Monday, November 1, 2010

Celgene (CELG) Gathers Momentum

Celgene reported third quarter (Q3) 2010 results on October 28th that showed impressive strength in sales of its current drugs, Revlimid and Vidaza. Just as important to future profit growth are a variety of new therapies in the pipeline at various stages of clinical trials.

Revenue was $910 million, up 7% sequentially from $852.7 million and up 31% from $695.1 in the year-earlier quarter.

GAAP Net income was $281.2 million, up 81% sequentially from $155.4 and up 30% from $216.8 million year-earlier. That equates to EPS (earnings per share) of $0.60, up 82% sequentially from $0.33 and up 30% from $0.46 year-earlier.

Revlimid, used to treat MDS (myelodysplastic syndrome) and multiple myeloma, saw revenues increase 44% from Q3 2009. Vidaza, also used to treat MDS, had revenue up 37% y/y. Thalidomid and ritalin revenues continued to decline.

What is exciting about Celgene, besides its stock price being very reasonable in this risk-averse environment, is that Revlimid and Vidaza are both likely to be approved by the FDA (and international equivalents) for more indications. Throw in known sales of Abraxane for breast cancer, obtained from the recent purchase of Abraxis Bioscience, with good Phase III data for non-small cell lung cancer and Phase II data for other cancers.

Otherwise in oncology (cancer) besides Revlimid there is Amrubicin, Tork Inhibitor, ACE-011, and a whole series of ABI compounds. In hematology there are istodax and pomalidomide.

In Immunology Celgene has apremilast, JNK-930, CC-11050, pomalidomide, and PDA-001.

There are also a 15 compounds that have not made it to Phase I trials yet.

To see diseases targetted and how far each therapy is along in the clinical process, see the Celgene product pipeline.

Celgene, at the close today at $61.90, was selling at 23 times trailing non-GAAP earnings. That is very cautious investing, typical of the climate we are in today. Of course many compounds never get FDA approval, and so their R&D dollars go down the drain. There will be some of that with Celgene. With the very solid Revlimid and Vidaza profits, Celgene has undertaken an expensive but well-targetted research and development effort. In the biotechnology industry you can't stand still: you need to keep discovering better medicines. Celgene is doing just that, and that is what, as a long-term investor, I like to see.

See also:
My Celgene Analyst Conference Call summary for Q3 2011

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