We recently upgraded Celgene Corporation (CELG) to Outperform from Neutral following its strong second quarter 2011 results and the decision of the European Committee for Medicinal Products for Human Use (CHMP) that the benefits associated with cancer drug Revlimid outweigh the risks in patients suffering from multiple myeloma (MM).
Celgene performed impressively in the second quarter of 2011 and beat the Zacks Consensus Estimate both in terms of revenues and earnings. Earnings were driven by strong sales of key products such as Revlimid and Vidaza. The strong showing encouraged Celgene to increase its 2011 earnings and revenue guidance.
Celgene expects to end 2011 with adjusted earnings in the range of $3.45-$3.55 per share 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.
Moreover, the September 2011 opinion of the CHMP that the benefits associated with Revlimid outweigh the risks in patients suffering from MM is a positive for the stock. The CHMP reached the decision after conducting a safety review (article 20) of Revlimid in combination with dexamethasone in MM patients who have received at least one prior therapy. The safety review was conducted following reports of second primary malignancies (SPMs) associated with Revlimid in clinical studies.
The analysis revealed that the rate of SPMs observed in the studies was low and not unexpected in the patient population targeted by the drug. Celgene updated Revlimid’s label to include information on SPMs. The favorable opinion has removed a major overhang for the stock since Revlimid is Celgene’s key growth driver.
We are also impressed by Celgene’s impressive oncology portfolio, efforts to expand further, strong balance sheet and strong pipeline. These positive catalysts cause us to believe that Celgene will continue performing impressively in the coming quarters. We believe that the current price represents an attractive entry point for long-term investors.
