Celgene Corp.'s Earnings Hint at Big Things to Come

By Markets Fool.com

Celgene Corp.reported its first-quarter earnings before the bell this morning, beating expectations on diluted earnings per share but missing on revenue. Specifically, the biotech reported diluted EPS of $1.07, topping consensus by $0.01. Total revenue for the three-month period came in at $2.081 billion. However, Wall Street had expected a slightly higher figure of $2.11 billion.

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Even though Celgene's first-quarter numbers didn't exactly blow away the Street, the company did report an impressive 28.9% jump in diluted EPS and a 20.3% increase in net product sales, year over year, making it one of the fastest-growing large-cap biotechs.

Given Celgene's importance in the industry, let's take a deeper look at today's report to see how the company arrived at these numbers and what might lie ahead.

Celgene's growth still propelled mainly by its cancer franchise
Celgene's top-tier growth rate has largely been driven by its core cancer franchise of Revlimid, Abraxane, and Pomalyst/Imnovid. This trend continued in the first quarter.

Revlimid's quarterly sales grew by an astounding 19.3%, on an operational basis, to $1.342 billion. Celgene noted, though, that unfavorable exchange rates in international markets had a negative impact of 1.9% on the drug's global sales for the three-month period.

Worldwide sales of Abraxane also shot higher by 20.9%, to $223 million, during the quarter, with the drug experiencing only negligible impacts from foreign currency exchange. This healthy upswing in sales is presumably the result of the drug's recent label expansions intonon-small cell lung cancer and pancreatic cancer.

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Finally, Pomalyst/Imnovid sales grew by 46.4%, to $198.5 million, compared to the same period a year ago, putting it on track to reach blockbuster status this year.

Outside of oncology, Celgene's biggest products performed pretty much as expected. Specifically, the relatively new psoriasis drug Otezla posted global sales of $60.3 million, up $13.3 million from the fourth quarter. Global sales of the blood disorder drug Vidaza fell by 3.2% year over year, to $143.6 million. This drop reflected the devastating impact of the introduction of generics in the U.S., where the drug's sales cratered by 60% during the first quarter.

What's next?
Perhaps one of the biggest takeaways from today's earnings report is that Celgene is building a monstrous cash position, exiting the quarter with over $7.3 billion in cash and cash equivalents.

So far, the biotech has only dabbled on the merger and acquisition front by buying up privately heldQuanticel for an up-front cash payment of $100 million and $385 million in contingent payments based on research and developmental milestones. Although the company recently agreed to a couple equity investment deals withCRISPR Therapeutics and Mesoblast, these two deals combined cost Celgene less than $100 million.

Celgene is on track to finish the year with well over $8 billion in cash, depending on how management uses the remaining $2 billion in share buybacks under the current program. As a result, it should have ample dry powder to either pursue a largish buyout or reward shareholders by initiating a dividend.

As valuations across the board in biotech remain on the high side, my bet is that Celgene will start paying a dividend before year's end. Stay tuned!

The article Celgene Corp.'s Earnings Hint at Big Things to Come originally appeared on Fool.com.

George Budwell has no position in any stocks mentioned. The Motley Fool recommends Celgene. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.