Stock Update (NASDAQ:CELG): Celgene Corporation Reports 2Q:15 Operating and Financial Results


Celgene Corporation (NASDAQ:CELG) reported net product sales of $2,254 million for the second quarter of 2015, a 22 percent increase from the same period in 2014. The negative net impact of currency on net product sales was 2 percent. Second quarter total revenue increased 22 percent to $2,278 million compared to $1,873 million in the second quarter of 2014. Adjusted net income for the second quarter of 2015 increased 36 percent to $1,019 million compared to $748 million in the second quarter of 2014. Adjusted diluted earnings per share (EPS) in the second quarter of 2015 was $1.23 which includes a $0.06 gain related to the sale of an equity investment upon completion of their acquisition by another company. For the same period in 2014, adjusted diluted EPS was $0.90.

Based on U.S. GAAP (Generally Accepted Accounting Principles), Celgene reported second quarter of 2015 net income of $356 million or $0.43 per diluted share. For the second quarter of 2014, net income was $598 million or $0.72 per diluted share.

“The Celgene team delivered exceptional results across the portfolio in the second quarter,” said Bob Hugin, Chairman and Chief Executive Officer ofCelgene Corporation. “We continue to invest strategically in the long-term future of Celgene and expect our recently announced transactions with AstraZeneca, Juno and Receptos to accelerate our earnings growth beginning in 2019.”

Second Quarter 2015 Financial Highlights

Unless otherwise stated, all comparisons are for the second quarter of 2015 compared to the second quarter of 2014. The adjusted operating expense categories presented below exclude share-based employee compensation expense and upfront collaboration payments. Please see the attached Reconciliation of GAAP to Adjusted Net Income for further information.

Net Product Sales Performance

  • REVLIMID® sales for the second quarter increased 19 percent to $1,444 million and were driven by volume in both the U.S. and International markets, increased duration of therapy and continued market share leadership in multiple myeloma. U.S. sales of $873 million and International sales of $571 million increased 22 percent and 15 percent, respectively.
  • ABRAXANE® sales for the second quarter were $244 million, a 13 percent increase. U.S. sales of $170 million and International sales of $74 million increased 6 percent and 34 percent, respectively. The increase in sales reflects volume growth in both the U.S. and Europe driven by increased use in pancreatic cancer.
  • POMALYST®/IMNOVID® sales for the second quarter were $235 million, an increase of 46%. U.S. sales were $144 million and International sales were $91 million, an increase of 38% and 60%, respectively. POMALYST®/IMNOVID® sales were driven by volume increases globally, increasing duration of treatment and share gains, as well as geographic expansion, including the launch in Japan in June.
  • VIDAZA® sales in the second quarter remained flat year-over-year at $152 million. International sales were $146 million, an increase of 3 percent.
  • OTEZLA® sales for the second quarter were $90 million, increasing 49 percent over the first quarter of 2015. U.S. sales were $85 million and International sales were $5 million. OTEZLA® uptake and market share gains have been strong in the U.S. since the initial approval in March 2014. Early launch countries in Europe have begun contributing. Prescription trends continue to increase.
  • All other product sales, which include THALOMID®, ISTODAX® and an authorized generic of VIDAZA® drug product in the U.S., were $89 millionin the second quarter of 2015 compared to $98 million for the second quarter of 2014.

Research and Development (R&D)

Adjusted R&D expenses were $477 million for the second quarter of 2015 compared to $397 million for the second quarter of 2014. The increase was primarily due to an increase in clinical trial activity across the portfolio. On a GAAP basis, R&D expenses were $1,110 million for the second quarter of 2015 and $457 million for the same period in 2014 primarily reflecting an increase in upfront collaboration expenses.

Selling, General, and Administrative (SG&A)

Adjusted SG&A expenses were $541 million for the second quarter of 2015 compared to $440 million for the second quarter of 2014. The increase was primarily due to investments in support of the global launches of OTEZLA® in psoriasis and psoriatic arthritis and REVLIMID® in newly diagnosed multiple myeloma. On a GAAP basis, SG&A expenses were $617 million for the second quarter of 2015 compared to $492 million for the same period in 2014. The increase in GAAP SG&A expenses also included an increase in share-based compensation expense.

