Celgene Delivers a Blockbuster Quarter

By Markets Fool.com

Multiple myeloma powerhouse Celgene Corp (NASDAQ: CELG) rode sales growth for its first- and second-line multiple myeloma drug, Revlimid, to a record-setting quarter in Q3. The company's results outpaced industry watchers' predictions on both the top and bottom lines, allowing management to bump up its guidance for this year and next year.

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Image source: Celgene Corp.

Biggest catalyst

Celgene's Revlimid sales have been increasing steadily since the FDA expanded Revlimid's label last year to include its use in first-line multiple myeloma patients.

In Q3,Revlimid revenue jumped 30% year over year to $1.9 billion due to both increasing volume and longer treatment duration.

Strong demand for the expensive therapy in the quarter led management to rejigger its outlook for Revlimid sales in both 2016 and 2017. Celgene now expects Revlimid revenue of $7 billion this year and north of $8 billion next year. Previously, management's guidance was for $6.8 billion this year and "approximately" $8 billion next year.

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Expansion plans are paying off

Revlimid is having the biggest impact on the company's performance, but Celgene is also benefiting from rapid adoption of Otezla, a psoriasis drug. Otezla is the company's first foray into autoimmune disease, and since winning approval in 2014,sales have accelerated more quickly than competing, prior-generation psoriasis drugs.

Image source: Celgene Corp.

Otezla's mounting momentum led to sales skyrocketing 98% to $275 million in the third quarter, and that performance brought Otezla's sales through the first nine months of this year to $712.1 million. Last year, sales through the first nine months were $289 million. Otezla's sequential sales increase from Q2 also means it has reached an annualized billion-dollar sales run rate for the first time.

Otezla's sales continue to capture prescription share in the U.S., but international sales are growing even more quickly. Otezla won EU approval in 2015, and thanks to securing pricing deals with member countries since then, Otezla's Q3, 2016 international revenue jumped to $30.1 million from $10.3 million in Q3, 2015. Otezla's international sales through the first nine months of 2016 were $76 million, up from $16.2 million in the comparable period last year.

Financial flexibility

Revlimid and Otezla's performances were backed up by solid growth for Pomalyst and stable sales for Abraxane. Pomalyst sales grew 33% year over year to $341 million, and Abraxane sales were essentially unchanged, up 1% to $233 million.

Across all of Celgene's products, the company generated a record $2.97 billion in net product sales and an adjusted net income of $1.26 billion.Celgene's $723 million in Q3 operating cash flow continues to provide it with plenty of financial firepower to continue financing both internal R&D and external collaborations.

Among Celgene's most promising drug candidates are Agios'AG-221 and ozanimod.

AG-221 is a therapy for treating relapsed/refractory acute myeloid leukemia (AML) patients with a specific genetic mutation. Solid results from an ongoing phase 1/2 trial has Celgene planning to file for FDA approval of AG-221 before the end of this year. If AG-221 is eventually approved, it may become an important new option for the nearly 20,000 AML patients diagnosed in the U.S. every year.

Ozanimod, which was acquired when Celgene bought Receptos in 2015 for $7.2 billion, is under development for multiple sclerosis and other autoimmune disorders. Data from phase 3 multiple sclerosis trials is anticipated next year, and if results are positive, ozanimod could potentially reshape treatment in what is currently a $19 billion market for MS treatment.

What's ahead

Celgene exited the third quarter with $6.9 billion in cash on the books, and its increased guidance for next year is reassuring for investors worrying that political and payer push-back on drug prices could derail the company's growth. Scrutiny of high drug prices is likely to continue, but Celgene's Revlimid is best-in-class, and that may insulate it a bit. Even if it doesn't, it appears to me that Celgene's pipeline is about to have some successes that could still allow management to deliver future sales and profit growth.

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Todd Campbell owns shares of Celgene.Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may have positions in the companies mentioned.Like this article? Follow him onTwitter where he goes by the handle@ebcapitalto see more articles like this.

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