Celgene Corporation (NASDAQ:CELG) reported net product sales of $2,313 million for the third quarter of 2015, an 18 percent increase from the same period in 2014. The negative net impact of currency on net product sales was 2 percent. Third quarter total revenue increased 18 percent to $2,334 million compared to $1,982 million in the third quarter of 2014. Adjusted net income for the third quarter of 2015 increased 26 percent to $1,011 million compared to $806 million in the third quarter of 2014. Adjusted diluted earnings per share (EPS) in the third quarter of 2015 was $1.23 and includes a $0.04 dilutive impact related to the acquisition of Receptos, Inc. For the same period in 2014, adjusted diluted EPS was $0.97. The results of operations for Receptos, Inc. are included in the consolidated financial results from the August 27, 2015 acquisition date.
Based on U.S. GAAP (Generally Accepted Accounting Principles), Celgene reported a third quarter of 2015 net loss of $34 million or a loss of $0.04per diluted share. The reported GAAP net loss for the quarter primarily reflects an increase in costs related to strategic transactions including upfront collaboration expenses driven by the Juno Therapeutics collaboration, inclusive of the premium paid to acquire an equity stake, as well as expenses incurred in connection with the acquisition of Receptos. For the third quarter of 2014, net income was $508 million or $0.61 per diluted share.
“Our strong third quarter performance and acceleration of key drivers create significant momentum in our business, further advancing us toward our 2020 targets,” said Bob Hugin, Chairman and Chief Executive Officer of Celgene Corporation. “The continued progress of our clinical pipeline and important strategic collaborations have us well-positioned for long-term growth.”
Third Quarter 2015 Financial Highlights
Unless otherwise stated, all comparisons are for the third quarter of 2015 compared to the third 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 third quarter increased 12 percent to $1,453 million. U.S. sales of $895 million and International sales of $558 millionincreased 18 percent and 3 percent year-over-year, respectively. Volume was the main driver of the increase as both market share and duration trends are positive across major geographies.
- POMALYST®/IMNOVID® sales for the third quarter were $257 million, an increase of 42 percent. U.S. sales were $150 million and International sales were $107 million, an increase of 27 percent and 69 percent, respectively. POMALYST®/IMNOVID® sales were driven by increased volume as both market share and duration trends are positive across major geographies.
- ABRAXANE® sales for the third quarter were $230 million, an 8 percent increase. U.S. sales of $145 million decreased 4 percent year-over-year and were impacted by competitive dynamics in lung cancer and breast cancer. International sales of $85 million increased 40 percent year-over-year and were positively impacted by increased volume from the ongoing launch for pancreatic cancer in Europe.
- OTEZLA® sales for the third quarter were $139 million, increasing 55 percent over the second quarter of 2015. U.S. sales were $129 million and International sales were $10 million. OTEZLA® uptake and market share gains continued to accelerate in the third quarter in the U.S. with increased contribution from early launch countries in Europe.
- All other product sales, which include THALOMID®, ISTODAX®, VIDAZA® and an authorized generic of VIDAZA® drug product in the U.S., were$234 million in the third quarter of 2015 compared to $246 million for the third quarter of 2014.
Research and Development (R&D)
Adjusted R&D expenses were $488 million for the third quarter of 2015 compared to $419 million for the third 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 $1,305 million for the third quarter of 2015 and $675 million for the same period in 2014 primarily reflecting an increase in upfront collaboration expenses driven by the Juno Therapeutics collaboration, inclusive of the premium paid to acquire an equity stake.
Selling, General, and Administrative (SG&A)
Adjusted SG&A expenses were $474 million for the third quarter of 2015 compared to $441 million for the third 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 $550 million for the third quarter of 2015 compared to $498 million for the same period in 2014.
Cash, Cash Equivalents, and Marketable Securities
In the third quarter of 2015, Celgene purchased approximately 7.1 million of its shares at a total cost of approximately $815 million. As ofSeptember 30, 2015, the Company had approximately $4.3 billion remaining under the stock repurchase program.
During the third quarter of 2015, Celgene issued an aggregate of $8 billion in senior unsecured notes in tranches of three-, five-, seven-, ten- and thirty-years. The Company used the net proceeds from the offering primarily to finance the acquisition of Receptos, Inc. as well as for general corporate purposes.
Operating cash flow was $285 million in the third quarter of 2015. Celgene ended the quarter with approximately $7.5 billion in cash, cash equivalents and marketable securities.
2015 Guidance for REVLIMID® and ABRAXANE® Updated
- 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 approximately $5.8 billion, an increase from the previous range of $5.6 billion to $5.7 billion
- ABRAXANE® net sales are expected to be in the range of $950 million to $1.0 billion, a decrease from the previous range of $1.0 billion to$1.25 billion
- Adjusted 2015 operating margin remains unchanged at approximately 52 percent; GAAP operating margin is expected to be approximately 25.2 percent, lowered from approximately 36.4 percent
- Adjusted diluted EPS is expected to be in the range of $4.75 to $4.85
- GAAP diluted EPS is expected to be in the range of $2.02 to $2.24, a decrease from the previous range of $2.17 to $2.46
Product and Pipeline Updates
In October, VIDAZA® was approved by the European Commission for the treatment of adult patients aged 65 years or older with acute myeloid leukemia (AML) who are not eligible for hematopoietic stem cell transplantation. A positive opinion from the European Medicines Agency’sCommittee for Medicinal Products for Human Use (CHMP) was granted in September. VIDAZA® will receive extended market protection in all its indications for an additional year throughout the European Economic Area.
A Supplementary New Drug Application was filed with the U.S. Food and Drug Administration for the expanded indication of REVLIMID® for the treatment of non-del 5q lower risk myelodysplastic syndromes (MDS). The Prescription Drug User Fee Act date for the submission is April 16, 2016.
