Celgene Corporation (NASDAQ:CELG) reported net product sales of $2,745 million for the second quarter of 2016, a 22 percent increase from the same period in 2015. Net product sales growth includes a 1 percent negative impact from currency exchange effects. Second quarter total revenue increased 21 percent to $2,754 million compared to $2,278 million in the second quarter of 2015.

Net income for the second quarter of 2016 based on U.S. GAAP (Generally Accepted Accounting Principles), was $598 million or $0.75 per diluted share compared to $356 million or $0.43 per diluted share in the second quarter of 2015. Adjusted net income for the second quarter of 2016 was$1,152 million or $1.44 per diluted share compared to $1,019 million or $1.23 per diluted share for the second quarter of 2015.

“Our first-half 2016 operating results were outstanding and we are pleased with the progress made advancing many key corporate objectives,” saidMark J. Alles, Chief Executive Officer of Celgene Corporation. “This strong momentum increases our confidence in our near- and longer-term outlook as we continue to invest in innovative research and the development of transformational therapies for patients worldwide.”

Second Quarter 2016 Financial Highlights

Unless otherwise stated, all comparisons are for the second quarter of 2016 compared to the second quarter of 2015. The adjusted operating expense categories presented below exclude share-based employee compensation expense, upfront collaboration expense and a litigation-related loss contingency accrual expense. 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 18 percent year-over-year to $1,701 million and were driven by new patient market share gains and increased duration. U.S. sales of $1,080 million and international sales of $621 million increased 24 percent and 9 percent year-over-year, respectively.
  • POMALYST®/IMNOVID® sales for the second quarter were $318 million, an increase of 35 percent year-over-year. U.S. sales were $185 millionand international sales were $133 million, an increase of 29 percent and 46 percent year-over-year, respectively. POMALYST®/IMNOVID® sales grew due to increased volume from duration gains.
  • ABRAXANE® sales for the second quarter were $249 million, a 2 percent increase year-over-year. U.S. sales of $175 million increased 3 percent year-over-year. International sales were $74 million.
  • OTEZLA® sales for the second quarter were $242 million, a 170 percent increase year-over-year. U.S. sales were $217 million and international sales were $25 million. Sales were driven by market share gains and increased prescriber adoption.
  • In the second quarter, all other product sales, which include THALOMID®, ISTODAX®, VIDAZA® and an authorized generic version of VIDAZA®drug product in the U.S., were $235 million compared to $242 million in the second quarter of 2015.

Research and Development (R&D)

On a GAAP basis, R&D expenses were $949 million for the second quarter of 2016 compared to $1,110 million for the same period in 2015. The change was primarily driven by a decrease in upfront collaboration expenses compared to the previous year, partially offset by early research and clinical trial activity related to the acquisitions of Receptos, Inc. and Quanticel Pharmaceuticals, Inc. that closed in the second half of 2015. Adjusted R&D expenses were $601 million for the second quarter of 2016 compared to $477 million for the second quarter of 2015. Adjusted R&D does not include upfront collaboration expenses but does reflect the increase in early research and clinical trial activity.

Selling, General, and Administrative (SG&A)

On a GAAP basis, SG&A expenses were $732 million for the second quarter of 2016 compared to $617 million for the same period in 2015. The increase was primarily due to a loss contingency accrual expense of $100 million related to a contractual dispute. Adjusted SG&A expenses were$547 million for the second quarter of 2016 compared to $541 million for the second quarter of 2015.

Cash, Cash Equivalents, and Marketable Securities

Operating cash flow was $936 million in the second quarter of 2016. Celgene ended the quarter with approximately $6.4 billion in cash, cash equivalents and marketable securities.

In the second quarter of 2016, Celgene purchased approximately 3.4 million of its shares at a total cost of approximately $343 million. In June 2016, the share repurchase authorization was increased by an additional authorization of $3 billion. As of June 30, 2016, the Company had approximately$5.1 billion remaining under the stock repurchase program.

2016 Guidance Updated    
  Previous 2016
Guidance
Updated 2016
Guidance
Net Product Sales    
Total $10.75B-$11.0B Approximately $11.0B
REVLIMID® Approximately $6.7B Approximately $6.8B
GAAP diluted EPS $4.26 to $4.56 $3.82 to $4.05
Adjusted diluted EPS $5.60 to $5.70 $5.70 to $5.75
GAAP operating margin Approximately 42% Approximately 37%
Adjusted operating margin Approximately 53.5% Approximately 54.0%
Weighted average diluted shares 811M 806M

