Why Celgene's Shares Rallied Higher in February

By Todd Campbell Markets Fool.com

What happened

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After reporting fourth-quarter financials in late January and announcing positive phase 3 trial results for its promising multiple sclerosis drug in February, shares in Celgene Corp.(NASDAQ: CELG)climbed more than 5% last month, according to S&P Global Market Intelligence.

So what

Celgene shareholders have been rewarded with a bevy of good news this year. On Jan. 26, management reported fourth-quarter and full-year financial results that outpaced industry watchers' estimates, and on Feb. 17, management disclosed positive results for its promising oral multiple sclerosis drug, ozanimod.

IMAGE SOURCE: GETTY IMAGES.

In the fourth quarter, net product sales shot up 17% to $2.98 billion, and adjusted earnings per shareincreased 36% to $1.61. The strong fourth quarter contributed to full-year revenue of $11.2 billion, up 21% year over year. Adjusted EPS in 2016 clocked in at $5.94, up 26% from 2015.

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Last year's performance was supported by ongoing sales growth for its best-selling Revlimid, a multiple myeloma medicine that's become the leading drug prescribed in the first- and second-line setting. Revlimid's sales were $6.97 billion in 2016, up 20% from 2015. Also contributing to growth was Otezla, a psoriasis drug launched in 2015 that's quickly winning over doctors and patients. Otezla's sales were$1.02 billion, up 116% year over year.

Celgene invested$4.5 billion back into R&D last year, and in mid-February, management reported that ozanimod, one of its most promising drugs in development, aced its phase 3 study for use in MS.

Specifically, ozanimod outperformed Biogen's Avonex, a multibillion-dollar per year MS drug. Importantly, ozanimod was fairly well-tolerated by patients, with arguably fewer side effects than other oral MS drugs, including Gilenya. Oral MS drugs have become standard care in MS, and the three oral MS therapies that are currently on the market generated about $9 billion in combined sales in 2016.

Now what

Celgene has high expectations for the coming year. Its guidance is for sales of at least $13 billion and adjusted EPS of at least $7.1. Revlimid's and Otezla's successes are a big reason for that anticipated growth.

Further out, ozanimod could become a big driver of Celgene's top and bottom lines. The MS market is worth $19 billion annually, and it's growing. Ozanimod is also in studies evaluating its use in ulcerative colitis and Crohn's disease. If successful in those trials, too, Celgene thinks peak sales for ozanimod will be in the multiple billions of dollars annually.

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Todd Campbell owns shares of Celgene.His clients may have positions in the companies mentioned.The Motley Fool owns shares of and recommends Biogen and Celgene. The Motley Fool has a disclosure policy.