Leerink Notes Positive Celgene (CELG) CFO Meeting

November 30, 2016 6:44 AM EST
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Price: $117.25 +0.59%

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Leerink Partners analyst Geoffrey Porges said yesterday's Celgene (NASDAQ: CELG) CFO meeting focused on positive trends, confidence in guidance and LT outlook.

Porges commented, "Yesterday as part of our POLARxPRESS biopharma bus tour, we and a group of investors met with Celgene’s (CELG, MP) CFO Peter Kellogg and Investor Relations team for an hour to discuss the company's outlook for the myeloma market, US healthcare policy, and long-term strategic assets. The main topics discussed were the impact of Darzalex (daratumumab, JNJ, OP) on Revlimid’s average duration of therapy and the staging of Pomalyst therapy in the myeloma treatment paradigm, the current pricing dynamic across the portfolio, the strategic implications of potential US healthcare and tax reform policies under the new administration, and the timeline for pipeline assets CC-122, Ozanimod, and Luspatercept."

The analyst highlighted confidence in Revlimid remains high amid new entrants into myeloma market. "Celgene continues to expect immunomodulatory drugs (IMiDs) such as Revlimid to remain the backbone therapy for myeloma despite new entrants into the field. Celgene’s dominant asset Revlimid is in its eleventh year on the market for multiple myeloma and is still projected to grow 26% y/y in 2016E. Mr. Kellogg stated that the two key drivers of this incredible growth are increased duration in the US (driven by the improved clinical responses shown in the SWOG 777 dataset combining Revlimid with Velcade and dexamethasone as a RVd triplet therapy in first-line myeloma treatment) and the European country launches of the newly diagnosed myeloma indication, with very little growth coming from net price increases. Mr. Kellogg did not expect to see an immediate impact on Revlimid sales from the FDA approval of Darzalex combination with Revlimid and dexamethasone in second-line on November 21, 2016. He offered the example of the RVd SWOG 777 data, originally released at ASH 2015, which did not completely flow into the market and translate into increased volume for Revlimid until 3Q, and he expected this 6-9 month lag to also occur for the Darzalex second-line study approval. These data extended the duration of Revlimid use from 3 years to 4 years and can provide another leg of significant growth for Revlimid sales over late 2017 and beyond. Celgene also mentioned that about a third of myeloma patients are over 75 years of age and are currently not eligible for triplet therapy. Unless guidelines for eligibility change with the efficacy benefits seen in these new agents, Celgene predicted that Revlimid will continue to be the primary backbone in doublet combination therapy for older patients."

The analyst also highlighted:

  • Otezla Establishing Strong Foothold With Physicians/Patients, Increasingly Competitive With Biologics
  • Limited Impact From US Federal Election and Likely Policy Changes; Access To Foreign Cash Flows Most Important
    • Mr. Kellogg described his top priorities as the following:
      • 1. Fund current strategic priorities
        • a. Fund and build upon the next generation assets in the pipeline to provide revenue growth through the 2020’s
        • b. Budget for the upcoming value inflection and go/no-go decisions for the numerous early stage collaborations once data mature
      • 2. Deliver cash returns to shareholders a. Maintain a healthy share repurchase program
        • i. Program is already generous
        • ii. Repurchases will continue to be strong, but will not massively expand b. Maintain industry-leading position in cash return via share buybacks
      • 3. Look outside the company to add assets through deals
        • a. Commercial mid-caps will not be the focus as the bidding process is very competitive and Celgene does not require near-term fixes to revenue
        • b. Celgene’s management feel better about going after and paying up for emerging technology that will drive long-term growth and where they can deploy their development capabilities.
  • FX Hedges In Place Now to Protect 2017 Guidance
  • Pricing Dynamics Unchanged in Hematology, But Otezla May Face Pressure From Expansion
  • Major Pipeline Events Increasing After Unexciting 2016

The firm maintained an Market Perform rating and price target of $139 on CELG.

For an analyst ratings summary and ratings history on Celgene click here. For more ratings news on Celgene click here.

Shares of Celgene closed at $122.13 yesterday.



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