Company Update (NASDAQ:CELG): Celgene Corporation Reports First Quarter 2016 Operating and Financial Results


Celgene Corporation (NASDAQ:CELG) reported net product sales of $2,495 million for the first quarter of 2016. Net product sales grew 21 percent from the same period in 2015, including a 2 percent negative impact from currency exchange effects. First quarter total revenue increased 21 percent to $2,512 million compared to $2,081 million in the first quarter of 2015. Adjusted net income for the first quarter of 2016 increased 19 percent to $1,064 million compared to $891 million in the first quarter of 2015. For the same period, adjusted diluted earnings per share (EPS) increased 23 percent to $1.32 from $1.07.

Based on U.S. GAAP (Generally Accepted Accounting Principles), Celgene reported first quarter of 2016 net income of $801 million or $0.99 per diluted share. For the first quarter of 2015, net income was $719 million or $0.86 per diluted share.

“Our global teams generated excellent first quarter results and our strong operating momentum makes us confident that we will achieve or exceed our ambitious 2016 goals,” said Mark Alles, Chief Executive Officer of Celgene. “We are driving long-term value creation through the continued advancement of our innovative pipeline with significant clinical data expected over the next two years.”

First Quarter 2016 Financial Highlights

Unless otherwise stated, all comparisons are for the first quarter of 2016 compared to the first quarter of 2015. The adjusted operating expense categories presented below exclude share-based employee compensation expense and upfront collaboration expense. Please see the attached Reconciliation of GAAP to Adjusted Net Income for further information.

Net Product Sales Performance

  • REVLIMID® sales for the first quarter increased 17 percent to $1,574 million. Growth was driven by increased market share in newly diagnosed multiple myeloma and increases in duration. U.S. sales of $997 million and international sales of $577 million increased 23 percent and 8 percent, respectively.
  • POMALYST®/IMNOVID® sales were $274 million, a 38 percent increase year-over-year. U.S. sales of $171 million and international sales of$103 million increased 33 percent and 47 percent, respectively. POMALYST®/IMNOVID® sales were driven by increases in market share and duration trends.
  • ABRAXANE® sales for the first quarter were $225 million, a 1 percent increase year-over-year. U.S. sales of $144 million and international sales of $81 million decreased 10 percent and increased 26 percent, respectively. The decrease in sales in the U.S. reflects quarterly customer buying patterns and increased competition in breast cancer and lung cancer from new market entrants.
  • OTEZLA® sales in the first quarter were $196 million, a 224 percent increase year-over-year. Growth was driven by market share gains in theU.S. and Europe. U.S. sales were $175 million and international sales were $21 million.
  • In the first quarter, all other product sales, which include THALOMID®, ISTODAX®, VIDAZA® and an authorized generic version of VIDAZA®drug product in the U.S., were $226 million compared to $230 million in the first quarter of 2015.

Research and Development (R&D)

Adjusted R&D expenses were $591 million for the first quarter of 2016 compared to $431 million for the first quarter of 2015. The difference was primarily due to an increase in clinical trial activity across the portfolio and includes $65 million of milestones achieved by collaboration partners in the first quarter of 2016 while there were none in the first quarter of 2015. On a GAAP basis, R&D expenses were $733 million for the first quarter of 2016 and $506 million for the same period in 2015, also reflecting an increase in upfront collaboration expenses.

Selling, General, and Administrative (SG&A)

Adjusted SG&A expenses were $468 million for the first quarter of 2016 compared to $463 million for the first quarter of 2015. On a GAAP basis, SG&A expenses were $543 million for the first quarter of 2016 compared to $529 million for the same period in 2015.

Cash, Cash Equivalents, and Marketable Securities

Operations generated cash flow of $975 million in the first quarter of 2016, an increase of 14 percent year-over-year. In the first quarter, Celgenepurchased approximately $1,410 million of its shares. As of March 31, 2016, Celgene had $2,481 million remaining under the existing share repurchase program. Celgene ended the quarter with $5,707 million in cash and marketable securities.

