Celgene Corp. (CELG) is one of biotech's largest companies, but that hasn't kept shares from falling in the past year because of disappointments and missteps. In the past year, the company's market cap has been cut in half because of headwinds, yet I've got no intention of selling my stake. Read on to learn why I plan to hold onto this biotech Goliath.
Why it's tumbled
Celgene has had a tough 12 months. The failure of a promising Crohn's disease drug in phase 3 trials and slowing sales growth for its psoriasis drug, Otezla, forced management to lower its long-term sales outlook for 2020 to at least $19 billion from $21 billion or more. Then, the FDA refused to accept ozanimod's application for approval in multiple sclerosis patients, waylaying the most promising drug in Celgene's pipeline.
IMAGE SOURCE: GETTY IMAGES.
It's not all bad news
These stumbles have overshadowed what's been a very successful year in terms of growing revenue and boosting profitability.
Despite its headwinds, Celgene reported third-quarter financials this week that beat industry watchers' estimates on both the top and bottom lines. Sales surged 18.2% year over year to $3.9 billion, and adjusted earnings per share (EPS) jumped 20% year over year to $2.29.
Those results make me think investors may be too pessimistic; especially since Celgene's best-selling drug, Revlimid, isn't losing any steam.
In the first nine months of 2018, growing use in multiple myeloma has increased Revlimid's sales by 19% in the past year, to $7.1 billion. The news is similar for its second-best-seller, Pomalyst, which has posted year-to-date sales of $1.5 billion due to growing use as a second-line and third-line multiple myeloma treatment.
Otezla is reemerging as a growth driver, too. Following its disappointing performance last fall, Otezla's sales total $1.2 billion this year through September, and that's up 28% from last year. Notably, Otezla's sales jumped 40% to $432 million in Q3.
Not to be left out, its cancer drug, Abraxane, also posted double-digit year-over-year growth last quarter. Its sales clocked in at $288 million, up from $251 million last year, which brought year-to-date sales to $793 million, up 7% year over year.
Revenue is also perking up for Idhifa, a blood cancer drug that's licensed from Agios and that won FDA approval in August 2017. In Q3, its sales were $50 million, up 614% from one year ago.
Catalysts are coming
Celgene's solid quarterly performance has it guiding for $15.2 billion in revenue this year, up from $15 billion previously, and adjusted EPS of at least $8.75.
It's an encouraging outlook, but what has me most interested in holding onto my shares is the potential for new drugs to drive sales significantly higher over the next three years.
Celgene has several interesting drugs advancing to the market, but its collaborations with bluebird bio (BLUE 7.03%) and Acceleron Pharma (XLRN), and its expected FDA filings for ozanimod and fedratinib have really caught my attention.
Alongside bluebird bio, Celgene is developing bb2121 and bb21217, two chimeric antigen receptor T-cell therapies for multiple myeloma. Data for bb2121 has been remarkable so far, with overall response rates above 90% in heavily pretreated patients. The potential for bb2121 and its follow-on therapy, bb21217, to produce similar efficacy in earlier stages of multiple myeloma could make them Revlimid successors when generic competitors beginning chipping away at Revlimid in 2022. Celgene is expected to file bb2121 for approval in time for it to win a regulatory green light in 2020.
The company's partnership with Acceleron Pharma is also exciting because the two companies have developed luspatercept, a treatment for beta thalassemia and myelodysplastic syndrome. Celgene expects to file that drug for approval in the first half of 2019, and if it wins approval, the company thinks its peak sales could reach $2 billion.
Celgene is also on pace to refile its application for approval of ozanimod early next year, and if it gets an OK, it could begin challenging Gilenya and Tecfidera for market share in the oral multiple sclerosis market in 2020. Gilenya and Tecfidera have combined sales of over $7 billion annually, so there's a good chance ozanimod will be a blockbuster if it wins a thumbs-up.
Additionally, Celgene is about to file for approval of fedratinib, a myelofibrosis drug it acquired when it bought Impact Biomedicines in January. If approved, fedratinib could challenge the blockbuster drug Jakafi for sales. Recently, another challenger in this indication faltered, making fedratinib's chances for success even better.
That's not all
In addition to those promising drugs, the company could file JCAR17 for approval in non-Hodgkin's lymphoma and other B-cell cancers in 2019, and it could win label expansions for its existing drugs, too.
For example, Roche Holdings (RHHBY 1.20%) recently reported positive data from a phase 3 study combining the use of its PD-1 checkpoint inhibitor, Tecentriq, with Celgene's Abraxane in previously untreated, triple-negative, metastatic breast cancer, and non-small cell lung cancer patients. Positive data has also been reported for Revlimid's use alongside commonly used drug Rituxan in tough-to-treat non-Hodgkin lymphoma cases.
Similarly, Celgene recently filed for FDA approval of Otezla in Behcet's disease, and it reported positive top-line data for Otezla's use in scalp psoriasis. Approvals in those and other indications being considered offer up to $500 million in additional peak sales opportunity for the company, according to management.
It's also encouraging that management is taking advantage of the sell-off in its shares to buy back shares at favorable prices to boost earnings. Last quarter alone, Celgene's repurchases added $0.29 to its adjusted EPS, without derailing its R&D spending.
Overall, there's no telling when Celgene's shares will stop falling, but I think the company's got plenty going on that could kick-start investors' interest in the coming year, and for that reason, I have no plans to sell my shares.
