Celgene (NASDAQ: CELG), one of the larger players in the pharmaceutical industry, released surprisingly good preliminary results for 2012, which also left an upbeat and optimistic sentiment on Wall Street about the company's performance in 2013. Their extremely successful anemia drug REVLIMID (lenalidomide) achieved net sales of $1 billion, and supported the company's expectations of $6 billion in sales revenue for fiscal year 2013.
Investors were also reminded that their psoriasis drug met its primary and secondary endpoints in the phase III ESTEEM trials, which paves the way for another FDA approval. The stock moved up steadily upwards throughout the day on heavy volume, closing 6.6% higher.
Keep in mind that this is impressive due to the size of Celgene - a 6.6% movement to the upside also means that investors added about $2.5 billion to the worth of the company in a single trading session. After this big move up, is CELG still worth it for a prospective investor?
I would say yes for almost anyone who is looking for a mid-size pharmaceutical company (with a good track record) to add to their portfolio. Although it might be better to wait for a dip, or at least a little less bullishness on the stock, the company and its financial prospects look terrific as we head into a new year.
First we should consider five prominent FDA-approved products that Celgene is now marketing.
1 - Revlimid (lenalidomide) for anemia caused by myelodysplastic syndrome (NYSE:MDS)
2 - Istodax (Romidepsin) for cutaneous and peripheral T-cell lymphomas
3 - Vidaza (Azacitidine) for myelodysplastic syndrome
4 - Abraxane (Protein-bound paclitaxel) for breast and other forms of cancer
5 - Thalomid (thalomide) for erythema nodosum leprosum and multiple myeloma in combination with dexamethasone
These products bring the bulk of the company's $1.39 billion in quarterly sales revenue, and are expected to bring more in 2013 and subsequent years. Abraxane in particular should see expansion of its indication into other forms of cancer, including all-too-common pancreatic cancer. If clinical trials go well, we may also see abraxane changed from a second-line treatment for breast cancer to a first-line treatment, significantly expanding its application in the large market for breast cancer treatments.
On top of promising expansion for its current products, Celgene has thirteen clinical development stage compounds with indications in hematology, oncology, and immunology. Despite the company's huge pipeline, it remains profitable at a P/E ratio that is actually reasonable (25).
While Celgene lacks the explosive potential that many smaller biotech companies do, it serves as a well-rounded play on the industry. The company also appears to be efficient, which is incredibly important for larger pharmaceutical companies. If the company can meet its own expectations in 2013, I think CELG will be north of $110/share by 2014.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in CELG over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.