What: Shares of biopharmaceutical giant Celgene (NASDAQ:CELG) rocketed higher by 13% in October, based on data provided by S&P Capital IQ, after the company reported better-than-expected third-quarter earnings results and provided a positive update to its midstage Crohn's disease study involving oral antisense therapy GED-0301.
So what: To begin with, Celgene delivered an impressive third-quarter earnings report which highlighted strong earnings growth and little cost-cutting and share buyback trickery to achieve its growth.
For the quarter, Celgene reported an 18% increase in sales to $1.98 billion as its adjusted profit per share jumped by an even more impressive 24% to $0.97. Comparatively speaking both results managed to squeeze by Wall Street's expectations. More importantly, Celgene boosted its full-year profit forecast to a fresh range of $3.65-$3.70 per share, up from a prior forecast of $3.60-$3.65 per share, and the second EPS raise of the year. The company's revenue forecast remained unchanged at $7.6 billion.
Celgene saw strong growth practically across the board, with blood cancer drug Revlimid producing a sales surge of 19% to $1.3 billion during the quarter, cancer drug Abraxane delivering a 25% increase in sales to $212 million, and multiple myeloma drug Pomalyst/Imnovid doubling its revenue year-over-year to $181 million. As Celgene noted during its conference call, three-quarters of its revenue improvement was as a result of increased demand for its products with the remainder coming from U.S. price increases.
The other factor playing a big role was initial data on the company's phase 2 Crohn's disease drug GED-0301. Based on the initial data after two weeks, of the three doses administered (10 mg, 40mg, and 160 mg) the 10 mg cohort demonstrated no significant difference, but the 40 mg and 160 mg cohorts saw remission rates of 55% and 65%, respectively, compared to just 9.5% for the control group. Current remission rates for approved drugs range from the mid-teens to nearly 50%, so it would appear Celgene has another potential blockbuster on their hands.
Now what: I've said it before and I'll say it again; it's business as usual for Celgene. What's particularly unique about Celgene is that it isn't resorting to excess share buybacks and cost-cutting to drive its earnings higher, but is instead relying on product demand growth and internal pipeline innovation. Of course, Celgene also has a number of collaborations that could lead to a number of first-in-class medicines.
When asked whether or not Celgene's stock could head higher I'm inclined to believe it can. Management has been firm in its stance that EPS will double between 2014 and 2017 based on organic growth, and its annual revenue growth rate through 2017 should be about 20%. Obviously Celgene isn't going to go up every single month, but this is a company to consider buying on any sizable dip, in my opinion.
Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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