Last week, two major names in the biotech sector reported first quarter 2017 results -- Amgen, Inc. (AMGN - Free Report) and Celgene Corporation (CELG - Free Report). Here is a look at how both companies fared in the first quarter and which one looks better-positioned for the remainder of the year.

An In-Depth Look at 1Q17 Results: Both Amgen and Celgene surpassed earnings expectations while sales fell short of expectations. Amgen’s earnings results were driven by cost control, a lower tax rate and a lower share count despite a decline in sales. Among key products, drugs like Prolia, Xgeva and Kyprolis recorded year-over-year growth while mature brands like Enbrel, Aranesp, Epogen and Neupogen all recorded a decline in sales.

The softness in Enbrel’s sales is a key cause for concern. On the call, the company said that unit growth in rheumatology appeared to slow from 9% in 1Q16 to 2% in 1Q17, and from 25% to 9% in the dermatology segment for the same period.

Meanwhile, Celgene’s revenue miss was mainly due to lower-than-expected Otezla (psoriatic disease) sales. Otezla was impacted by managed care dynamics that led to lower total marketplace prescriptions for psoriasis therapies in Q1. Blood cancer drug, Revlimid, performed well with the newly diagnosed myeloma launch continuing to drive global increases in demand and duration. Pomalyst/Imnovid (multiple myeloma) is also benefiting from increasing use of triplets and duration gains.

2017 Outlook: 

Amgen maintained its revenue outlook for the year which includes potential biosimilar competition for Neulasta in the fourth quarter of 2017. The company raised the lower end of its earnings guidance range by 20 cents and now expects 2017 earnings in the range of $12.00 - $12.60 per share (previous guidance: $11.80 to $12.60 per share).

Celgene upped its earnings outlook from a range of $7.10 - $7.25 per share to a range of $7.15 - $7.30 per share.

Pipeline Catalysts: 

For any pharma or biotech company, the pipeline is of utmost importance and plays an important role in investment decisions. So, it always makes sense to take a look at a company’s pipeline and upcoming catalysts.

A key regulatory event for Amgen is the FDA action date of Jul 19 for Evenity for postmenopausal osteoporosis. A primary analysis of an event driven active-controlled phase III fracture study (ARCH) in postmenopausal women with osteoporosis is also expected in the second quarter.

Amgen expects to submit regulatory applications for its experimental migraine treatment, erenumab, in the second quarter as well.

Celgene also has some important regulatory events lined up this year -- the FDA is expected to respond on the approval status of Idhifa (acute myeloid leukemia) by Aug 30, 2017. Another key near-term growth driver for the company could be FDA approval for Pomalyst in combination with daratumumab for relapsed refractory myeloma by Jun 2017.

Meanwhile, results from the second phase III study on ozanimod for relapsing multiple sclerosis (MS) should be out well before the end of the second quarter. Celgene also expects to seek label expansion for Revlimid in first line transplant and non-transplant patients by year end.

Estimate Revisions & VGM Score: 

Both companies have been witnessing upward revisions in earnings estimates for 2017. While 2017 earnings estimates for Celgene are up 0.3% over the last 7 days, earnings estimates for Amgen are up 0.6%.

Amgen has a score of “B” while Celgene’s VGM Score is “A”.

Price and Valuation Perspective:

 A look at Amgen’s year-to-date (YTD) price performance shows that the company has outperformed the S&P 500 as well as the Zacks categorized 

 industry -- Amgen is up 11.7% YTD compared to the industry gain of 5.5%.

Celgene has also performed better than the industry with shares gaining 7% YTD.

Going by the current price-to-earnings multiple, which is often used to value drug stocks, Amgen is trading at a P/E multiple of 13.4, well below the S&P 500 P/E multiple of 18.2. Celgene looks more expensive given its P/E multiple of 17.3 though there is room for upside given the company’s 2-year high of 27.6.

Bottom Line

At present, Celgene looks like the better pick to us. Although Celgene missed revenue expectations in the first quarter, we believe the softness in Otezla sales is temporary and sales will bounce back in the coming quarters with additional commercial lives gaining access to Otezla. Celgene is also diversifying its portfolio and has a deep and promising pipeline. The company has some important pipeline events this year which could act as positive catalysts.

As far as Amgen is concerned, we are impressed by the company’s cost control efforts. However, the declining sales of mature brands are a major concern. Although Amgen has new products in its portfolio, these drugs are yet to gain enough traction to make up for lost sales of legacy products. The competitive landscape is also changing given the entry of biosimilars in the U.S.
Amgen and Celgene are both Zacks Rank #3 (Hold) stocks.