Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

Good morning, fellow Foolish investors! Let's take a look at three health care stocks that are worth following this morning -- Epizyme (EPZM), Celgene (CELG), and Eli Lilly (LLY 1.78%).

Epizyme soars on two milestone payments
Epizyme soared 34% after hours yesterday after announcing two major milestone achievements and a larger-than-expected cash position for 2013.

The clinical-stage biopharmaceutical company announced the achievement of a proof of concept, or POC, milestone for the EPZ-5676 DOT1L inhibitor clinical program. EPZ-5676 is a small molecule treatment for acute leukemias caused by the translocation of the MLL gene, which is also known as MLL-r.

Due to the rarity of the condition, the drug received an orphan drug designation in August 2013. Epizyme is collaborating with Celgene on EPZ-5676, which is in phase 1 trials. Epizyme earned a $25 million milestone payment from Celgene after the POC showed objective responses in patients with translocations of the MLL gene.

Epizyme also announced that it had achieved a development stage milestone for one of the three histone methyltransferase targets, or HMTs, that have been implicated in several types of cancers. That achievement earned it another $4 million milestone payment from partner GlaxoSmithKline (GSK 1.35%).

Including those two milestone payments, Epizyme now forecasts that it will conclude fiscal 2013 with $145 million in cash and account receivables, compared to its prior forecast of $115 million. Epizyme intends to have up to five clinical proof of concept programs in 2014.

These developments represent a positive reversal for Epizyme, which was crushed in late November after early stage results indicated that EPZ-5676 only showed a 50% response rate in patients with MLL-r and no response for non-MLL-r patients. While those results didn't suggest the drug would succeed or fail, investors abandoned the speculative company, which made its market debut in May 2013.

Europe OKs Celgene's Abraxane for late-stage pancreatic cancer
Meanwhile, Celgene announced that the European Commission has approved its cancer drug Abraxane as a first-line treatment for late-stage pancreatic cancer, to be used in combination with Eli Lilly's chemotherapy drug Gemzar.

This is a major positive development for Celgene for several reasons.

First, Celgene is highly dependent on the blood cancer drug Revlimid, which accounted for 65% of its top line last quarter. Although sales of Revlimid rose 12% year over year, there are concerns that its growth will eventually peak. Therefore, Celgene has been looking toward other treatments to balance out its top line.

Abraxane is commonly cited as the answer to that problem. The FDA approved Abraxane as a first-line treatment for advanced non-small cell lung cancer in October 2012. In September 2013, the FDA approved it for late-stage pancreatic cancer. Abraxane was also approved for late-stage breast cancer in the U.S. in 2005 and the European Union in 2008.

Abraxane remains in clinical trials for additional indications, including skin, breast, bladder, and ovarian cancers. In other words, Abraxane could be to Celgene what Avastin is to Roche -- a multiple indication blockbuster cancer drug.

Sales of Abraxane have been strong, rising 60% to $170 million last quarter. Analysts believe the drug could eventually generate $2.1 billion in annual sales -- a goal that seems a bit closer now that it has been approved in Europe. Abraxane was originally added to Celgene's portfolio from its $2.9 billion acquisition of Abraxis BioScience in 2010.

Eli Lilly reports guidance for 2014
Last but not least, Eli Lilly today released its earnings and revenue guidance for this year, which were in line with analyst expectations.

Lilly now expects earnings of $2.77-$2.85 per share for the year, in line with the Thomson Reuters' consensus estimate of $2.78 per share. The company forecasts revenue of $19.2 billion-$19.8 billion for the year, also matching expectations but lower than its own prior guidance for $20 billion. Additionally, Lilly hopes to achieve net income of $3 billion and operating cash flow of $4 billion.

By comparison, Lilly earned $3.66 per share on revenue of $22.6 billion in 2011 and has earned $3.64 per share on revenue of $17.3 billion in the first three fiscal quarters of 2012. Lilly is expected to report its fourth-quarter and full-year earnings on Jan. 30.

Lilly's top- and bottom-line declines in 2014 are attributed to three main factors:

  • The patent expiration of the blockbuster antidepressant Cymbalta, which generated $1.4 billion in revenue last quarter and accounted or 24% of Eli Lilly's top line.

  • Generic competition to other drugs such as its schizophrenia medication Zyprexa.

  • Several major pipeline failures related to Alzheimer's disease.

Those big problems have kept Eli Lilly stock flat over the past 12 months. The company is trying to reduce costs, explore new diabetes and oncology treatments, and buy back stock. Unfortunately, none of those will provide Lilly with much positive lift in the short term.

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