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Celgene Corporation’s (CELG - Analyst Report) second quarter 2012 earnings (excluding special items but including stock-based compensation expense) of $1.10 per share beat the year-ago earnings by 41%. Higher revenues drove earnings in the reported quarter. The Zacks Consensus Estimate was $1.06 per share.

Quarter in Details

Total revenue climbed 15.5% to $1.37 billion in the first quarter of 2012. Revenues were boosted by the impressive performance of Celgene’s cancer drugs Revlimid, Abraxane and Vidaza. Revenues surpassed the Zacks Consensus Estimate of $1.33 billion. Net product sales climbed 16% to $1.34 billion.

Net sales of Revlimid, the key growth driver at Celgene, came in at $934 million, reflecting an increase of 17% over the year-ago period. The drug did well both in the U.S. (up 17%) and international markets (up 18%).

Net sales of Vidaza climbed 24% to $201 million, driven by strong sales in international markets. Sales in international markets climbed 35% to $119 million. Strong sales of the drug in Europe and Japan boosted international sales in the quarter. US sales of Vidaza climbed 12% to $82 million.

Net sales of Abraxane climbed 16% to $110 million. Results were boosted by strong US sales which climbed 20% to $87 million. Abraxane sales in international markets climbed 3% to $23 million.

Net sales of another cancer drug, Thalomid, continued to decline due to the availability of better alternatives. Thalomid sales were $76 million, down 13%.

Research and development (R&D) expenses (excluding stock-based compensation and other special items) climbed 14.1% to $349 million in the reported quarter. The increase was primarily attributable to Celgene’s efforts to expand its pipeline.

Selling, general and administrative expenses (excluding stock-based compensation and other special items) in the quarter increased approximately 8% to $296 million. Costs associated with the marketing activities for Revlimid, Abraxane and pre-launch activites for pomalidomide primarily led to the rise in SG&A expenses.

Earnings Outlook for 2012 Raised

Apart from announcing financial results, Celgene upped its adjusted earnings guidance for 2012. Adjusted earnings (excluding stock-based compensation expense and other special items) are projected in the range of $4.80-$4.85 per share (old guidance: $4.70-$4.80), representing year-over-year growth of 27%.  

Celgene continues to expect adjusted revenues in the range of $5.4-$5.6 billion, up 15%. Revlimid will continue performing well with sales projected in the range of $3.75 - $3.85 billion, up 19%. The Zacks Consensus Estimate hints at earnings of $4.35 per share on revenues of $5.4 billion for 2012.

Our Recommendation

We have a Neutral recommendation on Celgene. We believe that Celgene, driven by its impressive oncology portfolio, expansion efforts, strong balance sheet and robust pipeline, will perform well in the coming quarters. The stock carries a Zacks #3 Rank (Hold rating) carried by the stock in the short run.

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