Leerink - Solid 4Q, Increase PTto $150.00 from $123.00 to Reflect Better Visibility on Long-Term Growth
Leerink Partners LLC Research
January 30, 2015
Price Target: $150.00 from $123.00
Reason for report: EARNINGS
Solid 4Q, Increase PT to Reflect Better Visibility on Long-Term Growth
• Bottom Line: Following the recent preannouncement (LINK), the 4Q:14
earnings report was largely in line, suggesting continued strong growth
trend across all product lines especially continued strength of Revlimid
in US and very encouraging Otezla performance. Management detailed
GED-0301 registration program in Crohn’s disease with data could begin
in 2017. While durable complete response rate for follicular lymphoma
(FL) could be a surrogate endpoint, management noted conservative
assumption in 2020 revenue guidance; therefore, it represents a
significant upside in our view. While near-term focus will be Revlimid
approval in newly diagnosed multiple myeloma, label expansion on
existing products and progressing of pipeline asset could provide support
for guided CAGR of 18/23% top/bottom line growth in 2014-2020. We are
increasing our PT to $150 to reflect better visibility on long-term growth
• Strong continued Revlimid growth in the US encouraging;
inflection point for Otezla. Revlimid revenue was $1.322B, representing
2% sequential growth q/q. US Revlimid sales of $797M (vs. consensus
and our estimates of $779M and $790M respectively) represented 5%
q/q growth in the most mature market for the product. Geographically,
management noted Russia, Mexico and Brazil could come in line in 2015
and represent growth opportunities. The Pomalyst revenue was $202M,
representing 12% sequential growth. Abraxane revenue had a rebound in
4Q:14 and achieved $236M in revenue, or 11% growth in sequential q/q.
Otezla revenue was $47M, representing 161% growth. IMS TRx growth
was 121% and showed a hockey stick inflection point pivoted around the
psoriasis approval at the end of Sept. The upcoming European launch
could provide another catalyst for growth. Management noted a $25M
negative impact to total product sales due to FX.
• More color on 2020 guidance suggests upside opportunities.
Management stated that of $20 billion in net product sales forecast
for 2020, $17B is from existing products and drivers that are already
understood such as newly diagnosed multiple myeloma opportunity with
Revlimid, the continued global rollout of Pomalyst / Imnovid, Otezla and
Abraxane. The remaining $3B includes the risk-adjusted opportunities
from 8 label expansions and 6 new product introductions. Management
also stated that there are at least 17 identified opportunities that would
provide upside to the $20B target. The company expects the commercial
investment it has made to date to be leveraged going forward and
its 2020 EPS forecast (23% CAGR from 2014-2020) to be primarily
operationally driven by assuming a constant share count and a constant
effective tax rate.
We believe that Celgene's Revlimid is emerging as a dominant franchise in cancer and biotech. Revlimid has shown strong efficacy in multiple myeloma (MM) and myelodysplastic syndrome (MDS) and we see continued growth opportunities from expanded maintenance use, combination use with Velcade and other agents, as well as geographical expansion in international markets. In addition, we anticipate potential applications of Revlimid outside the currently approved indications in non-
Hodgkin’s lymphoma (NHL) and chronic lymphocytic leukemia (CLL). In particular, we are intrigued by emerging data of Revlimid in combination with Rituxan in follicular lymphoma and other settings and with elotuzumab in MM that, in our opinion, are suggestive of the enhancement of antibody-dependent cellular cytotoxicity (ADCC) by Revlimid. We believe this, in turn, could have important implications for the long-term outlook of Revlimid and expand its use. We expect growth for Revlimid to be complemented by continued expansion of use of Vidaza, and Abraxane, as well as newly launched Pomalyst) and Otezla. Our patent analyses lead us to believe that Revlimid is likely protected beyond 2019 to the 2023-27 timeframe.
GED-0301 registration program detailed, data in 2017 but some visibility of the important endoscopy trial may be possible in 2015. There will be three trials running in parallel – one endoscopic outcome trial and two 52-week treat-through trial. While endoscopic trial could inform the
“treat-through” trial, management plans to initiate the treat-through trial in mid’15 before endoscopic trial completes. While 12-week endoscopic data could be available in 2015, the nature and timing of the data release have not been finalized.
Durable complete response rate as approvable endpoint could represent a significant upside to 2020 revenue guidance. FLASH meta analysis data in follicular NHL are expected at ASH 2015. Data likely could be positive and support pathologic complete response (PCR) at 30 months as surrogate endpoint for non-Hodgkin’s lymphoma (NHL) trials. This could advance potential approval by 2-3 years for Revlimid in NHL. Management noted current 2020 guidance does not assume early path of approval based on PCR.
Sentiment: Strong Buy
BMO - Solid Results and Guidance Affirm Growth Story - increase price target to $163
Industry Rating: Outperform
Top 15 US Large Cap Stock Selections
January 30, 2015
Jim Birchenough, M.D.
