Analysts' Choice: Celgene Shares Primed To Climb

3/27/2017


  Recent Price
$123
  Dividend
$0.00
  Yield
0.0%
  P/E Ratio
21
  Shares (millions)
802
  Long-Term Debt As % Of Capital
68%
  52-Week Price Range
$127.64 - $94.39

Shares of Celgene ($123; CELG), a drugmaker focused on oncology and psoriasis treatments, have risen 2% in the past month and 20% over the past year. Fueling the recent rally is strong operating momentum and an equally attractive growth profile.

Last year, Celgene grew per-share profits 28% on revenue of $11.23 billion, up 21%. Cash from operations surged 60%, and free cash flow 70%. Celgene's operating momentum was driven by 18% higher drug volumes.

Amid increasing scrutiny over drug prices, Celgene's volume-focused approach appears to be a sustainable path for growth. For 2017, analysts expect per-share profits to climb 22% and sales 18%. Management sees revenue topping $21 billion by 2020, implying annualized growth of 13%. Celgene is a Buy and a Long-Term Buy.

A game plan for growth

Celgene has built its drug portfolio like a successful NBA franchise constructs its basketball roster: Surround the superstar with a blend of young prospects and aging role players.

Celgene's superstar, Revlimid ($6.97 billion, or 62% of total revenue last year), treats multiple myeloma, a form of blood cancer. The drug's label was expanded in 2013 to include mantle cell lymphoma. Upbeat data from recent studies could lead to additional indications to broaden its usage.

Two newer drugs are developing into key contributors: Pomalyst, approved by the U.S. in 2013, and Otezla, approved in 2014. Pomalyst, a treatment for multiple myeloma, generated $1.31 billion, or 12% of 2016 sales. Otezla, used for psoriasis and psoriatic arthritis, generated $1.01 billion, or 9%. They helped pace Celgene's sales growth last year, with Pomalyst up 33% and Otezla up 116%. Analysts see peak sales topping $2 billion for Pomalyst and $5 billion for Otezla.

Rounding out Celgene's roster are Abraxane and Vidaza, both approved more than a decade ago. Abraxane, a chemotherapy drug, generated 9% of Celgene's sales last year, while Vidaza, used for bone-marrow disorders, represented 5%. Neither drug grew sales more than 3% in 2016.

Apart from Vidaza, all key drugs are protected by patents that stretch to at least 2022. However, Revlimid's patent expiration in 2022 adds some urgency for the pipeline to deliver.

Research and development represents 40% of sales, more than twice as high as the four other S&P 1500 biotech stocks with stock-market values above $50 billion. To expand its pipeline further, Celgene has completed a smattering of small and midsized deals. Last month, Celgene reported upbeat data from a late-stage trial for ozanimod, an experimental multiple sclerosis drug it inherited through an acquisition in 2015.

Conclusion

The recent rally has pushed Celgene's Quadrix Value score down to 48, though the shares look unusually cheap compared to historical norms. More than 90% of S&P 1500 biotech stocks trade at a discount to historical norms. Even among biotech companies, Celgene looks cheap, with shares trading at 21 times trailing earnings, half of its three-year average of 42.

An annual report for Celgene Corp. is available at 86 Morris Ave., Summit, New Jersey 07901; (908) 673-9000; www.celgene.com.

CELGENE
Quarter
Per-Share Earnings*
($)
Sales
Change
Quarterly
Price Range
($)
P/E Ratio
Range
Dec '16
1.61
vs.
1.18
16%
127.00
-
96.93
23 - 18
Sep '16
1.58
vs.
1.23
28%
117.90
-
98.25
23 - 19
Jun '16
1.44
vs.
1.23
21%
111.90
-
94.42
23 - 19
Mar '16
1.32
vs.
1.07
21%
119.59
-
93.05
25 - 20
           
Year
(Dec.)
Sales
 ($Bil.)
Per-Share
Earnings*
($)
Per-Share
Dividend
($)
52-Week
Price Range
($)
P/E Ratio
Range
2016
11.23
5.94
0.00
127.00
-
93.05
21 - 16
2015
9.26
4.71
0.00
140.72
-
92.98
30 - 20
2014
7.67
3.71
0.00
119.84
-
66.85
32 - 18
2013
6.49
2.98
0.00
86.90
-
39.88
29 - 13
 
Quadrix Scores †
Overall
Momen-
tum
Value
Quality
Financial
Strength
Earnings
Estimates
Performance
89
93
48
96
68
66
67

   * Earnings exclude special items.
   † Quadrix scores are percentile ranks, with 100 the best.
   NA Not available.


Current Hotline

Stock Spotlight

Individual Stock Reports

ISRs make stock research easy!

Perhaps the most valuable two page reports available anywhere.

All the data you would normally have to plow through years of 10-K filings, earnings reports, and reams of market data to assemble — yours all in one concise report.

ISRs contain our proprietary Quadrix scores — find out how we rate all the stocks in the S&P 500.

Visit us at individualstockreports.com