CELGCelgene Corporation (NASDAQ:CELG) reported net product sales of $2,969 million for the third quarter of 2016, a 28 percent increase from the same period in 2015. Net product sales growth includes a 1 percent negative impact from currency exchange effects. Third quarter total revenue increased 28 percent to $2,983 million compared to $2,334 million in the third quarter of 2015.

Net income for the third quarter of 2016 based on U.S. GAAP (Generally Accepted Accounting Principles), was $171 million or $0.21 per diluted share compared to a net loss of $34 million or $0.04 per diluted share in the third quarter of 2015. The results for the third quarter of 2016 include increased research and development expenses as a result of the EngMab AG acquisition. The net loss in the third quarter of 2015 reflected costs related to strategic transactions including the collaboration with Juno Therapeutics and the acquisition ofReceptos.

Adjusted net income for the third quarter of 2016 was $1,263 million or $1.58 per diluted share compared to $1,011 million or $1.23per diluted share for the third quarter of 2015.

“Continued outstanding execution by our teams around the world led to another strong quarter of revenue growth and progress advancing many of our most important strategic programs,” said Mark J. Alles, Chief Executive Officer of Celgene Corporation. “Our increasing enterprise-wide momentum has us on-track to exceed key 2016 objectives and positions us well for sustained long-term growth.”

Third Quarter 2016 Financial Highlights

Unless otherwise stated, all comparisons are for the third quarter of 2016 compared to the third quarter of 2015. The adjusted operating expense categories presented below exclude share-based employee compensation expense, collaboration-related upfront expense, research and development asset acquisition expense and a litigation-related loss contingency accrual expense. Please see the attached Use of Non-GAAP Financial Measures and Reconciliation of GAAP to Adjusted Net Income for further information relevant to the interpretation of adjusted financial measures and reconciliations of these adjusted financial measures to the most comparable GAAP measures, respectively.

Net Product Sales Performance

  • REVLIMID® sales for the third quarter increased 30 percent year-over-year to $1,891 million and were driven by new patient market share gains and increased duration. U.S. sales of $1,153 million and international sales of $738 million increased 29 percent and 32 percent year-over-year, respectively.
  • POMALYST®/IMNOVID® sales for the third quarter were $341 million, an increase of 33 percent year-over-year. U.S. sales were$203 million and international sales were $138 million, an increase of 35 percent and 30 percent year-over-year, respectively. POMALYST®/IMNOVID® sales grew due to increased volume from duration gains.
  • OTEZLA® sales for the third quarter were $275 million, a 98 percent increase year-over-year. U.S. sales were $245 million and international sales were $30 million. Sales were driven by market share gains and increased prescriber adoption.
  • ABRAXANE® sales for the third quarter were $233 million, a 1 percent increase year-over-year. U.S. sales of $144 milliondecreased 1 percent year-over-year. International sales were $89 million.
  • In the third quarter, all other product sales, which include THALOMID®, ISTODAX®, VIDAZA® and an authorized generic version of VIDAZA® drug product in the U.S., were $229 million compared to $234 million in the third quarter of 2015.

Research and Development (R&D)

On a GAAP basis, R&D expenses were $1,653 million for the third quarter of 2016 compared to $1,305 million for the same period in 2015. The increase was primarily driven by a $623.3 million asset acquisition expense associated with the purchase of EngMab AG and an increase in early research and clinical trial activity, partially offset by decreases in expenses related to collaboration-related upfront expenses. Adjusted R&D expenses were $644 million for the third quarter of 2016 compared to $488 million for the third quarter of 2015.

Selling, General, and Administrative (SG&A)

On a GAAP basis, SG&A expenses were $698 million for the third quarter of 2016 compared to $550 million for the same period in 2015. The increase was primarily due to a 2016 litigation-related loss contingency accrual expense as well as an increase in donations to independent patient assistance organizations. Adjusted SG&A expenses were $591 million for the third quarter of 2016 compared to$474 million for the third quarter of 2015.

Cash, Cash Equivalents, and Marketable Securities

Operating cash flow was $723 million in the third quarter of 2016. Celgene ended the quarter with approximately $6.9 billion in cash, cash equivalents and marketable securities.

In the third quarter of 2016, Celgene purchased approximately 2.5 million of its shares at a total cost of approximately $273 million. As of September 30, 2016, the Company had approximately $4.9 billion remaining under the stock repurchase program.

