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Post-merger Celgene to lead pharma growth

Moody’s predicts company will show most growth over next 18 months


While some investors have been sceptical about the merits of the Celgene-BMS merger, analysts from Moody's say Celgene is set to lead the sector in terms of profit growth for the next 18 months.

It forecasts that the drugmaker will post earnings growth before interest, taxes, depreciation and amortisation (EBITDA) of 10%, putting it well ahead of the rest of the industry. Behind Celgene is a cohort of five companies which are expected to post profit growth of 6-10%: AbbVie, AstraZeneca, Eli Lilly, Stada and Takeda.

Amgen, GSK and Teva are among the expected laggards in the sector, with Moody predicting they will register no profit growth for the period.

Moody’s attributes Celgene's bright prospects to it strong late-stage pipeline, and continued growth from its blood cancer blockbuster Revlimid, despite fears of patent challenges to the drug, which makes up almost two-thirds of the company’s sales.

Revlimid is due to go off-patent within the next few years, but Celgene has been making moves to expand its use in lymphoma, a therapy area where it is part of a two-drug cocktail currently under priority review by the FDA.

Celgene also has five potential blockbusters in its late-stage pipeline, including MS treatment ozanimod and myelodysplastic syndromes/beta thalassemia candidate luspatercept, which have both recently been filed.

EBITDA provides a snapshot of a business’ short-term operational efficiency, and is an important tool for sizing up suitable candidates for acquisitions, providing insight into approximate cash generation and operations.

The conclusion backs up BMS' move, which had been under pressure from certain investors since it decided to buy Celgene in a $74bn merger.

That debate ended earlier this month after rebel investors decided to abandon their opposition to the merger. Shareholders of both firms have now approved the deal, which is set to be completed in the third quarter.

Moody’s says further acquisitions may be driven by patient expirations, but added: “Large acquisitions are not the aim of all companies...instead, many will pursue deals that bring late- stage pipeline products or newly-launched drugs. Many deals of this type could be valued from $5-$20 billion. We anticipate that oncology, immunology and gene therapy will remain key areas for business development.”

The forecast has come ahead of Celgene’s Q1 results, and analysts expect that Revlimid will likely to be the main growth driver for this period.

Psoriasis drug Otezla, which chalked up a good sales performance in 2018, along with pancreatic cancer medicine Abraxane and blood cancer therapy Pomalyst, are all expected to contribute to the company’s growth in Q1.

Adding to the good news for the merged BMS-Celgene is the Q1 results from BMS, out today. These show a 14% rise in revenues, driven upwards by a 19% surge in sales for its immunotherapy Opdivo and 28% growth for anticoagulant Eliquis.

Article by
Gemma Jones

25th April 2019


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