Celgene Corporation (CELG) is all set to announce its first quarter 2011 results on April 28, 2011.
The Zacks Consensus Estimate for the quarter is $ 0.73, representing a year-over-year increase of 35.2%. The performance of Celgene has fluctuated over the last four quarters. The company has missed estimates in two of the four quarters of 2010. The trailing four-quarter average is -1.08%.
Fourth quarter 2010 recap
Celgene’s fourth quarter 2010 earnings (excluding special items but including stock-based compensation expense) was $ 0.62 per share, which was below the Zacks Consensus Estimate by $ 0.05 but above the year-ago earnings by $ 0.08.
On a reported basis (including special items), the company’s earnings fell 16.7%. Reported earnings were hurt by the costs incurred to acquire Abraxis BioScience, which was completed in October 2010. (Read our full coverage of the earnings report at Q4 Sales Swell at Celgene.)
Agreement of Estimate Revisions
Over the past thirty days, two of the 10 analysts covering Celgene for the first quarter of 2011 have revised their earnings estimates, one in either direction. We note that many analysts had trimmed their estimates following disturbing data regarding Revlimid as a maintenance therapy for multiple myeloma (MM) patients.
Data from some studies presented at the American Society of Hematology (ASH) in December 2010 suggested an increase in the number of patients with secondary malignancies in the Revlimid arm compared to placebo. Management at Celgene was not perturbed by the data as they claimed the figures to be within the expected range.
There is however an upward bias for fiscal 2011. Two of the 11 analysts following the stock for 2011 have revised estimates upwards over the last 30 days. None have moved in the opposite direction.
Magnitude of Revisions
Estimates for the first quarter of 2011 have remained static at $ 0.73 over the last 30 days due to the lack of significant estimate revisions by the analysts following the stock. Annual estimates (for 2011) have gone up by only $ 0.01 per share to $ 3.04 over the last 30 days.
Our Take & Recommendation
We are pleased with the impressive oncology portfolio at Celgene. Apart from an impressive portfolio, its robust pipeline and the efforts to expand further are also encouraging. We remain concerned about the continuing disappointing performance of cancer drug Thalomid. The continuing decline in Thalomid sales has the potential to hurt Celgene’s top line if other products do not perform impressively enough.
Moreover, in September 2010, Indian pharma company Natco Pharma filed an Abbreviated New Drug Application (ANDA) with the US Food and Drug Administration (FDA) seeking permission to manufacture and market a generic version of Revlimid.
Subsequently, Watson Pharmaceuticals Inc (WPI) inked a deal with Natco Pharma to develop and sell the generic version if the application is approved. Although Celgene has challenged the application, a decision in favor of Natco would be devastating for Celgene.
We have a ‘Neutral’ stance on Celgene in the long-run, which is supported by the Zacks #3 Rank (short-term ‘Hold’ recommendation) carried by the company.
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