2016 Guidance Updated

  Previous 2016 Guidance   Updated 2016 Guidance
Net Product Sales        
Total   Approximately $11.0B   Approximately $11.2B
REVLIMID®   Approximately $6.8B   Approximately $7.0B
GAAP diluted EPS   $3.82 to $4.05   $3.12 to $3.29
Adjusted diluted EPS   $5.70 to $5.75   $5.88 to $5.92
GAAP operating margin   Approximately 37%   Approximately 31%
Adjusted operating margin   Approximately 54.0%   Unchanged
Weighted average diluted shares   806M   804M

Net product sales guidance for POMALYST®/IMNOVID®, ABRAXANE® and OTEZLA® remain unchanged.

2017 Targets Updated

  • Total net product sales are expected to be at the high end of the range of $12.7 billion to $13.0 billion
  • REVLIMID® net sales are expected to be more than $8.0 billion versus the previous target of approximately $8.0 billion
  • Adjusted diluted EPS is expected to be at the high end of the range of $6.75 to $7.00

The net product sales target for ABRAXANE® and adjusted diluted share count remain unchanged.

Product and Pipeline Updates

Hematology/Oncology

  • A supplemental New Drug Application (sNDA) was filed with the U.S. Food and Drug Administration (FDA) for the expanded indication of REVLIMID® as maintenance treatment in newly diagnosed multiple myeloma (NDMM) patients after receiving an autologous stem-cell transplant (ASCT). The sNDA was granted Priority Review and the Prescription Drug User Fee Act (PDUFA) date for the submission is February 24, 2017. In June, an application was submitted to the European Medicines Agency (EMA) for the review of REVLIMID® as maintenance treatment in NDMM patients after receiving an ASCT. A decision on the European Union(EU) application is expected in the first half of 2017.
  • In August, the European Commission approved the inclusion of data from a pooled analysis of patients with relapsed and/or refractory multiple myeloma and impaired renal function in the IMNOVID® label.
  • Celgene expects to submit a new drug application (NDA) to the FDA for enasidenib (AG-221) in relapsed and/or refractory acute myeloid leukemia (AML) with isocitrate dehydrogenase-2 (IDH2) mutation by year-end. The NDA will be based on data from an ongoing phase I/II trial in patients with relapsed and/or refractory AML and other advanced hematologic malignancies with an IDH2 mutation.

Data at hematology and oncology medical congresses presented in the third quarter and expected in the fourth quarter include:

  • Data from multiple sponsored and independent studies evaluating the use of ABRAXANE® as a single agent or in combination with novel agents and novel regimens in patients with metastatic pancreatic cancer, metastatic breast cancer and non-small cell lung cancer (NSCLC) were presented during the European Society of Medical Oncology (ESMO) 2016 Annual Meeting in October.
  • Celgene’s collaboration partner Triphase Accelerator Corporation is expected to present results from a phase I trial evaluating marizomib in combination with bevacizumab in recurrent glioblastoma at the Society for Neuro-Oncology (SNO) meeting in November.
  • Data from the abound® program of ABRAXANE® in NSCLC are expected to be presented at the IASLC World Conference on Lung Cancer in December.
  • Data from the phase II tnAcity® trial evaluating ABRAXANE® in combination with gemcitabine or carboplatin in patients with triple negative breast cancer are expected at The San Antonio Breast Cancer Symposium (SABCS) in December.
  • At the 2016 American Society of Hematology (ASH) annual meeting in December, data presentations expected include:
    • Phase III Myeloma XI trial evaluating REVLIMID® as induction and maintenance therapy in patients with NDMM following ASCT.
    • Final overall survival data from the phase III MM-020 trial evaluating REVLIMID® in combination with low-dose dexamethasone in patients with NDMM who were not candidates for stem-cell transplant.
    • Phase III REMARC trial comparing REVLIMID® maintenance to placebo in elderly patients with diffuse large B-cell lymphoma (DLBCL) previously treated with rituximab plus chemotherapy (R-CHOP).
    • Phase III CONTINUUM trial comparing REVLIMID® maintenance to placebo in chronic lymphocytic leukemia following second-line therapy.
    • Interim data from the phase III MAGNIFYTM trial with REVLIMID® in combination with R-CHOP in patients with relapsed and/or refractory indolent lymphoma.
    • Phase Ib trial evaluating CC-122 in combination with obinutuzumab in patients with relapsed and/or refractory DLBCL or indolent non-Hodgkin’s lymphoma.

