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Wednesday May 09, 2012
Celgene: Selloff creates opportunity
by J. Royden Ward, editor Cabot Benjamin Graham Value Letter Celgene (CELG) develops and assists in the marketing of drugs to treat cancer and infl ammatory diseases. It acquired several companies recently, which will expand its product line and add promising products in various stages of development. Revlimid and Thalomid, Celgene’s leading drugs, account for 78% of sales, but the company’s diversification efforts will greatly increase its product offerings. Revlimid is used to treat myeloma cancer, and Thalomid is used to treat or prevent inflammatory skin diseases. Revlimid will enjoy patent protection through 2019 which could be extended to 2026. The drug is gaining market share, and many new Revlimid cancer treatments will be introduced within two to three years. Celgene is anxiously awaiting EU approval for additional Revlimid treatments; approval or disapproval should become known before the end of June. Approval will open up substantial new markets for the drug in Europe. The next step will be to apply for FDA approval in the U.S. for similar Revlimid treatments. Sales and earnings advanced 27% during the past 12 months. Sales growth was on target, but earnings beat my estimate by a wide margin. Sales growth was led by Celgene’s largest drug, Revlimid, with sales of $861 million, up 17%. Abraxane produced sales of $104 million, up 41%. I expect sales growth of 17% and earnings growth of 22% during the next 12 months. CELG shares are a bargain at 17.5-times my 12-month forward EPS estimate of 4.14. Recent acquisitions and new drugs could add significant sales and earnings during the next several quarters. I believe CELG will reach my minimum sell price target of $111.53 within the next one to two years. The recent decline in stock price has created an unusual buying opportunity. Learn more about this financial newsletter at J. Royden Ward's Cabot Benjamin Graham Value Letter. Related articles: 
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