Cash, Cash Equivalents, and Marketable Securities

In the second quarter of 2015, Celgene purchased approximately 7.9 million of its shares at a total cost of approximately $902 million. In June, the share repurchase authorization was increased by an additional $4.0 billion. As of June 30, 2015, the Company had approximately $5.1 billionremaining authorization under the stock repurchase program, including the additional $4.0 billion.

Operating cash flow was $284 million in the second quarter of 2015 which included $570 million of upfront payments relating to research and development collaborations. Celgene ended the quarter with approximately $7.5 billion in cash, cash equivalents and marketable securities.

2015 Adjusted EPS Guidance Raised

  • Total net product sales are expected to be in the range of $9.0 billion to $9.5 billion
  • REVLIMID® net sales are expected to be in the range of $5.6 billion to $5.7 billion
  • ABRAXANE® net sales are expected to be in the range of $1.0 billion to $1.25 billion
  • Adjusted diluted EPS is expected to be in the range of $4.75 to $4.85, up from the original range of $4.60 to $4.75, an increase of approximately 29% over 2014 adjusted diluted EPS
  • GAAP diluted EPS is expected to be in the range of $2.17 to $2.46, lowered from the original range of $2.97 to $3.19

Key Accomplishments in First Half of 2015

Hematology

  • Received approval for REVLIMID® for the expanded use in patients newly diagnosed with multiple myeloma in the U.S. and Europe
  • Presented results from the Follicular Lymphoma Analysis of Surrogacy Hypothesis (FLASH) trial, co-sponsored by Celgene and Roche, at theAmerican Society of Clinical Oncology (ASCO) Annual Meeting
  • Presented updated overall survival results from the MM-020/IFM 07-01 FIRST® trial of REVLIMID® in newly diagnosed multiple myeloma (NDMM) at ASCO and the European Hematology Association annual congress
  • Initiated enrollment in the phase III ROBUSTTM trial with REVLIMID® in diffuse large B-cell lymphoma (DLBCL)
  • Received approval for POMALYST® in Japan for the treatment of relapsed and refractory multiple myeloma (RRMM)
  • Announced that accelerated approval requirements for POMALYST® in the U.S. have been fulfilled and the U.S. label has been updated with overall survival results from MM-003
  • Announced, in collaboration with partner Acceleron Pharma, plans to initiate a phase III program with luspatercept in beta-thalassemia and myelodysplastic syndromes (MDS) by year-end 2015
  • Entered into a strategic collaboration with AstraZeneca/MedImmune to develop and commercialize durvalumab for hematologic malignancies and generated a clinical development plan covering multiple indications with trials to initiate by year-end

Oncology

  • Received approval for ABRAXANE® in combination with carboplatin in Europe for first-line non-small cell lung cancer (NSCLC) in adult patients who are not candidates for potentially curative surgery and/or radiation
  • Collaboration partner OncoMed began enrollment in phase II trials with demcizumab in first-line advanced-stage NSCLC and pancreatic cancer
  • OncoMed presented data from a phase Ib trial of demcizumab in NSCLC at the European Lung Cancer conference and presented data from a phase I trial with demcizumab in pancreatic cancer and NSCLC at ASCO
  • Multiple trials with ABRAXANE® in immune-oncology combinations initiated
  • Achieved reimbursement for ABRAXANE® for pancreatic cancer and NSCLC in key European markets

Inflammation & Immunology

  • Received approval in Europe for OTEZLA® for use in adult patients with moderate-to-severe chronic plaque psoriasis who failed to respond to or who have a contraindication to, or are intolerant to other systemic therapy including cyclosporine, methotrexate or psoralen and ultraviolet-A light and active psoriatic arthritis who have had an inadequate response or who have been intolerant to disease modifying antirheumatic drugs
  • Presented data from the phase III LIBERATETM (PSOR-010) trial with OTEZLA® at the American Academy of Dermatology
  • Published data from the phase II (BCT-001) trial of OTEZLA® in Behçet’s disease in The New England Journal of Medicine
  • Achieved the primary endpoint for PSOR-011, a trial to support registration for OTEZLA® in Japan
  • Submitted OTEZLA® for approval in Turkey for Behçet’s disease
  • Achieved primary endpoint in the phase III trial PSA-006 evaluating OTEZLA® in TNF-alpha naïve patients
  • Completed enrollment in AD-001, a phase II trial of OTEZLA® in atopic dermatitis
  • Initiated the registration-enabling endoscopy trial with GED-0301 in Crohn’s disease
  • Published data from a phase II trial of GED-0301 in Crohn’s disease in The New England Journal of Medicine
  • Presented post-hoc subgroup analysis from the phase II trial of GED-0301 in active Crohn’s disease at the Digestive Disease Week annual meeting
  • Received Orphan Drug Designation from the U.S. Food and Drug Administration for GED-0301 for the treatment of pediatric Crohn’s disease
  • Announced the signing of an agreement to acquire Receptos, Inc. for $232.00 per share, or a total of approximately $7.2 billion, net of cash acquired

