Celgene (NASDAQ:CELG) posted solid second-quarter results thanks to ever-expanding sales of blood cancer drug Revlimid, but investors should be equally focused on the biotech's potential as it prepares to expand its offerings, with multiple drugs up for approval in the coming year.

Celgene results: The raw numbers

Metric

Q2 2018

Q2 2017

Year-Over-Year Change

Revenue

$3.81 billion

$3.27 billion

17%

Income from operations

$1.49 billion

$1.31 billion

13%

Earnings per share

$1.43

$1.36

5.1%

Adjusted earnings per share

$2.16

$1.87

16%

Data source: Celgene.

What happened with Celgene this quarter?

  • Sales of top-selling Revlimid boosted revenue growth with a 21% year-over-year increase thanks to continued expansion of the drug into different blood cancer settings.
  • Celgene's other major blood cancer drug, Pomalyst, saw sales grow 30% year over year, driven by 41% growth in the U.S., where it's being used in a triple combination with Johnson & Johnson's Darzalex and a generic called dexamethasone for relapse refractory myeloma.
  • Abraxane sales were down 4%, but volume was stable and the decline was mostly due to the use of distributors' inventory that had increased in the first quarter.
  • Sales of Otezla, Celgene's only major non-cancer drug, were up 5% year over year, driven by a 62% increase in sales outside the U.S. The volume in the U.S. is still growing in the mid-teens year over year, but Celgene has had to discount the drug to drive those sales, which has hampered Otezla revenue in the U.S.
  • Celgene has released plenty of positive late-stage data recently, including three successful phase 3 trials in the last four weeks: two trials testing luspatercept, which it's developing with Acceleron Pharma, and a trial testing Revlimid in combination with Roche and Biogen's Rituxan.
  • Expenses increased as the company incorporated Juno Therapeutics' research and development costs, but Celgene was still able to post adjusted earnings growth close to its revenue growth thanks to buybacks lowering the share count.
Doctor with a clipboard talking to a patient in front of a window

Image source: Getty Images.

What management had to say

With the cost of medication in the political forefront, Chairman and CEO Mark Alles explained the company's plan to keep investors and politicians happy (or equally unhappy), "Going forward, as Celgene increases the price of any individual therapy across our portfolio, that price increase will be limited to no more than once a year and at a level no greater than the CMS projected increase in national health expenditures for the year."

CFO Peter Kellogg highlighted Celgene's accelerated share repurchase (ASR) plan: "In Q2, we took advantage of our lower stock price to accelerate our planned share-repurchase program. In summary, the way to think about it is that the shares that would have been bought over the next few quarters were pulled forward into Q2, including the May ASR."

Looking forward

Thanks to the strong Revlimid sales to date, management increased its revenue guidance to approximately $15 billion from previous guidance of $14.8 billion. The lower share count will help boost adjusted earnings, which are now expected to be in the range of $8.70 to $8.75 per share, up from previous guidance of approximately $8.45 per share.

Looking forward, Celgene has to start filing the marketing applications for all the recent phase 3 data. Fedratinib in myelofibrosis should be filed by the end of this year, and ozanimod for relapsing multiple sclerosis is scheduled to be filed in the first quarter of 2019. The FDA paperwork for Juno's lead drug, liso-cel, is also being worked on, setting up a potential approval next year.

Brian Orelli has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends BIIB and Celgene. The Motley Fool owns shares of JNJ and has the following options: short October 2018 $135 calls on JNJ. The Motley Fool has a disclosure policy.