Celgene (CELG) Gets Two Votes of Confidence from Oppenheimer and Canaccord Following Q1 Update

Oppenheimer's Leah R. Cann and Canaccord's John Newman are out with bullish research notes following this biotech giant's first quarter print.

Celgene Corporation (NASDAQ:CELG) was under the limelight for its first quarter earnings and update, especially following a recent rejection from the FDA on a lead pipeline asset: relapsing multiple sclerosis asset ozanimod. Yet, Friday’s print and company update have left two bulls continuing to bet on this biotech giant’s market opportunity.

Oppenheimer analyst Leah R. Cann is content to see both clinical as well as regulatory programs steaming right along the tracks with a first quarter earnings show that proved to rise above consensus expectations.

In reaction, the analyst reiterates an Outperform rating on CELG stock with a $163 price target, which implies a close to 93% upside from current levels. (To watch Cann’s track record, click here)

For the first quarter, the giant posted $1.10 in GAAP EPS, underclassing the analyst’s forecast of $1.73, which Cann attributes to one-time events in the quarter. Additionally, the analyst projects that before one-time events, EPS leveled at $1.68, or $2.7 below her expectations, albeit 3.7% above the Street’s $1.62 estimate. “The slightly lower than estimated clean earnings resulted from slightly lower than estimated product sales,” adds Cann, who keeps her product sales and revenue expectations between now and 2020 essentially the same. Product sales of $3.531 billion fell 2.9% under the analyst’s bullish $3.636 billion forecast while beating out the Street’s $3.469 billion by 1.8%. This strength Cann credits to stronger-than-anticipated sales from every product save for Istodax.

For this year and the next, the analyst is boosting her R&D expense estimates on back of further R&D expenses for both Juno’s as well as Impact’s programs. The CELG team lifted its revenue on a GAAP and adjusted basis for the existing business, as well as the EPS outlook. Yet, the company dialed down the 2018 EPS guide by $1.05 to account for the Juno acquisition.

“We have not included any sales impact to Celgene from Juno or Impact through 2022 at this time; however, potential products from these acquisitions could provide upside to our sales estimate by 2022. We have reduced our estimated interest income to account for acquisitions and the ongoing share repurchase program. The combined changes result in our estimated EPS being lowered by 6.6%, 8.4%, 6.5%, 6.9%, and 6.1% for years 2018-2022, respectively,” notes Cann.

In a nutshell, Cann remains bullish, asserting: “We continue to believe the company’s regulatory approvals and filings are on track. Following a Type A meeting with FDA in early April, Celgene expects to resubmit the NDA for ozanimod in the first quarter of 2019. Celgene reported that FDA is not requiring additional human clinical efficacy and safety studies.”

Canaccord analyst John Newman chimes in shining light on multiple myeloma asset Revlimid’s outperformance, which yielded $2.23 billion against the Street’s $2.21 billion and his estimate of $2.18 billion.

Newman highlights this beat follows “continued volume growth and longer treatment duration due to adoption of triplet combinations treatment, a strong indicator of long-term growth.” Notably, the CELG team sets a roughly $9.5 billion guide for 2018 of net sales, marking approximately 15% year-over-year growth. “We look for positive Phase 3 AUGMENT and ROBUST readout in 2018, and triplet data for NDMM in 2018 to further assess the growth potential of Revlimid,” predicts Newman.

Following the FDA’s Refusal to File letter for ozanimod, Newman is encouraged for a refiling anticipated next year, one that is “unlikely to require [a] lengthy metabolite study.”

In regard to psoriasis asset Otezla, the analyst cheers “steadying growth” as “encouraging,” where the drug yielded a whopping $353 million in first quarter net sales, above the Street’s $332 million projection.

Bigger picture, “CELG based on our expectation of continued upside from the pipeline and CELG’s strong execution of pipeline diversification and expansion based on organic R&D, in-licensing, and M&A. We are encouraged by the steady growth in Revlimid to help support CELG’s business development strategy to acquire and expand the existing pipeline. Furthermore, we look forward to strong data update from the CART programs, which could help strengthen CELG’s leadership in hematological oncology space while bolstering defense against future generic pressure on Revlimid by pivoting to biologic therapy,” Newman concludes.

As such, the analyst maintains a Buy rating on CELG stock with a price target of $140, which implies a just under 66% upside from current levels. (To watch Newman’s track record, click here)

TipRanks indicates the biotech giant has drawn healthy optimism on the Street. Out of 21 analysts polled in the last 3 months, 13 are bullish on CELG stock while 8 remain sidelined. With a return potential of nearly 39%, the stock’s consensus target price stands at $117.25.  

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