2016 Guidance Updated

    Previous 2016
Guidance
    Updated 2016
Guidance
Net Product Sales:            
Total     $10.5B-$11.0B     $10.75B-$11.0B
REVLIMID®     $6.6B-$6.7B     Approximately $6.7B
POMALYST®/IMNOVID®     Greater than $1.0B     Greater than $1.0B
ABRAXANE®     Greater than $1.0B     $950M-$1.0B
OTEZLA®     Greater than $1.0B     Greater than $1.0B
Adjusted operating margin     Approximately 53.5%     Approximately 53.5%
GAAP operating margin     Approximately 42%     Approximately 42%
Adjusted diluted EPS     $5.50 to $5.70     $5.60 to $5.70
GAAP diluted EPS     $4.26 to $4.64     $4.26 to $4.56
Weighted average diluted shares     825M     811M
             

2017 Targets Updated

  • Updated targets reflect current exchange rates, inclusive of existing hedging contracts
  • Total net product sales are expected to be in the range of $12.7 billion to $13.0 billion versus the previous range of $13.0 billion to $14.0 billion
  • REVLIMID® net sales are expected to be approximately $8.0 billion versus the previous target of $7.0 billion
  • ABRAXANE® net sales are expected to be approximately $1.0 billion versus the previous range of $1.5 billion to $2.0 billion
  • Adjusted diluted EPS is expected to be in the range of $6.75 to $7.00 versus the previous target of $7.25
  • Weighted average diluted shares expected to be 825 million versus the previous target of 830 million

2020 Net Product Sales and Adjusted Diluted EPS Targets On-Track

  • Updated targets reflect current exchange rates
  • Total net product sales are expected to be more than $21.0 billion
  • Adjusted diluted EPS expected to be more than $13.00

Product and Pipeline Updates

Hematology/Oncology

In collaboration with our partner Agios Pharmaceuticals Inc., enrollment began in a phase III trial with AG-221 in IDH-2 mutated relapsed and/or refractory acute myeloid leukemia (AML). In collaboration with our partner Acceleron Pharma Inc., enrollment began in a phase III trial evaluating luspatercept in patients with anemia due to low- or intermediate-risk myelodysplastic syndromes and a phase III trial in regularly transfused beta-thalassemia patients is initiating.

During the quarter, several early- and mid-stage clinical trials began enrollment. These include:

  • The phase I/II ENHANCETM trial evaluating CC-122 in combination with ibrutinib and obinutuzumab in patients with relapsed and/or refractory chronic lymphocytic leukemia (CLL)
  • A phase II trial evaluating luspatercept in patients with anemia due to low- or intermediate-risk myelodysplastic syndromes who are ring sideroblasts negative or are eligible but have not yet received an erythropoiesis-stimulating agent
  • A safety trial with AG-120 or AG-221 in combination with standard chemotherapy in patients with newly diagnosed AML with an IDH-1 and/or IDH-2 mutation
  • A phase Ib trial from the FUSIONTM program combining durvalumab and POMALYST®/IMNOVID® in patients with relapsed and refractory multiple myeloma

The phase III apact® trial evaluating ABRAXANE® in combination with gemcitabine as adjuvant therapy in patients with surgically resected pancreatic cancer completed enrollment. Data from this trial are expected in 2017.

At the American Society of Clinical Oncology (ASCO) annual meeting in June 2016, expected presentations include:

  • A meta-analysis of overall survival in patients treated with REVLIMID® maintenance after high-dose melphalan and autologous stem cell transplant
  • Data on combinations with REVLIMID® or POMALYST®/IMNOVID® with novel agents in relapsed and/or refractory multiple myeloma
  • Data from the ETNA (Evaluating Treatment with Neoadjuvant Abraxane) phase III trial comparing neoadjuvant ABRAXANE® to paclitaxel in patients with HER2-negative high-risk breast cancer

Inflammation & Immunology (I&I)

In March, a New Drug Application in Japan was submitted for OTEZLA® for the treatment of psoriasis and psoriatic arthritis. A decision from theJapan Pharmaceuticals and Medical Devices Agency is now expected by year-end.

