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Why Is Celgene (CELG) Up 6.1% Since Last Earnings Report?

Zacks Equity Research

It has been about a month since the last earnings report for Celgene (CELG). Shares have added about 6.1% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Celgene due for a pullback? 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 drivers.

Celgene Beats on Q2 Earnings, Raises Revenue Guidance

Celgene reported adjusted earnings of $2.86 per share in second-quarter 2019, which beat the Zacks Consensus Estimate of $2.62 and also increased from $2.16 a year ago.

Moreover, total revenues grew 15% year over year to $4.4 billion in the reported quarter, beating the Zacks Consensus Estimate of $4.2 billion as well.

Quarter in Detail

Net sales of Revlimid came in at $2.7 billion, reflecting an 11% year-over-year increase. The drug performed well, both in the United States (up 14%) and international markets (up 6%). Growth in the quarter was driven by the adoption of triplet therapy for myeloma, thereby increasing its market share and extending the treatment duration.

Net sales of another cancer drug, Abraxane, surged 30% in a year to $316 million. Also, Pomalyst/Imnovid sales came in at $619 million, up 22% year over year. Sales were driven by the triplet therapy for myeloma, resulting in market share increase and extended duration of treatment.

Sales of psoriasis drug, Otezla, were up 31% year over year to $493 million. The drug performed well both in the United States (up 37%), driven by higher demand and customer buying patterns, and in the international markets (up 12%) owing to continued expansion in the key markets.

All other product sales (including Istodax, Idhifa, Thalomid, Vidaza and an authorized generic version of Vidaza in the United States) totaled $239 million in the second quarter, up from $230 million in the year-ago quarter.

Adjusted research and development expenses dipped 1.4% to $935 million. While adjusted selling, general and administrative expenses increased 3.1% to $693 million.

Business Update

Celgene has been in news for its impending merger with Bristol-Myers Squibb Company. In January, Bristol-Myers had announced that it will acquire Celgene for approximately $74 billion. In April, the stockholders of Celgene voted in favor of the proposed merger with Bristol-Myers. The transaction is expected to close by the end of 2019 or the beginning of 2020.

Pipeline Update

In May 2019, the European Commission (EC) approved Revlimid (lenalidomide) in combination with Velcade and dexamethasone (RVd) for the treatment of adult patients with previously untreated multiple myeloma, who are not eligible for transplant. Also, during the same month, the FDA approved Revlimid in combination with a rituximab product for the treatment of adult patients with previously treated follicular lymphoma (FL) or marginal zone lymphoma (MZL).

Notably, in June, the FDA accepted for review the new drug application (NDA) for ozanimod to treat patients with relapsing forms of multiple sclerosis (RMS) in the United States. The European Medicines Agency (EMA) also accepted for review the Marketing Authorization Application for ozanimod to treat adults with relapsing-remitting multiple sclerosis in the European Union.

The FDA has set an action date of Mar 25, 2020 for ozanimod while a decision in the EU is expected in the first half of 2020.

Moreover, the FDA granted Priority Review designation to the NDA for fedratinib for patients with myelofibrosis with a target action date set for Sep 3, 2019.

The FDA also accepted the Biologics License Application (BLA) for investigational erythroid maturation agent, luspatercept. The candidate is being developed in collaboration with Acceleron Pharma Inc. Luspatercept is being developed to treat adult patients with very low to intermediate-risk myelodysplastic syndromes (MDS)-associated anemia, who have ring sideroblasts and require red blood cell (RBC) transfusions, and also those with beta-thalassemia-associated anemia, who require RBC transfusions. A decision on the MDS indication is expected on Apr 4, 2020.

Additionally, the FDA has granted Priority Review to the BLA for the treatment of patients with beta-thalassemia-associated anemia, who require RBC transfusions and has set an action date of Dec 4, 2019.

Earlier this month, the FDA approved Otezla for the treatment of adult patients with oral ulcers associated with Behçet’s Disease.

2019 Outlook Raised

Celgene expects earnings per share of $10.65-$10.85 in 2019, above the earlier guided range of $10.60-$10.80. Net revenues are estimated to be $17.2-$17.4 billion compared with $17- $17.2 billion, expected earlier. Revlimid sales are projected to be $10.8 billion, unchanged from the previous guidance and Abraxane sales to be around $1.2 billion compared with $1.1 billion expected earlier. Pomalyst’s revenues are now expected to be $2.5 billion, which were earlier assumed to be $2.4 billion. While Otezla sales are projected to be $1.9 billion, which is again unchanged from the previous guidance.
 

How Have Estimates Been Moving Since Then?

Estimates revision followed a flat path over the past two months.

VGM Scores

Currently, Celgene has a nice Growth Score of B, a grade with the same score on the momentum front. Following the exact same course, 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 A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Celgene has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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