It's been a wild ride for Celgene (NASDAQ: CELG) over the past four months. A once-promising Crohn's disease drug flopped in a late-stage study. Celgene stock tanked over 30%. And the company announced the acquisitions of Impact Biosciences and Juno Therapeutics (NASDAQ: JUNO).
Celgene announced its fourth-quarter and full-year 2017 results on Thursday. Its management team had a lot to say about those results and more during the earnings call. Here are five things from that call that you'll really want to know.
Continue Reading Below
1. Price hikes aren't the primary driver of sales growth
Some headlines last year focused on price increases that Celgene took for its top-selling blood cancer drugs Revlimid and Pomalyst. FiercePharma's Eric Saganowsky wrote in October that the biotech was "defying critics in Congress and elsewhere" by three price hikes for Revlimid in 2017 and two for Pomalyst.
Celgene CFO Peter Kellogg, however, stated that the biotech's net product sales growth stemmed largely from gaining volume. The company reported year-over-year net product sales growth in the fourth quarter of 17%. Kellogg said that 5.1% of that increase stemmed from price hikes. Most of the growth -- 13.2% -- came from volume gains. The year-over-year growth was pulled down a bit by foreign exchange fluctuations and hedges.
2. Otezla is doing just fine
Investors panicked in late October after Celgene missed revenue expectations -- a rare occurrence for the company. The disappointing results were due in large part to headwinds impacting Celgene's autoimmune disease drug Otezla. One of those headwinds stemmed from lower pricing resulting from gross-to-net adjustments in contracts implemented last year for Otezla. Another challenge came from payers restricting access to the drug.
The message from the fourth quarter, though, was that Otezla is doing fine. Terri Curran, Celgene's president of inflammation and immunology, said that sales for Otezla jumped 22% year over year in the fourth quarter and 20% above the third-quarter results. She noted several positives for the drug, including improving patient access in the U.S. and successful launches in key international markets.
3. What the Impact and Juno deals bring to the table
Nadim Ahmed, Celgene's president of hematology and oncology, was quick to point out the high expectations for assets that will be gained with the Impact Biosciences and Juno Therapeutics acquisitions. Ahmed said that the company projects Impact's fedratinib could generate $1 billion annual sales, while Juno's JCAR017 would be "an anchor asset" with peak annual revenue potential of $3 billion.
What isn't known yet, though, is how the acquisitions will impact Celgene's 2020 outlook. Kellogg said that the Juno deal could cause operating margin to be "set back a smidge in 2018." However, he added that the margin should quickly return to growth. Kellogg also stated that Celgene plans to update its guidance for 2020 after the Juno acquisition closes. However, he said that the impact of the deal would be felt more after 2020.
4. More acquisitions and share buybacks are likely
Celgene's No. 1 priority continues to be making strategic investments for its future. But Jonathan Biller, senior vice president of tax and treasury, said that the company can make more "external investments to grow beyond 2020" and still buy back more shares. Tax reform gives Celgene considerable financial flexibility, according to Biller, especially with the more ready access to offshore cash.
Which other companies could be on Celgene's radar screen for acquiring? Kellogg said that Celgene would "like to see high potential with a lot of optionality" combined with long-term intellectual property protection and "strong science" behind the potential candidates' products.
While no specific names were mentioned by Celgene's executives as potential candidates, one obvious and frequently mentioned prospect is bluebird bio (NASDAQ: BLUE). Celgene CEO Mark Alles did say that the company has a "very important partnership" with Bluebird and referred to the smaller biotech's lead candidate bb2121 as a "disruptive technology."
5. 2018 should be "a really good year"
One of Kellogg's final remarks was that the company thinks that it "will have a really good year" in 2018. Although both Kellogg and Curran mentioned that there could be some seasonal softness for certain products in the first quarter of the year, that's typical.
Celgene provided 2018 guidance calling for revenue to grow 12% year over year and adjusted earnings per share to jump 18%. That's slower growth than the company achieved in 2017. However, it wouldn't surprise me if Celgene is sandbagging a little.
I think that Kellogg is right that 2018 will be really good. Will it be the best year ever for Celgene? In some ways, such as revenue and earnings generated, it probably will be. But after a dismal 2017 stock performance, investors will probably be quite happy with a really good year, even if isn't the best ever.
10 stocks we like better than CelgeneWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Celgene wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Click here to learn about these picks!
*Stock Advisor returns as of January 2, 2018