Research and Early Development

  • Filed four Investigational New Drug (IND) applications
  • Initiated phase I trials with CC-90002 (anti-CD47 antibody) in multiple myeloma and solid tumors
  • Initiated CC-486 in phase II trials for metastatic breast cancer and nasopharyngeal cancer and a phase I trial for DLBCL
  • Initiated phase I trial with CC-90003 (selective ERK inhibitor) in relapsed and refractory solid tumors
  • Initiated phase I trial with CC-90005 (selective PKC theta inhibitor) in healthy volunteers and patients with moderate-to-severe plaque psoriasis
  • Exercised option to obtain an exclusive license outside the U.S. for Agios’ AG-120
  • Entered into a joint worldwide development and profit share agreement for Agios’ AG-881 and initiated phase I trial with AG-881 in IDH-1 and/or IDH-2 mutated hematologic malignancies and solid tumors
  • Announced agreement to acquire privately-held biotechnology company Quanticel Pharmaceuticals Inc.
  • Announced global collaboration with Lycera that includes an exclusive option to license the company’s portfolio of ex vivo
  • Entered into a strategic collaboration with Juno Therapeutics to develop and commercialize novel immunotherapies for the treatment of cancer and autoimmune diseases

Key Milestones Expected During the Second Half of 2015

Hematology & Oncology

  • Regulatory decision on REVLIMID® for NDMM in Japan
  • Submission of REVLIMID® for non-del5q MDS in the U.S. and Japan
  • Complete enrollment in the phase III CONTINUUM® trial with REVLIMID® for chronic lymphocytic leukemia
  • Regulatory decision in Europe on REVLIMID® for relapsed and refractory mantle cell lymphoma
  • Opinion from the EU Committee for Medicinal Products for Human Use on VIDAZA® for elderly acute myeloid leukemia (AML)
  • Initiate CC-122 in phase I/II trials in DLBCL
  • Initiate pivotal program for luspatercept in beta-thalassemia and MDS
  • Initiate pivotal program for AG-221 in AML with IDH-2 mutation

Inflammation & Immunology

  • Complete enrollment in registration-enabling endoscopy trial with GED-0301 in Crohn’s disease
  • Initiate enrollment in the phase III trials of GED-0301 in Crohn’s disease
  • Initiate enrollment in a phase II trial of GED-0301 in ulcerative colitis
  • Complete enrollment in a phase II trial with CC-220 in systemic lupus erythematosus
  • Close acquisition of Receptos (Original Source)

Shares of Celgene Corporation closed yesterday at $138.26. CELG has a 1-year high of $139.12 and a 1-year low of $83.16. The stock’s 50-day moving average is $119.10 and its 200-day moving average is $117.82.

On the ratings front, Celgene has been the subject of a number of recent research reports. In a report issued on July 21, Piper Jaffray analyst Joshua Schimmer reiterated a Buy rating on CELG, with a price target of $160, which represents a potential upside of 15.7% from where the stock is currently trading. Separately, on July 15, Nomura’s Ian Somaiya reiterated a Buy rating on the stock and has a price target of $165.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Joshua Schimmer and Ian Somaiya have a total average return of 12.6% and 33.5% respectively. Schimmer has a success rate of 68.7% and is ranked #193 out of 3713 analysts, while Somaiya has a success rate of 78.4% and is ranked #35.

Overall, 2 research analysts have assigned a Hold rating and 6 research analysts have given a Buy rating to the stock. When considering if perhaps the stock is under or overvalued, the average price target is $146.00 which is 5.6% above where the stock closed yesterday.