Biotech Movers: Celgene Corporation (NASDAQ:CELG) And Idera Pharmaceuticals, Inc. (NASDAQ:IDRA)

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One of the major movers in the biotechnology space at the end of this week is Celgene Corporation (NASDAQ:CELG). Often times, when we look at these sharp bouts of volatility, and especially as relates to the biotechnology sector, the action is driven by a development related catalyst – a drug meeting its primary endpoint in a study, a therapy picking up approval from the FDA in the US, that sort of thing. In this instance, however, it’s all about the numbers. Celgene just put out its third-quarter 2017 financials and, as per the release, things don’t look great.

The topline figures associated with the quarter in question actually rose on a year-over-year basis, with third-quarter revenues coming in at a little over $3.28 billion, up 11% on the same period a year earlier.

The problem is that this figure came in at around $140 million below the consensus analyst estimate. In financial markets, and very much in the biotechnology space, a company can grow top line year-over-year but if it misses on analyst estimates, the markets will sell off based on the downside surprised as opposed to the top line growth.

That is exactly what has happened here.

Compounding the downside action, on top of the revenue miss, the company has also revised its long-term revenue expectations, with full year 2017 down to $13 billion from the previously reported $13.4 billion and total net product sales of between $19 billion and $20 billion in 2020, down from a $20 billion estimate that Celgene reported back in 2015.

One of the primary drivers behind these revised estimates is a slowdown in sales of a drug called Otezla, which is currently on the market as a treatment for psoriasis in patients with moderate to severe forms of the condition.

So, should investors be worried?

in short, probably not. While expectations for future revenues are down slightly, this is a company that is growing and will continue to grow based on its strong and diverse development pipeline and solid management team. Sure, competitive pressures may temper growth somewhat over the coming decade, but as a safe haven large-cap, this one remains one of the topics in this sector.

At close on Thursday, Celgene was trading for a close to 16% discount to its preannouncement market capitalization. For a company the size of this one, that’s a considerable selloff and, in our opinion, is something of a sizable oversell in terms of response to the numbers in question.

Moving on, we’re going to shift down to the smaller end of the biotech sector and look at Idera Pharmaceuticals, Inc. (NASDAQ:IDRA).

Just as with Celgene, Idera has taken a hit on some fresh news that hit press on Thursday, but this development is not related to third quarter financials – instead, the company announced that it is looking to raise cash.

Specifically, Idera announced the pricing of its underwritten public offering of 33.3m shares of its common stock at a public offering price of $1.50 per share for net proceeds of $46.8m.

This is a company that needs money to fund its development pipeline towards commercialization, and it is one that has been poised for an equity issue for the last few months. However, even though markets expected the company to raise cash, when it actually happens nobody’s happy about it. Why? Because capital raises generally involve dilutive equity issue and, when shareholders are diluted, the proportionate value of their holdings reduces in parallel to the issue.

In this instance, 33.3 million shares added to the outstanding base is quite considerable and when you consider that the company was trading at more than two dollars a share preannouncement, the $1.50 at which the shares are being offered only serves to exacerbate the situation.

Again, however, just as with Celgene, there is plenty of room for recovery here. These are companies that can put the capital to use towards reaching a major catalyst and, if said capitalist headspace is positive, there is no reason that the decline we have seen in Idera over the last 24 hours won’t close.

At market close on Thursday, Idera went for $1.48 a share – a 27% decline throughout the session in the US.

We will keep an eye on things as they mature to a close in the biotechnology space this week and update as appropriate.

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