ALTH Allos Therapeutics, Inc. (MM)

Celgene Corporation’s (CELG) second quarter 2011 earnings (excluding special items but including stock-based compensation expense) of $0.78 per share beat the Zacks Consensus Estimate by $0.01 and the year-ago earnings by $0.17.

On a reported basis (including special items), the company’s earnings increased 78% to $0.59. Higher revenues boosted earnings in the quarter.

Adjusted revenues climbed 38% to $1.18 billion in the second quarter of 2011. Revenues were boosted by the impressive performance of Celgene’s cancer products Revlimid and Vidaza. Revenue for the quarter surpassed the Zacks Consensus Estimate of $1.10 billion.

Revlimid net sales came in at $795 million, reflecting an increase of 35% over the year ago period. Vidaza continued to perform impressively. Net sales of the drug for the reported quarter came in at $162 million, an increase of 23% over the second quarter of 2010.

However, net sales of another cancer drug, Thalomid, continued to decline due to the availability of better alternatives. Thalomid sales were $88 million, down 10%. Net sales of Abraxane, added to the portfolio with the October 2010 acquisition of Abraxis BioScience, were $95 million in the reported quarter.

Adjusted research and development (R&D) spend climbed 51.5% to $306 million in the reported quarter. The increase was primarily attributable to Celgene’s efforts to expand its pipeline. Selling, general and administrative expenses (on an adjusted basis) in the quarter increased approximately 39.1% year-over-year to $274 million.

Costs associated with the launch of cancer drugs Revlimid in Japan, Istodax in the US and Vidaza in Europe primarily led to the rise. Acquisition related costs and higher facility costs incurred in the quarter were also responsible for the increase.

We remind investors that the label of Istodax, already approved for treating patients suffering from T-cell lymphoma who have received at least one systemic therapy, was expanded in June 2011.

The US Food and Drug Administration (FDA) granted accelerated approval to Istodax for treating patients suffering from peripheral t-cell lymphoma (PTCL). The patients were treated at least once for PTCL. In the PTCL market, the other notable therapy is Allos Therapeutics’ (ALTH) injectable treatment − Folotyn − which was launched in 2009.

2011 Forecast Upped

Following the release of second quarter results, Celgene upped its guidance for 2011. In 2011, the company expects to earn in the range of $3.45-$3.55 per share (on an adjusted basis) on revenues of $4.60 billion to $4.70 billion.

The previous guidance hinted at adjusted earnings in the range of $3.35-$3.40 per share on revenues of $4.45 billion to $4.55 billion. Currently, the Zacks Consensus Estimate for 2011 hints at earnings of $3.09 on revenues of $4.53 billion.

Revlimid sales are expected to contribute the lion’s share to total revenues. Sales of the cancer drug are expected in the range of $3.15 billion to $3.25 billion (up approximately 30% year over year).

Neutral on Celgene

We have a Neutral recommendation on Celgene. The stock carries a Zacks #3 Rank (Hold rating) in the short run.

 
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