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

Product and Pipeline Updates

Hematology/Oncology

  • At the American Society of Clinical Oncology (ASCO) meeting in June, pooled data from a meta-analysis of overall survival (OS) in multiple myeloma patients receiving REVLIMID® as maintenance treatment following autologous stem-cell transplant were presented. An application was submitted to the European Medicines Agency (EMA) in early June for the review of REVLIMID® as maintenance treatment in newly diagnosed multiple myeloma (NDMM) patients after receiving an autologous stem-cell transplant. A decision on the application is expected in 2017. A submission in the U.S. is expected in the second half of 2016.
  • In July, the European Commission (EC) approved REVLIMID® for the treatment of adult patients with relapsed or refractory mantle cell lymphoma. REVLIMID® is approved in the U.S. for the treatment of mantle cell lymphoma after relapse or progression on two prior therapies.
  • In June, the U.S. product insert for POMALYST® was updated to include data from a pooled pharmacokinetics analysis of patients with relapsed and/or refractory multiple myeloma (RRMM) and impaired renal function. In Europe, the Committee for Medicinal Products for Human Use (CHMP) granted a positive opinion for IMNOVID® based on the same data. The EC decision is expected in the third quarter.
  • In July, Celgene disclosed the top-line results of the phase III REMARC trial evaluating REVLIMID® as maintenance therapy compared with placebo in patients with diffuse large B-cell lymphoma responding to treatment with rituximab in combination with standard chemotherapy. The full data set will be presented at a future medical congress.
  • In July, Celgene’s partner Juno Therapeutics provided preliminary data from the ongoing phase I trial with JCAR017 in patients with adult non-Hodgkin lymphoma (NHL). In ten patients evaluable for efficacy, an overall response rate of 80 percent and a complete response rate of 70 percent were seen. In thirteen patients evaluable for safety, the rate of severe neurotoxicity was 15 percent and the rate of cytokine release syndrome was zero percent. An update of the trial data is expected later in the year.
  • The FUSIONTM program evaluating durvalumab in hematological malignancies continues to advance with six early-stage trials enrolling. The trials are evaluating durvalumab as a single agent or in combination with novel agents in NDMM, RRMM, myelodysplastic syndromes, acute myeloid leukemia, NHL and chronic lymphocytic leukemia.
  • A phase II trial with CC-486 in combination with pembrolizumab in previously treated locally advanced or metastatic non-small cell lung cancer completed enrollment in the second quarter.

Inflammation & Immunology

  • Long-term data from the PALACE program evaluating OTEZLA® in moderate-to-severe psoriatic arthritis were presented at the EuropeanLeague Against Rheumatism (EULAR) meeting in June. Included was three-year pooled efficacy and safety data from the phase III PALACE program, as well as pooled data on fatigue, HAQ-DI and BASDAI from PALACE 1-3.
  • The phase II proof-of-concept trial evaluating OTEZLA® in atopic dermatitis has completed. Celgene is evaluating the data to determine next steps. The data will be published at a later date.
  • In May, the phase II TOUCHSTONE trial evaluating ozanimod induction and maintenance in patients with moderate-to-severe ulcerative colitis was published in The New England Journal of Medicine. Histologic data from the phase II TOUCHSTONE trial were presented at the Digestive Disease Week meeting in May. The phase III TRUE NORTH trial evaluating ozanimod in patients with moderate-to-severe ulcerative colitis continues to enroll with data expected in 2018.
  • The registration-enabling endoscopy trial (CD-001) with GED-0301 in patients with active Crohn’s disease completed enrollment. Top-line data from the 12-week portion of the trial is expected in the second half of 2016.

Business Update

  • In July, Celgene announced a strategic collaboration with Jounce Therapeutics, Inc. The collaboration includes options on Jounce’s lead product candidate, JTX-2011, targeting ICOS (the Inducible T cell CO-Stimulator), and up to four early-stage programs to be selected from a defined pool of B cell, T regulatory cell and tumor-associated macrophage targets emerging from Jounce’s research platform, and an additional option on a Jounce checkpoint immuno-oncology program.
  • In May, Celgene and Agios Pharmaceuticals, Inc. entered into a new global strategic collaboration for the discovery, development and commercialization of novel metabolic immuno-oncology therapies based on Agios’ innovative cellular metabolism research platform. In addition, Celgene transferred global development and commercialization rights to the AG-120 program to Agios. (Original Source)

Shares of Celgene are up nearly one percent to $109.35 in pre-market trading. CELG has a 1-year high of $133.59 and a 1-year low of $92.98. The stock’s 50-day moving average is $102.11 and its 200-day moving average is $102.92.

On the ratings front, Celgene has been the subject of a number of recent research reports. In a report issued on July 26, Cantor Fitzgerald analyst Mara Goldstein reiterated a Buy rating on CELG, with a price target of $159, which represents a potential upside of 47.1% from where the stock is currently trading. Separately, on the same day, Robert W. Baird’s Brian Skorney reiterated a Buy rating on the stock and has a price target of $162.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Mara Goldstein and Brian Skorney have a total average return of -2.8% and 4.5% respectively. Goldstein has a success rate of 44.0% and is ranked #3572 out of 4087 analysts, while Skorney has a success rate of 55.0% and is ranked #703.

The street is mostly Bullish on CELG stock. Out of 15 analysts who cover the stock, 12 suggest a Buy rating and 3 recommend to Hold the stock. The 12-month average price target assigned to the stock is $139.25, which implies an upside of 28.8% from current levels.

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.