Why Investors Can Trust Calgene

We’re waist deep into the earnings season and many companies have already filed. Celgene Corp CELG has filed as well – and its reported earnings beat Wall Street’s expectations. Here are some takeaways from the report.

Earnings overview

Revenues came in at $1.87 billion, a 17 percent increase from the prior year quarter. Earnings came in at $748 million, up 15 percent from the $653 million that the company reported for the same quarter last year. EPS increased by 18 percent to $0.90 from $0.76 for the same quarter a year ago, beating Wall Street’s expectations of $0.89.

The company also raised guidance for the entire 2014. Good as it may seem, analysts deem the new outlook disappointing, as it is only meeting up with estimates.

RBC Capital Markets analyst Michael Yee told Reuters that, “Celgene was fine but disappointed the bulls after a big recent stock run to its all time highs.” This has caused its stock to struggle over the last few days.

Yee also said that this so-called disappointing guidance has made more investors look in the direction of other biotech companies – like Gilead GILD and Biogen BIIB – that “have more near-term earnings upside and catalysts coming.”

Instead of dwelling on this aspect, which isn’t negative in itself, investors should be looking into the reason why the stock has done so well over the past year. If there was something awesome about the company that made it grow so mush within such a little time, that should be what investors should set their sights on, as that is what will determine the future of the company.

Calgene, a bet on a robust drug portfolio

Simply put, Calgene is a good bet on a robust drug pipeline. Of the two companies that Yee mentioned above, only Gilead’s drug pipeline can match that of Calgene. Calgene boasts of a more robust drug pipeline than Biogene. A look at the pipeline pages on each of their websites makes this clear.   

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With such a superior pipeline, Calgene seems to offer a greater growth potential than Biogen. Moreover, compared with Biogen, Calgene is already more diversified in that its revenues come from more sources.

Critics might want to point to the fact that Biogen doesn’t overly depend on one drug for its revenues. That is true. But what is overlooked is the fact that tremendous growth is on the horizon for a number of Calgene’s drug. Abraxane, Pomalyst and Otezla are a good example.

Drawing from analysts’ estimates, these three drugs, combined, are expected to account for about $3.5 billion in annual sales. And with Abaraxene being touted to lead the pancreatic cancer market, there are chances that these drugs could perform better than estimated.

Maximizing research

One other thing that Calgene seem to be doing better than its peers, including Gilead and Biogen, is that it has a good strategy for maximizing the potential of its researches. The company is doing this with its flagship blood-cancer treatment Revlimid. And if you look at the company’s pipeline page, you’d find that even other pipeline candidates are being researched for other indications.

This could mean more revenues for the company. If the company can be successful with this strategy, then it will be a bigger force in future.