At the American Academy of Dermatology in March, an analysis of pooled 182-week (3.5-year) safety data from the ESTEEM 1 and 2 trials of patients with moderate to severe plaque psoriasis who are candidates for phototherapy or systemic therapy and pooled 3-year safety data from the PALACE 1-3 trials of patients with active psoriatic arthritis were presented.

The phase IIIb PSA-006 trial evaluating OTEZLA® in psoriatic arthritis patients with early disease met the primary endpoint of ACR 20 response rate. The data will be presented at a future medical congress.

The registration-enabling endoscopy trial (CD-001) with GED-0301 in patients with active Crohn’s disease completed enrollment. Data from the trial are expected to be presented at a major medical meeting in 2017.

Data from the phase II TOUCHSTONE trial with ozanimod showing the histologic improvement in patients with ulcerative colitis were presented at the Congress of the European Crohn’s and Colitis Organization (ECCO) in March 2016. Data from the enrolling phase III TRUE NORTH trial of ozanimod in patients with ulcerative colitis are expected in 2018.

Data at 72-weeks from the phase II portion of the RADIANCE trial evaluating ozanimod in patients with multiple sclerosis were presented at the ACTRIMS (Americas Committee for Treatment & Research in Multiple Sclerosis) meeting in February 2016.

In February, data from the phase II portion of the RADIANCE trial evaluating ozanimod in patients with relapsing multiple sclerosis were published inLancet Neurology. The phase III trials with ozanimod in multiple sclerosis (SUNBEAM and RADIANCE) have completed enrollment and are ongoing with data analysis expected in 2017.

The phase II trial evaluating RPC4046 in eosinophilic esophagitis met the primary endpoint of reduction of mean eosinophil count. Celgene is evaluating the data to determine next steps with the program. AbbVie, Inc. has a co-development option on RPC4046. The study results will be presented at a future medical meeting.

Business Update

In February, Celgene exercised its option to exclusively license bb2121, bluebird bio’s therapy targeting B cell maturation antigen (BCMA). Celgenewill be responsible for worldwide development and commercialization of bb2121 after the phase I trial is completed.

At the end of February, Celgene closed on the sale to Human Longevity, Inc. of Celgene Cellular Therapeutics’ (CCT) biobanking business known as LifebankUSA and CCT’s biomaterials portfolio of assets including Biovance®.

In April, Celgene exercised its option to develop and commercialize the Juno Therapeutics, Inc. CD19 program outside North America and China. Both companies will now share global development expenses for products in the CD19 program. Celgene has commercial rights outside of North America and China and will pay Juno a royalty at a percentage in the mid-teens on any future net sales of therapeutic products developed through the CD19 program in Celgene’s territories. (Original Source)

Shares of Celgene closed yesterday at $106.15, down $1.40 or -1.30%. 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 $103.41 and its 200-day moving average is $108.74.

On the ratings front, Celgene has been the subject of a number of recent research reports. In a report issued on April 26, Robert W. Baird analyst Brian Skorney reiterated a Buy rating on CELG, with a price target of $162, which implies an upside of 52.6% from current levels. Separately, on April 25, Merrill Lynch’s Ying Huang reiterated a Buy rating on the stock and has a price target of $125.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Brian Skorney and Ying Huang have a total average return of -2.1% and 16.6% respectively. Skorney has a success rate of 44.1% and is ranked #3161 out of 3839 analysts, while Huang has a success rate of 71.4% and is ranked #180.

Overall, one research analyst has assigned a Hold rating and 11 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 $137.20 which is 29.3% above where the stock closed yesterday.

Celgene Corp. is an integrated global biopharmaceutical company engaged primarily in the discovery, development and commercialization of therapies for the treatment of cancer and inflammatory diseases through gene and protein regulation. Its targeting areas include intracellular signaling pathways, protein homeostasis and epigenetics in cancer and immune cells, immunomodulation in cancer and autoimmune diseases and therapeutic application of cell therapies. The company’s products include Revlimid, Vidaza, Thalomid, Pomalyst/Imnovid, Abraxane, and Istodax. Celgene was founded by David Stirling and Sol Barer in 1986 and is headquartered in Summit, NJ.