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Summary

  • Celgene’s bag of signature drugs continued to drive its top and bottom line growth in the second quarter.
  • Growth was primarily contributed by the strong performance of Celgene’s flagship drugs, Revlimid, Pomalyst, Abraxane etc.
  • Launched in March, Otezla has paralleled with Humira as the top notch new branded treatment starts for PSA.
  • Future revenue growth: introducing Otezla in other markets and researching on four other indications that can be treated by Otezla in order to earn higher revenue from this drug.
  • The company has bright future prospects but it only offers return to its investors in the form of capital appreciation and not regular dividend income.

As we approach the end of July, many companies are busy filing their quarter end results. Some have reported positive earnings surprises while others may have just missed the consensus forecast by a small margin. However, the general investor reaction has been that surpassing analysts' expectations by a mere one cent is likely to have a lesser positive impact as compared to the negative stock price movement in a situation where company misses the consensus forecast by a small margin.

In this report, I will focus on analyzing the recent earnings release of Celgene Corporation (NASDAQ:CELG) and its future prospects.

Quarter Results

Celgene's bag of signature drugs continued to drive its top and bottom line growth in this quarter as well. To begin with, the company reported an increase of 17% in its top line majorly on the back of higher volume of drugs being sold. Growth was primarily contributed by the strong performance of Celgene's blockbuster drug, Revlimid, which continued to grab higher sales by 15% in US and 17% in the international market. The double-digit growth was achieved due to the positive growth in the multiple myeloma treatment market and increased duration of therapy. Pomalyst, another drug that treats multiple myeloma, also registered an increase of 143% on a yearly basis. The supernormal growth has been the result of its introduction in the European market, which is quite similar to the market response when the drug was launched in the US region.

Abraxane, the breast, lung and pancreatic cancer medicine, also contributed significantly to the volume and revenue growth. The drug was able to post an increase of 39% in its quarterly sales but missed the analysts' expectations by a small margin.

Celgene introduced Otezla during the first quarter of 2014, which is used to treat psoriatic arthritis "PSA." The results so far have been a little disappointing. The drug was able to rake in $5 million in sales revenue in contrast to the analyst's forecast of $12 million as most new patients were given free samples as part of the promotion of the drug. The company revealed during its conference call that more than 4,000 patients were already using Otezla while over 1,000 doctors had recommended the drug with most of the prescriptions producing multiple prescriptions. The brand has been recognized by 96% of the dermatologists in the 15-week period, which is a positive signal.

Otezla has paralleled with Humira as the top notch new branded treatment starts for PSA during the 15-week period following its launch in the market. This shows the potential that Otezla upholds to outsell its alternates. Otezla was the most switched to product as well. Winning the crown in both new patient initiations and patient switches augurs well for the future growth of the company. In fact, Celgene expects the sales of the drug to increase to $1.5-2 billion per annum by the year 2017.

The company plans to exploit the benefits of higher revenue from its blockbuster drug, Otezla, by introducing it in other markets as well i.e. for psoriasis in the United States and PSA and psoriasis in the European Union in forthcoming months. Celgene is also researching on four other indications that can be treated by Otezla. This way it can earn higher revenue from a single drug that is used for treating different problems under arthritis and in multiple markets. It is an efficient way of utilizing the company's research to the optimum level. The company also intends to expand its geographical presence in the upcoming years.

On the back of the positive volume growth of its flagship cancer drugs, Celgene was able to register a staggering 25% increase in its bottom line. In fact, the company has also slightly increased its full year earnings guidance to $3.60 to $3.65 on a per share basis while analysts have estimated a wider corridor with the expectation that Celgene's earnings will fall in between $3.51 to $3.86.

Final Verdict

In the wake of the flagship cancer drug portfolio and Otezla, the company has bright future prospects for its medium term investors. However, Celgene only offers return to its investors in the form of capital appreciation and not regular dividend income. Therefore, I recommend buying the stock for the investors seeking capital gains.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Source: Celgene: Constantly Adding Signature Drugs To Its Healthy Portfolio

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