Celgene Misses, Reaffirms - Analyst Blog

Celgene Corporation’s (CELG) first quarter 2012 earnings (excluding special items but including stock-based compensation expense) of 96 cents per share beat the year-ago earnings by 35%. Higher revenues drove earnings in the reported quarter. The Zacks Consensus Estimate was $1.02 per share.

Quarter in Details

Total revenue climbed 13.2% to $1.27 billion in the first quarter of 2012. Revenues were boosted by the impressive performance of Celgene’s cancer drugs Revlimid, Abraxane and Vidaza. Revenues for the quarter were, however, below the Zacks Consensus Estimate of $1.32 billion.

Net sales of Revlimid, the key growth driver at Celgene, came in at $861 million, reflecting an increase of 17% over the year-ago period. The drug did well both in the US (up 17%) and international markets (up 16%).

Net sales of Vidaza climbed 14% to $186 million, driven by strong sales in international markets. Sales in international markets climbed 23% to $112 million. Results were aided by launches in many new markets.

Performance of the drug in the US, where it went off patent in May 2011, was not very impressive. On a year over year basis, sales climbed a mere 3% to $74 million. On a sequential basis, US sales of Vidaza were down 14%, mainly due to reduced levels of wholesaler inventory.

Net sales of Abraxane climbed 41% to $104 million. Sequential US sales were hurt by the reduced levels of wholesaler inventory coupled with the restoration of supply (in maximum capacity) of the generic version of Abraxane.

Net sales of another cancer drug, Thalomid, continued to decline due to the availability of better alternatives. Thalomid sales were $78 million, down 9%.

Research and development (R&D) expenses (excluding stock-based compensation and other special items) climbed 13.3% to $315 million in the reported quarter. The increase was primarily attributable to Celgene’s efforts to expand its pipeline.

Selling, general and administrative expenses (excluding stock-based compensation and other special items) in the quarter increased approximately 10.7% year-over-year to $299 million. Costs associated with the marketing activities for Revlimid and pre-launch activites for pomalidomide primarily led to the rise in SG&A expenses.

We note that Celgene filed a new drug application (NDA) with the FDA for pomalidomide for treating patients suffering from relapsed and refractory multiple myeloma during the quarter. European approval will be sought for the same indication later in the year.

Outlook Backed

Apart from announcing financial results, Celgene reaffirmed the bright outlook for 2012, provided by it earlier. Adjusted earnings (excluding stock-based compensation expense and other special items) are projected in the range of $4.70-$4.80 per share, representing year-over-year growth of 25%. The Zacks Consensus Estimate for 2012 is $4.32 per share.

Adjusted revenues are projected in the range of $5.4-$5.6 billion, up 15%. The Zacks Consensus Estimate is $5.5 billion, within the guidance range provided by the company. Revlimid will continue performing well with sales projected in the range of $3.75 - $3.85 billion, up 19%.

Neutral on Celgene

We have a Neutral recommendation on Celgene. Our long-term stance is in-line with the Zacks #3 Rank (Hold rating) carried by the company in the short run.

Apart from Celgene, other major players in the pharmaceutical sector -- Bristol-Myers Squibb Company (BMY) and generic player Mylan Inc. (MYL) -- also reported earnings this morning. Gilead Sciences Inc. (GILD) will report earnings after the close of the market today.

BRISTOL-MYERS (BMY): Free Stock Analysis Report

CELGENE CORP (CELG): Free Stock Analysis Report

GILEAD SCIENCES (GILD): Free Stock Analysis Report

MYLAN INC (MYL): Free Stock Analysis Report

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