enable us to absorb the financial impact cause by the delay in the expected launch of Ozanimod," he said.

Those companies aren't the only ones that CFO Peter Kellogg sees as a good investment, "In Q1, we purchased $2.7 billion of shares, bringing our total share repurchases over the last two quarters to $5.7 billion, reflecting our belief that the recent share price pressure presents a compelling investment opportunity."

Looking forward

After a strong first quarter, management raised its revenue guidance to approximately $14.8 billion, which was the high end of the previously forecast range. Guidance for the adjusted earnings line went down to $8.45 per share, from a previous guidance of $8.70 to $8.90, but that was entirely due to the increased spending on Juno's pipeline. Without the dilution from Juno, adjusted EPS would be $8.95 per share, higher than the previous guidance.

Management also reaffirmed its 2020 outlook for revenue of $19 billion to $20 billion and adjusted diluted EPS of greater than $12.50.

More immediately, investors will get to see a lot of data at the American Society for Clinical Oncology meeting next month, including results of the phase 3 Optimismm trial testing Pomalyst in combination with bortezomib and dexamethasone in multiple myeloma and the phase 3 Relevance trial comparing Revlimid and rituximab to rituximab plus chemotherapy in patients with follicular lymphoma. Data from both its new JCAR017 and older BB2121 CAR T therapies will be presented as will data from a trial testing Abraxane plus atezolizumab.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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