American Society of Hematology Meeting
At the 2015 American Society of Hematology annual meeting in December, data presentations expected include:
- Data from the phase III cooperative group SWOG S0777 trial comparing REVLIMID®, bortezomib, and dexamethasone versus REVLIMID® and dexamethasone in patients with newly diagnosed multiple myeloma not intended for immediate autologous stem cell transplant
- Data on REVLIMID® in novel combinations including elotuzumab, ixazomib and PD-1/PD-L1 compounds in multiple myeloma
- Data from phase II trials of luspatercept in beta-thalassemia and MDS
- Data from a phase I/II trial AG-221 in patients with IDH2-mutated AML
- Data from a phase I trial of AG-120 in advanced hematologic malignancies
- Data from phase I/II trials of ACY-1215 in relapsed and/or refractory multiple myeloma
At the 2015 San Antonio Breast Cancer Symposium annual meeting in December, data presentations expected include:
- Updated data from the GEPARSepto phase III trial with ABRAXANE® in neoadjuvant breast cancer
- Data from the WSG-ADAPT TN phase II trial comparing ABRAXANE® in combination with carboplatin to gemcitabine in triple-negative breast cancer
- Updated data from a phase I trial with atezolizumab in combination with ABRAXANE® in triple-negative breast cancer
Inflammation & Immunology (I&I)
On August 27, 2015, Celgene completed the acquisition of Receptos, Inc. for approximately $7.1 billion, net of cash and marketable securities acquired. The acquisition of Receptos, Inc. enhances the Company’s I&I portfolio, further diversifies the expected revenue beginning in 2019, and builds upon the Company’s growing expertise in inflammatory bowel disease. The transaction adds ozanimod, a novel, potentially best-in-class, oral, selective sphingosine 1-phosphate 1 and 5 receptor modulator to the Company’s deep and diverse pipeline of potential disease-altering medicines and investigational compounds. Phase III trials with ozanimod in moderate-to-severe ulcerative colitis and relapsing multiple sclerosis are ongoing with data from these trials expected beginning in 2017.
Maintenance data from the phase II TOUCHSTONE trial with ozanimod in moderate-to-severe ulcerative colitis were presented in October at both the American College of Gastroenterology and the United European Gastroenterology: Week annual meetings. In the trial, a significantly greater proportion of patients that continued on to the ozanimod maintenance phase achieved or maintained clinical remission at 32 weeks compared with those on placebo. In addition at 32 weeks, both the high- and low-dose ozanimod arms were statistically significant compared to placebo for clinical response and mucosal healing. In phase II trials, ozanimod had a well-tolerated safety profile.
The phase III SUNBEAM trial with ozanimod in relapsing multiple sclerosis (RMS) completed enrollment ahead of schedule in October. In addition to the ongoing phase III trials with ozanimod in RMS and moderate-to-severe ulcerative colitis, a phase II proof-of-concept trial in moderate-to-severe Crohn’s disease initiated this quarter.
The phase III registration program with GED-0301 in patients with active Crohn’s disease is initiating. The registration-enabling endoscopy trial with GED-0301 in patients with active Crohn’s disease is ongoing and expected to complete enrollment by year-end. A phase II trial with GED-0301 in moderate-to-severe ulcerative colitis is expected to begin by year-end.
One-year data from the phase III LIBERATE® (PSOR-010) trial evaluating OTEZLA® or injectable etanercept versus placebo in patients with moderate-to-severe plaque psoriasis were presented at the European Academy of Dermatology and Venereology meeting in October. Improvements in PASI scores and disease-related quality of life observed at week 16 were maintained at week 52 in patients randomized to OTEZLA® at baseline and in patients who switched from etanercept to OTEZLA® at week 16.
Research and Early Development
The previously announced acquisition of Quanticel Pharmaceuticals, Inc. closed in October 2015. Celgene now has access to Quanticel’s proprietary platform for the single-cell genomic analysis of human cancer, as well as Quanticel’s programs that target specific epigenetic modifiers, which are expected to advance Celgene’s pipeline of innovative cancer therapies. Multiple drug candidates from Quanticel are expected to enter into clinical development beginning in early 2016. Celgene acquired Quanticel for $100 million in cash and up to an additional $385 million in contingent payments.
Perry Karsen, Chief Executive Officer of Celgene Cellular Therapeutics (CCT), is retiring at the end of 2015. Mr. Karsen’s time with Celgene spanned over 10 years. He served as CEO of CCT since May 2013 and was also Chief Operations Officer from July 2010 until July 2014 and from 2004 to 2009 was Senior Vice President and Head of Worldwide Business Development. Mr. Karsen was instrumental in the acquisition of Pharmion in 2008 which brought VIDAZA® to our portfolio of products. (Original Source)
Shares of Celgene Corporation are down 4.07% to $122 in pre-market trading. CELG has a 1-year high of $140.72 and a 1-year low of $92.98. The stock’s 50-day moving average is $118.10 and its 200-day moving average is $119.62.
On the ratings front, Celgene has been the subject of a number of recent research reports. In a report issued on October 23, J.P. Morgan analyst Cory Kasimov reiterated a Buy rating on CELG, with a price target of $152, which implies an upside of 19.5% from current levels. Separately, on October 16, RBC’s Michael Yee reiterated a Buy rating on the stock and has a price target of $150.
According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Cory Kasimov and Michael Yee have a total average return of 4.8% and 7.2% respectively. Kasimov has a success rate of 58.1% and is ranked #668 out of 3824 analysts, while Yee has a success rate of 62.3% and is ranked #453.