Celgene Misses Narrowly in 4Q - Analyst Blog

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Celgene Corporation 's ( CELG ) fourth quarter 2011 earnings (excluding special items but including stock-based compensation expense) of 93 cents per share was below the Zacks Consensus Estimate by 2 cents but above the year-ago earnings by 31 cents.

Quarter in Details

Total revenue climbed approximately 20% to $1.28 billion in the final quarter of 2011. Revenues were boosted by the impressive performance of Celgene's cancer products Revlimid and Vidaza. Revenues for the quarter were just shy of the Zacks Consensus Estimate of $1.29 billion.

Revlimid net sales came in at $855 million, reflecting an increase of 20% over the year-ago period. The drug did well both in the US and also in the international markets.

Vidaza continued to perform impressively. Net sales of the drug for the reported quarter came in at $189 million, an increase of 34% over the fourth quarter of 2010. Bulk of the revenues came from international markets. Sales in the international markets climbed 51% to $104 million. Vidaza lost exclusivity in the US in May 2011. In spite of the development, Vidaza sales climbed 19% in the US during the fourth quarter of 2011.

However, net sales of another cancer drug, Thalomid, continued to decline due to the availability of better alternatives. Thalomid sales were $82 million, down 12%. Net sales of Abraxane, added to the portfolio with the October 2010 acquisition of Abraxis BioScience, were $104 million in the fourth quarter of 2011, down 8.7% sequentially.

Research and development (R&D) expenses (excluding stock-based compensation and other special items) climbed 17.1% to $349 million in the reported quarter. The increase was primarily attributable to Celgene's efforts to expand its pipeline.

Selling, general and administrative expenses (excluding stock-based compensation and other special items) in the quarter increased approximately 10.3% year-over-year to $278 million. Costs associated with the launch of cancer drugs Revlimid in Japan, Istodax in the US and Abraxane in the European Union and US primarily led to the rise in SG&A expenses. Acquisition related costs were also responsible for the increase.

Annual Results

For the full year 2011, Celgene earned (excluding special items but including stock-based compensation expense) $3.31 per share (up 38%). The Zacks Consensus Estimate for 2011 is $3.33. In 2011, total revenue came in at $4.84 billion, just above of the Zacks Consensus Estimate of $4.83 billion. Revlimid sales increased 30% to approximately $3.21 billion.

Outlook Backed

Apart from announcing financial results, Celgene reaffirmed the bright outlook for 2012, which it had provided while announcing preliminary results earlier this month. Adjusted earnings (excluding stock-based compensation expense and other special items) are projected in the range of $4.70-$4.80 per share, up 25%. Including the impact of stock-based compensation expense, 2012 earnings are expected in the range of $4.17-$4.32 per share. The Zacks Consensus Estimate for 2012 is $4.13 per share.

Adjusted revenues are projected in the range of $5.4-$5.6 billion, up 15%. The Zacks Consensus Estimate is $5.5 billion, within the guidance range provided by the company. Revlimid is expected to continue its strong performance. Sales of the drug are projected in the range of $3.75 - $3.85 billion, up 19%.

Celgene to buy Avila Therapeutics

In a bid to further strengthen its pipeline, Celgene announced that it will purchase privately held biotechnology company Avila Therapeutics, Inc. for $350 million in cash.

Per the terms of the deal, expected to close by March 31, 2012, Celgene will have to further shell out up to $195 million in milestone payments depending on the development and regulatory approval of AVL-292, Avila's lead pipeline candidate. AVL-292 is being developed for treating cancer and autoimmune diseases. Moreover, Celgene is eligible to pay Avila up to an additional $380 million subject to the development and approval of candidates developed with the help of the latter's technology. Celgene expects the deal to be neutral to its 2012 projected adjusted earnings.

Our Recommendation

We have an Outperform recommendation on Celgene. Despite the narrow miss in the final quarter of 2011, we believe that Celgene, driven by its impressive oncology portfolio, expansion efforts, strong balance sheet and robust pipeline, will outperform the broader market in the coming quarters.

Our optimism is justified by the Zacks #2 Rank (Buy rating) carried by the stock in the short run.


 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



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