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It has been about a month since the last earnings report for Celgene Corporation CELG. Shares have lost about 7.9% in that time frame.
Will the recent negative trend continue leading up to its next earnings release, or is CELG due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Celgene Q1 Earnings & Sales Beat on Revlimid Strength
Celgene reported encouraging first-quarter 2018 results wherein both earnings and sales topped expectations.
The company reported adjusted earnings of $2.05 per share which beat the Zacks Consensus Estimate of $2.00, up from $1.67 in the year-ago quarter.
Total revenues grew 19.4% to $3.54 billion in the quarter and beat the Zacks Consensus Estimate of $3.50 billion. Revenues were boosted by consistent performance of the company’s key growth driver, Revlimid.
Revlimid — Key Catalyst
Net product sales increased 20% year over year to $3.5 billion. Net sales of Revlimid came in at $2.2 billion, reflecting 19% year-over-year growth. The drug performed well both in the United States (up 21%) and international markets (up 15%). Growth in the quarter was driven by increased volume as a result of increases in duration of treatment and market share.
Net sales of another cancer drug, Abraxane increased 11% to $262 million as sales benefited from buying patterns. Pomalyst/Imnovid came in at $453 million, up 24%. Sales were driven by increased volume due to increase in market share and duration.
Otezla sales were $353 million in the quarter, up 46%. Sales in the United States were primarily volume-driven due to increasing demand and improved access pull-through in contracted health plans while sales in international markets were driven primarily by increasing adoption in key ex-U.S. markets.
All other product sales (including Istodax, Thalomid, Vidaza and an authorized generic version of Vidaza in the United States) totaled $229 million in the quarter, up from $226 million from the year-ago quarter.
Adjusted research and development expenses increased 16.6% to $694 million due to higher spending related to drug discovery and clinical trial activity while adjusted selling, general and administrative expenses decreased 24.5% to $671 million.
Celgene acquired acquire Juno Therapeutics, Inc. for approximately $9 billion in March 2018. In February 2018, the company also acquired Impact Biomedicines and added a late stage candidate, fedratinib, a highly selective JAK2 kinase inhibitor, to its pipeline.
Celgene announced a global collaboration with Prothena in March 2018 to develop new therapies for a broad range of neurodegenerative diseases primarily focused on three proteins implicated in the pathogenesis of several neurodegenerative diseases, including tau, TDP-43 and an undisclosed target.
Celgene's partner bluebird bio opted to co-develop and co-promote bb2121, an experimental anti-BCMA CAR T cell therapy for the treatment of patients with RRMM in the United States in March 2018. Both companies had originally entered into a broad, global strategic research collaboration in 2013 to discover, develop and commercialize novel therapies in oncology, which included bb2121. The agreement was amended in 2015.
However, Celgene suffered a setback when it received a Refusal To File letter from the FDA regarding the New Drug Application (NDA) for ozanimod in relapsing multiple sclerosis (RMS). Celegne now plans to resubmit the NDA in the first quarter of 2019 following a Type A meeting with the FDA in early April. The company also plans to submit a Marketing Authorization Application (“MAA”) for ozanimod in RMS in the first quarter of 2019.
2018 Outlook Updated
Celgene now anticipates earnings per share of $8.45 in 2018 compared to the earlier estimate of $8.70-$8.90. The Zacks Consensus Estimate for earnings is $8.44 per share. Net revenues are now estimated around $14.8 billion, at the high end of the previously projected range of $14.4-$14.8 billion, while the Zacks Consensus Estimate for the same is pegged at $14.84 billion. The numbers include the impact of dilution from the Juno acquisition.
Revlimid sales are now projected at $9.5 billion, up from $9.4 billion estimated earlier. Abraxane sales are estimated to be around $1 billion. Pomalyst’s revenues are now projected at around $2.0 billion (previous projection: $1.9 billion). Otezla sales continued to be projected at $1.5 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. There have been six revisions higher for the current quarter compared to four lower.
Celgene Corporation Price and Consensus
Celgene Corporation Price and Consensus | Celgene Corporation Quote
At this time, CELG has a poor Growth Score of F, however its Momentum is doing a lot better with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for value investors than momentum investors.
Estimates have been broadly trending upward for the stock and the magnitude of these revisions looks promising. Notably, CELG has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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