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Celgene (CELG) Beats on Q3 Earnings, Raises '16 Outlook

Zacks Equity Research

Celgene Corporation CELG reported third-quarter 2016 earnings of $1.39 per share (including share-based compensation expense and tax adjustments), beating the Zacks Consensus Estimate of $1.31 and surging almost 28% from the year-ago period.

Excluding share-based compensation expense, Celgene’s earnings climbed approximately 29% year over year to $1.58 in the reported quarter.

Total revenue soared 28% to $2.98 billion in the third quarter of 2016. Revenues were boosted by a consistently strong performance by the company’s key growth driver, Revlimid. Revenues were also above the Zacks Consensus Estimate of $2.85 billion.

Revlimid Continues to Shine

Net product sales increased 28% year over year to $2.97 billion, including a 1% negative impact from currency movement.

Net sales of Revlimid came in at $1.9 billion, reflecting a year-over-year increase of 30.1%. The drug did well in both the U.S. (up 28.8%) and international markets (up 32.2%). Growth in the reported quarter was driven by new patient market share gains and longer duration.

Net sales of another cancer drug, Abraxane, inched up 1.5% to $233.3 million. Sales of oncology drug, Pomalyst/Imnovid, came in at $341.1 million, up 33%. Sales were driven by increased volume from duration gains.

Newly launched Otezla reported sales of $274.6 million in the reported quarter, up 13.5% sequentially. Sales benefited from market share gains and increased prescriber adoption.

All other product sales (including Istodax, Thalomid, Vidaza and an authorized generic version of Vidaza in the U.S.) totaled $229 million in the third quarter, down 2.1%.

Adjusted research and development expenses increased approximately 32% to $644 million, while adjusted selling, general and administrative expenses rose about 25% to $591 million.

2016 Earnings Outlook Lifted

Celgene increased its earnings expectations for 2016 once again. Moreover, the company has updated its guidance for net product sales and Revlimid. The company now anticipates earnings in the range of $5.88–$5.92 per share (old guidance: $5.70–$5.75). The Zacks Consensus Estimate for earnings is $5.10.

While net product sales are now expected to be approximately $11.2 billion (old guidance: approximately $11 billion), Revlimid sales will come in at around $7 billion (old guidance: approximately $6.8 billion).

The net product sales guidance for Pomalyst/Imnovid, Abraxane and Otezla remained unchanged.

While Pomalyst/Imnovid and Otezla are still expected to generate sales in excess of $1 billion, Abraxane sales are projected to be in the range of $950 million to $1 billion.

2017 Outlook Updated

For 2017, Celgene now expects earnings at the high end of the previously projected range of $6.75 to $7.00 per share. The Zacks Consensus Estimate for earnings stands at $6.41. Net product sales are expected at the high end of the prior guidance range of $12.7–$13 billion.

Revlimid sales are now expected to cross $8 billion, compared with the previous expectations of approximately $8 billion. Abraxane sales are still estimated to be around $1 billion.

In Sep 2016, Celgene acquired Switzerland-based, privately-held biotechnology company EngMab AG for $625.3 million plus contingent development, regulatory and commercial milestones. The acquisition has added EngMab's lead candidate, EM901, a T-cell bi-specific antibody targeting B-cell maturation antigen, to Celgene’s pipeline. The acquisition included an additional undisclosed program.

CELGENE CORP Price, Consensus and EPS Surprise

CELGENE CORP Price, Consensus and EPS Surprise | CELGENE CORP Quote

Our Take

Celgene’s third-quarter results were better than expected, with the company beating on both the top line and the bottom line. Revlimid continued to outperform in the quarter. Other key products – Pomalyst/Imnovid, Abraxane and Otezla – also performed well. The company’s raised and updated its expectations for both 2016 and 2017, which is again encouraging. Meanwhile, the company continues to progress with its label expansion efforts and pipeline development.

Celgene is a Zacks Rank #3 (Hold) stock. Some better-ranked stocks in the health care sector include BioMarin Pharmaceutical Inc. BMRN, Exelixis, Inc. EXEL and Incyte Corporation INCY. While BioMarin sports a Zacks Rank #1 (Strong Buy), Incyte and Exelixis carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Incyte’s earnings estimates for 2016 and 2017 were up a respective 10% and 2.1% over the last 60 days. The company has beaten earnings estimates thrice in the last four quarters with an average surprise of 335.16%.

Exelixis has an average positive surprise of 9.10% over the trailing four quarters. Its share price has jumped almost 98% year to date. The loss estimates for both 2016 and 2017 have narrowed down over the past 60 days.

Loss estimates for BioMarin have narrowed from 28 cents to 25 cents for 2016 and from $1.16 to $1.11 for 2017 over the last 60 days.

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