Celgene Corporation’s (CELG) fourth quarter 2010 earnings (excluding special items but including stock-based compensation expense) of 62 cents per share was below the Zacks Consensus Estimate by 5 cents but exceeded the year-ago earnings by 8 cents. 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.
Adjusted revenues climbed 38% to $1.05 billion in the final quarter of 2010. Revenues were boosted by the impressive performance of Celgene’s cancer products Revlimid and Vidaza. Revenue for the quarter handsomely beats the Zacks Consensus Estimate of $957 million.
Revlimid net sales came in at $708 million, reflecting an increase of 42% over the year ago period. Vidaza continued to perform impressively. Net sales of the drug for the reported quarter came in at $140 million, an increase of 20% over the fourth quarter of 2009. However, net sales of another cancer drug, Thalomid, continued to decline due to the availability of better alternatives. Thalomid sales were $91 million, down 17%. Net sales of Abraxane, added to the portfolio with the purchase of Abraxis BioScience, were $71 million in the reported quarter.
Research and development (R&D) spend climbed 62.4% to $327.5 million in the reported quarter. The increase was primarily attributable to Celgene’s efforts to expand its pipeline. Selling, general and administrative expenses in the quarter increased approximately 39.5% year-over-year to $295.1 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.
Net interest and other income plummeted to a loss of $8 million in the fourth quarter of 2010 from a gain of $22 million in the comparable quarter of 2009. The decline was primarily attributable to a reduction in interest and investment income, coupled with a loss on net hedging and foreign currency revaluation gains in the reported quarter.
For the full year 2010, Celgene reported adjusted earnings of $2.41 (up 36.2%) on adjusted revenues of $3.60 billion. While Revlimid sales increased 44.5% to $2.47 billion, Vidaza sales climbed 38% to $534 million. The Zacks Consensus Estimate for 2010 is $2.49 on revenues of $3.43 billion.
Our Recommendation
Currently, 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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