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Is Celgene (CELG) Poised for a Beat This Earnings Season?

Zacks Equity Research

Celgene Corporation CELG is scheduled to report third-quarter 2017 results on Oct 26, before the opening bell.


Celgene’s stock has moved up 6.1% year to date compared with the industry’s gain of 11.8%.

Celgene has an excellent track record with the company beating earnings estimates in the last four trailing quarters. Last quarter, the company beat expectations by 2.8%. Overall, the company has delivered an average positive surprise of 3.8%. We expect the company to beat estimates once again on the back of strong performance of key drug Revlimid.

Why a Likely Positive Surprise?

Our proven model shows that Celgene is likely to beat on earnings estimates this quarter. This is because it has the right combination of two key ingredients, a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold).

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +0.08%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Celgene currently carries a Zacks Rank #3. The combination of Zacks Rank #3 and a positive ESP makes us confident of an earnings beat.

Conversely, Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Celgene Corporation Price and EPS Surprise


Celgene Corporation Price and EPS Surprise | Celgene Corporation Quote

Revlimid to Drive Growth

Concurrent with the second-quarter earnings results, Celgene raised its guidance for 2017. The company anticipates earnings in the range of $7.25-$7.35 per share compared with the previous guidance of $7.15-$7.30 per share. Net product sales are projected at $13-13.4 billion.The Zacks Consensus Estimate for product sales in the third quarter currently stands at $3.4 billion.

Revlimid, an oral immunomodulatory drug, is currently approved for several indications including MM, myelodysplastic syndromes and mantle cell lymphoma. The drug performed well in the first half and combated the challenges of uneven buying patterns and coverage gap. Market share gains in key markets and longer treatment duration are contributing to the drug’s growth.

Meanwhile, Celgene is working on expanding Revlimid’s label further. Revlimid received the FDA’s approval for use as a maintenance treatment in NDMM patients after they receive an autologous stem-cell transplant. NDMM market share continues to grow outside the United States, with a positive uptake both in the EU and Japan.

Continued momentum in the core indication, label expansion and global launches should help the product to keep contributing to the top line. The Zacks Consensus estimate for Revlimid currently stands at $2.1 billion for the third quarter.

Other key products — Pomalyst/Imnovid, Abraxane and Otezla — continue to perform well. Pomalyst/Imnovid is being evaluated in multiple combination studies in relapsed/refractory MM. The drug’s label was updated in the United States and the Europe to include data from a pooled pharmacokinetics analysis of patients with relapsed and/or refractory MM and impaired renal function.  Pomalyst, in combination with Darzalex and dexamethasone for relapsed/refractory myeloma was approved in the United States and should propel sales further.

The approval of Idhifa for the treatment of adult patients with relapsed or refractory AML (R/R AML) will further boost Celgene’s portfolio. The drug was developed in collaboration with Agios Pharmaceuticals AGIO. Otezla achieved the blockbuster status in 2016 driven by solid demand in the United States and trend is expected to continue in 2017. Increased contribution from European countries also impacted sales positively. It is currently being evaluated in phase III studies for Behçet's disease, atopic dermatitis and expanded indications in psoriatic arthritis and plaque psoriasis.

The company is keen to expand its oncology franchise beyond Abraxane. Label and geographical expansion of approved drugs in additional indications will increase their commercial potential further. Abraxane sales are estimated to be around $1 billion. While Pomalyst’s revenues are projected around $1.6 billion, the same for Otezla are estimated around $1.5-1.7 billion.

During third-quarter earnings call investors are expected to remain focused on the company’s performance and label expansion efforts, along with updates on the pipeline front.

Other Stocks Poised to Beat Estimates

Here are some other health care stocks that you may want to consider, as our model shows that they too have the right combination of elements to post an earnings beat this quarter.

Vertex Pharmaceuticals Inc. VRTX has an Earnings ESP of +7.24% and a Zacks Rank #2. The company is scheduled to release third-quarter results on Oct 25. You can see the complete list of today’s Zacks #1 Rank stocks here.

GlaxoSmithKline plc GSK has an Earnings ESP of +1.28% and a Zacks Rank #2. The company is scheduled to release third-quarter results on Oct 25.

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