Inflammation & Immunology (I&I)

Data at I&I medical congresses presented in the third quarter and expected in the fourth quarter include:

  • Long-term data from the phase II RADIANCE trial evaluating ozanimod in relapsing multiple sclerosis were presented at theEuropean Committee for Treatment and Research in Multiple Sclerosis (ECTRIMS) in September.
  • Phase Ib trial evaluating the effects of oral GED-0301 (mongersen) on both endoscopic and clinical outcomes in patients with active Crohn’s disease were presented at the United European Gastroenterology Week (UEGW) in October. The phase III program continues to enroll with data expected in 2018.
  • Phase II trial of RPC4046 in patients with eosinophilic esophagitis were presented at UEGW and the American College of Gastroenterology (ACG) meetings in October.
  • Phase II TOUCHSTONE trial evaluating ozanimod as induction and maintenance in patients with ulcerative colitis presented at UEGW and ACG.
  • Pooled 3-year data analyses from ESTEEM 1 and 2 and PALACE 1-3 trials were presented at the European Academy of Dermatology and Venereology (EADV) meeting in October.
  • Phase IIb trial of OTEZLA® in Japanese patients with moderate-to-severe psoriasis were presented at EADV. This trial will be used to support the regulatory approval in Japan.
  • At the 2016 American College of Rheumatology annual meeting in November, data presentations expected include:
    • Three-year safety and efficacy data from the PALACE program with OTEZLA® in psoriatic arthritis.
    • Four-year safety and efficacy data from PALACE 3 trial with OTEZLA® in DMARD- and/or biologic-experienced psoriatic arthritis patients.
    • Pooled three-year data from the PALACE program for the enthesitis and dactylitis and HAQ-DI endpoints.
    • 52-week data from the PSA-006 trial of OTEZLA® in biologic-naïve patients with active psoriatic arthritis.
    • Phase II safety and dose-ranging trial of CC-220 in systemic lupus erythematosus. The second part of the phase II trial evaluating improvement in skin manifestations and improvement in the Cutaneous Lupus Area and Severity Index (CLASI) score is enrolling.
  • An encore presentation of the phase Ib trial evaluating the effects of oral GED-0301 on both endoscopic and clinical outcomes in patients with active Crohn’s disease are expected at the Advances in Inflammatory Bowel Diseases (AIBD) meeting in December.

Business Update

In September, Celgene completed a transaction to acquire Switzerland-based, privately-held biotechnology company EngMab AG for$625.3 million plus contingent development, regulatory and commercial milestones. EngMab’s lead molecule is EM901, a T-cell bi-specific antibody targeting B-cell maturation antigen (BCMA). The acquisition includes an additional undisclosed program. The Company plans to file an Investigational New Drug (IND) application for EM901 in late 2017. The transaction was accounted as an asset acquisition, resulting in $623.3 million of research and development expense and $2.0 million of net working capital acquired. (Original Source)

Shares of Celgene are currently trading at 104.04, up $5.63 or nearly 6% in early trading Thursday. CELG has a 1-year high of $128.39 and a 1-year low of $93.05. The stock’s 50-day moving average is $104.91 and its 200-day moving average is $105.54.

On the ratings front, Celgene has been the subject of a number of recent research reports. In a report issued on October 20, Stifel Nicolaus analyst Katherine Breedis maintained a Buy rating on CELG, with a price target of $138, which implies an upside of 40% from current levels. Separately, on October 18, BMO’s Ian Somaiya reiterated a Buy rating on the stock and has a price target of $141.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Katherine Breedis and Ian Somaiya have a yearly average loss of 6.2% and a return of 10.9% respectively. Breedis has a success rate of 0% and is ranked #2942 out of 4188 analysts, while Somaiya has a success rate of 46% and is ranked #319.

The street is mostly Bullish on CELG stock. Out of 18 analysts who cover the stock, 15 suggest a Buy rating and 3 recommend to Hold the stock. The 12-month average price target assigned to the stock is $140.13, which represents a potential upside of 42% from where the stock is currently trading.

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.