Celgene (CELG +0.00%) is one of the most prolific deal makers in the biotech industry, inking dozens of collaborations with emerging biotechs working on the next big thing in medicine.
Celgene's collaborations aim to expand upon an already-impressive franchise that includes a blockbuster treatment for myeloma and another potential blockbuster for pancreatic cancer.
Since the company just reported record revenue and earnings, and shares have tumbled recently as investors abandon biotech stocks, let's take a closer look at Celgene's first quarter to see if there may be an opportunity to buy.
Proven blockbuster grows again
Celgene's best-selling drug is Revlimid, a treatment for multiple myeloma that won approval in 2006 for use in patients who have already tried -- and failed -- on one prior therapy.
Despite its second-line treatment status, Revlimid sales have soared, totaling more than $4 billion last year and more than $1.1 billion in the first quarter, up 14% from a year ago.
Revlimid's revenue jump came from higher patient volume tied to staying on the drug longer and thanks to market share expanding in both the U.S. and overseas. U.S. sales grew 13% from last year to $642 million, and international sales increased 16% to $502 million during the quarter.
Those solid results have Celgene expecting that Revlimid's full-year sales will finish between $4.9 billion and $5 billion this year, up 16% from 2013.
Revlimid's sales could improve even more in 2015 if the Food and Drug Administration and the EU approve Celgene's application to expand Revlimid's label to include the treatment of newly diagnosed multiple myeloma patients, making it a first-line alternative for doctors. A decision on those applications is expected next year.
Tough to treat cancer has a new enemy
Celgene is also enjoying sales growth for its cancer drug Abraxane. Abraxane won FDA approval as a treatment for pancreatic cancer last September, and is also approved as a treatment for non-small cell lung cancer and metastatic breast cancer.
Since pancreatic cancer is a particularly tough-to-treat cancer, Abraxane has been well received by doctors eager for new therapies. As a result, Abraxane's market share as a first-line treatment for pancreatic cancer has already reached 36%.
That led to Abraxane sales totaling $185 million in the first quarter, up 51% from last year. Although sales slid sequentially from the fourth quarter, much of that drop can be attributed to inventory building in the fourth quarter following the approval for use in pancreatic cancer patients.
The year-over-year strength was spread evenly across the U.S. and overseas. U.S. sales were up 51% to $142 million and overseas sales were up 49% to $43 million. European sales should improve even more this year as the drug continues to roll out.
That has Celgene guiding for Abraxane's sales of between $850 million and $900 million this year, up 35% from 2013. However, sales could head even higher next year given Celgene has ongoing late-stage trials evaluating the drug as a maintenance therapy for non-small cell lung cancer and as a first-line treatment for melanoma.
A promising new drug debuts
Celgene hopes it can duplicate Revlimid's and Abraxane's success with its newly launched Otezla.
Otezla is the first autoimmune drug launched by Celgene, and hope for sales is high given AbbVie's autoimmune drug, Humira, is the best-selling drug in the world with annual sales north of $10 billion. Despite Humira having been on the market since 2002, Humira's sales continue to grow. In the first quarter, Humira's sales were up 14% worldwide to $2.6 billion.
The FDA approved Otezla for psoriatic arthritis in March, so Celgene's first-quarter earnings didn't reflect any sales of significance. That means investors will have to wait until the second-quarter results are released to get a clearer picture of whether Otezla can cut into Humira's dominance.
Regardless, demand for Otezla could climb significantly next year thanks to label expansion. Celgene has already filed for Otezla's approval as a treatment for psoriasis, and a decision is expected by the FDA in late September.
Similarly, the EU is also evaluating Otezla for both indications with a decision expected by year-end. If approved for psoriasis, that would open Otezla up to a much larger patient population of more than 125 million diagnosed psoriasis patients globally, which would better position Otezla to win away AbbVie market share.
All in all... a solid quarter
In addition to Revlimid and Abraxane, Celgene also markets Vidaza and Pomalyst. Vidaza has lost patent protection and its sales continue to slide, falling 27% in the first quarter to $148 million. Sales were led lower by an 83% decline to $14 million in the U.S.; however, sales overseas, where it holds patent protection until 2018, improved 14% to $134 million.
Sales of Pomalyst, which won approval as a third-line treatment for advanced multiple myeloma in February 2013, more than tripled to $136 million from its launch a year ago -- $89 million of those sales came from the U.S. and $47 million from overseas as the drug launched in new countries.
Combined with Revlimid and Abraxane, Celgene's total first-quarter revenue grew 19% to $1.7 billion, bringing trailing-12-month sales to $6.75 billion. First-quarter sales translated into net income of $705 million and adjusted EPS of $1.67, which was up 22% year over year and outpaced analyst EPS estimates for $1.65 in the quarter.
CELG Revenue (TTM) data. Source: YCharts.
The sales and operating cash growth helped Celgene buy back 10.7 million shares for about $1.7 billion during the first quarter, and those buybacks are set to continue given that Celgene's board of directors approved a massive $4 billion buyback program earlier this month.
Foolworthy final thoughts
Celgene is aggressively partnering with emerging biotech plays to discover next-generation cancer and autoimmune treatments to add to its product lineup. Despite those investments and the substantial first-quarter share buyback, the company's balance sheet still finished the quarter in good shape, with $5.1 billion in cash.
Since Celgene is guiding for full-year sales of roughly $7.5 billion, up 15% from 2013, and EPS of $7.00 to $7.20, up 19%, there isn't much for investors to dislike about the first-quarter results or the full-year estimates. That suggests that the recent sell-off in the company's shares may be presenting an opportunity ahead of FDA and EU decisions on whether to expand the labels for its existing treatments.