Solid Results and Guidance Affirm Growth Story
Target Price$163.00 ↑
Celgene (CELG) reported 4Q14/FY2104 operating results yesterday with an update on key initiatives for 2015 and guidance through 2020. Non-GAAP 4Q14 EPS of $1.01 was ahead of $0.99 consensus on revenues of $2.085B vs.$2.076B consensus. Strong YOY growth was seen for REVLIMID (16%), POMALYST/IMNOVID (123%), ABRAXANE (31%) and in its first year,OTEZLA scripts are outpacing all recent dermatology/rheumatology launches.For 2015, CELG guided to total product sales of $9-9.5B with REVLIMID $5.6-5.6B and non-GAAP EPS of $4.6-4.75. In 2015, REVLIMID growth willbe driven by front-line label expansion, with decisions in the US/EU expected1Q15 and Japan 2H15. POMALYST/IMNOVID will benefit from increasedmarket penetration in current geographies and entry to the Japanese market2H15. ABRAXANE growth will benefit from a NSCLC label in Europe as wellas expanded use in pancreatic cancer. The OTEZLA launch has gainedmomentum in the US following the 2H14 psoriasis (PsO) approval and an EUlaunch for both psoriatic arthritis and PsO is expected later in 1Q15. The keyphase 3 initiative in 2015 will be GED-301 for Crohn’s disease, but registrationtrials for AG-221 in IDH2+ve AML and sotatercept or luspatercept in betathalassemia and possibly MDS provide additional opportunity for earnings acceleration by 2020 above and beyond label expansion for in-line products.
Citi: Expanding Labels, Extending Treatment and Pipeline Maturation Continue to Keep Celgene Compelling – Raising TP to $143 (+$24)
Celgene reported Q4:14 earnings in line with pre-announced results. We continue to be impressed with the long-term growth prospects for the stock driven by its current products and future growth drivers such as AG-221, luspatercept/sotatercept, and GED-301. Our own models for these drugs are in-line with Celgene’s risk-adjusted estimates and this supports our view on Agios and Acceleron. We view Celgene’s ’15 EPS guidance as conservative given the potential OpEx leverage in the model. We see sales growth driven near term by further label expansion for Abraxane and Revlimid with continued increase in Revlimid’s treatment duration. We see Celgene’s pipeline products playing a major contribution beyond ’17 where their extensive collaborations will begin to contribute to the bottom line. Celgene and Gilead remain our top picks in lg cap. We are rolling our valuation to 2016 and raising our TP to $143 based on 24x $5.97.
Otezla and Abraxane Growing Well
We note that q/q Otezla sales were up ~170% driven by a rapid increase in dermatology prescribers following the PsO approval. Mgt noted that 80% of patients are pre-biologic with 20% moving from biologic to Otezla. This will continue to accelerate. Abraxane will have further data in neoadjuvant breast in 2015 and ph 2 data from tnAcity in TNBC in 2015 followed by ph 3 in 2016. This data should help lead to approval in both indications. This is upside to the Abraxane model.
Our new 2015 EPS. ests is $4.75 vs guidance of $4.60-$4.75 and 2016 $5.97 (-$0.23).
Major Pipeline Products Will Progress in 2015 — AG-221, mongersen (GED-301) and sotatercept/luspatercept are slated to enter ph3 pivotal trials in 2015. An additional 8 label expansion and 6 new products are expected in the next 5 years. We are bullish on mongersen which is scheduled to enter 3 ph 3 trials in 2015. Two pivotal trials with CDAI as the primary endpoint are expected to readout in 2017 and an additional endoscopic outcomes trial has the potential for an earlier interim look in 2016. At UEG physicians showed a clear desire to see endoscopic evidence of disease regression, suggesting this interim look will be a major catalyst. All 3 trials include a single 12 wk induction regimen with patients randomized to 1 of 3 maintenance regimens through 52 wks. Finally data from the RELEVANCE in follicular lymphoma and REMARC in DLBCL are expected in late ‘16/early ’17 and could lead to a filing esp given that the FLASH meta-analysis at ASCO should support filing on 30 mos CR data for follicular lymphoma.
Baird 2nd rpt... - Pipeline remains on track, catalyst-rich 2015.Remain buyers into the $139 range.
January 29, 2015
Baird Equity Research
Celgene Corporation (CELG)
Few Surprises for Q414 Print, As Expected Following Earlier Pre-Release
Reiterate Outperform rating, $139 price target. With CELG shares trading in line with the Biotech sector to start the year (+6% vs NBI +5%), we see today’s print as a largely confirmatory event. Going forward, we like the set-up in front of Revlimid’s front-line rollout both in the US and EU, Otezla’s continued uptake in the dermatology setting as well as EU launch, and continued increased visibility for GED-301.
o Q414 print relatively quiet, as expected. Little suspense today as Q414 non-GAAP EPS $1.01 was pre-released earlier this month (see note). Two points:
- Revlimid driven by treatment duration increases, volume. Already known, total Revlimid $1.322B roughly in line with consensus, but today we learned more about geographic breakdown. US Revlimid was $797M +5% Q-Q, with management citing increased treatment duration as a contributor. With potential US/EU front-line approval on tap for Q115, we think the franchise continues to hold a positive long-term outlook.
- Abraxane steady as she goes. Abraxane’s Q414 results also already known ($236M versus $237M). New today, we learned US strength a key driver ($172M, +14% Q-Q). While we note a potentially changing competitive landscape with the emergence of other agents (e.g., SRTE’s cynviloq), we agree more data is necessary and are comforted by management’s confidence in their FY15 Abraxane guidance ($1.0B-$1.25B), as well as their continued investments to broaden the Abraxane label.
o Guidance reaffirmed for FY15 and beyond. While management provided FY15 and FY2020 guidance earlier this month, today we learned FY15 net product sales guidance ($9.0B-$9.5B) also includes up to $100M negative f/x impact, a consistent theme we’re hearing from many biotechs.
o Pipeline remains on track, catalyst-rich 2015. More details unveiled today on GED-301 clinical efforts, which include a registrational-enabling endoscopy trial now underway that is evaluating changes after 12 weeks. Additionally, two 52-week “treat-through” studies will begin ~mid-15 with potential data beginning in 2017. No change to our GED301 estimates which we model launching in 2018.
o Remain buyers. Flagship franchise Revlimid still has sizable growth potential ahead and with an increasingly diverse product portfolio emerging, we like the direction things are heading. Combining this with robust catalyst flow and we continue to recommend purchase into the high $130s. buyers following a quiet Q414 print, maintaining $139 price target. CELG reported Q414 non-GAAP EPS $1.01, ahead of pre-existing consensus $0.99 and consistent with its pre-release earlier this month. Revlimid revenue $1.322B, also consistent with the pre-release, was roughly in line with consensus and included $797M from the US +5% Q-Q). Management cited increased Revlimid treatment duration as a contributor and with potential front-line approval for US/EU on tap for Q115, we hold a positive long-term outlook on the franchise. Abraxane Q414 revenue $236M was consistent with the pre-released number and roughly in line with pre-existing consensus $237M. A key driver for Abraxane is US strength with $172M (+14% Q-Q) and though increased competition may be emerging, management is confident in FY15 guidance ($1.0B-$1.25B) and efforts to broaden the label continue. FY15 and FY20 guidance described earlier this month were reiterated, and we learned FY15 guidance ($9.0B-$9.5B) includes up to $100M from f/x headwinds. More detail on GED-301 efforts discussed today on the endoscopy trial underway and two 52-week “treat-through” studies beginning ~mid-2015, with data potentially in 2017. With what we see as sizable growth ahead for Revlimid and an increasingly diverse portfolio emerging, we like the direction things are heading. Remain buyers into the $139 range.
Model updates. In some model housekeeping, we are raising our net interest expense estimates for 2015-2020 to $108M, $70M, $65M, $60M, $55M, and $50M, respectively. These changes are offset by slight reductions to our cost of goods and SG&A estimates for 2015-2020 and slightly lowering our modeled FY15 tax rate to 16%. The net of these housekeeping items yields EPS estimates of $1.07, $1.18, $1.25, and $1.37 for Q115-Q415, respectively, and FY15-FY20 EPS estimates remain unchanged at $4.87, $6.21, $7.85, $9.45, $10.85, and $12.25, respectively. We continue to derive our $139 price target by applying a 23X multiple to our 2017 EPS estimate of $7.85, discounted back by 15%/year.
o A very clean commercial story. Key commercial players Revlimid and Thalomid benefit from higher margins, complementing the company's commercial strength. The end result is robust cash generation, as 2014 saw $2.8B of cash flow from operations.
o Revlimid is a blockbuster product in multiple myeloma. Extensive uptake in the multiple myeloma maintenance setting with 70%+ share in the US, based on our US Hem/Onc survey feedback. Continued international rollouts can contribute to what remains a strong growth trajectory for Revlimid.
oAbraxane building momentum. We have long viewed Abraxane as an asset with significant unrealized upside opportunity. With our recent oncology surveys showing Abraxane is taking share in MBC, a recently granted label expansion into NSCLC and pancreatic cancer, we think this franchise is well positioned to deliver solid growth both near and longer term.
o Valuation. In that big-cap commercial biotechnology companies have recently traded on average between 15X and 25X current-year consensus EPS, we apply a multiple of 23 to our 2017 EPS estimate of $7.85, discounted back by 15%/year to derive our 12-month price target of $139.
I hope you shorted so that when you have to buy it back even higher it'll help the stock price. ;)
Well, it turns out you had a great day in the market...as I knew you would. MM went trolling for stop losses and stole some shares on a blockbuster ER and amazing CC. They know CELG is a $250 stock in the making. New 52 wk high on Monday.
Sentiment: Strong Buy