Celgene Corp (CELG), a global biopharmaceutical company that focuses on the development of cancer and immune-inflammatory treatments, has been on an excellent run; the stock is up over 27% YTD and recently plowed through its previous all-time high. In the last six months the stock has almost doubled in value, up over 48%. What has contributed to this run up? … Earnings and future earnings based on some of the company's new drugs that are in late-stage tests.
Celgene expects to announce sales in 2012 of $5.4 billion, up 15% over the previous year, with total revenues of approximately $5.5 billion, up 14% over 2011, and estimated earnings per share (EPS) of $4.90.According to a WSJ article dated January 7th 2013 titled Celgene Sees 2012 Earnings at High End of View, the company is expecting net product sales to be approximately $6 billion, up 11.4% over the previous year, and EPS between $5.50 to $5.60, up 12% to 14%. The company looks to continue its growth through 2015 and expects adjusted earnings to be in the range of $8.00 to $9.00 per share. Net product sales for 2015 are still forecasted in the range of $8 to $9 billion.
What continues to drive the sales is Celgene's strong pipeline of products, and what should continue to drive future sales upward are the company's other promising drug candidates in late stages of testing.
Celgene has a number of drugs on the market today that are highly profitable. Revlimid, the oncology drug for treatment of multiple myeloma accounts for 66% of the company's sales and is projected to grow 9% to 12% year over year. Revenues from the oncology drug, which is currently undergoing Phase III clinical trials for numerous other indications, including chronic lymphocytic leukemia, and non-deletion 5q myelodysplastic syndromes, grew 18% over last year's 3rd quarter with sales of $970 million. The total sales for 2012 is expected to come in somewhere between $4.1 to $4.2 billion, an increase of 9% to 12% over 2011. However, sales of Revlimid could be tempered somewhat with competition from Onyx Pharmaceutical's (ONXX) drug Kyprolis that received FDA approval in July of 2012, also for the treatment of multiple myeloma.
Abraxane, Celgene's chemotherapy drug to treat breast cancer, recently won FDA-approval for treatment of non-small cell lung cancer, and therefore has the potential to bolster its sales by as much as $110 million. Other late-stage clinical trials continue with Abraxane. Celgene reported results from an ongoing Phase III trial with patients suffering Stage IV metastatic melanoma. Data showed a prolonged progression-free survival compared to patients receiving dacarbazine chemotherapy.
Abraxane is also in a late-stage pancreatic cancer trial, where the drug has demonstrated a significant improvement in overall survival of patients compared to those receiving standard treatment. Advanced pancreatic cancer is the fourth most common cause of cancer death throughout the world. It is difficult to diagnose and equally difficult to treat. Pancreatic cancer patients have the lowest survival rates among all cancer suffers, and the disease is increasing worldwide with almost 220,000 new cases per year. Analyst Joel Sendek at Stifel Nicolaus expects FDA-approval of Abraxane to treat pancreatic cancer sometime in 2014, and sees sales for the drug for pancreatic cancer patients around $92 million in 2014 and $241 million in 2015.
Other drugs in Celgene's portfolio have seen mixed gains. 3rd quarters sales of Vidaza, the company's drug to fight cutaneous T cell lymphoma, rose 15% to $220 million despite the loss of its exclusivity in 2011, but sales were aided by increasing new markets such as the UK and Japan. Sales estimates of 2012 are expected to come in at $819 million, but 2013 projections were not as promising as sales estimates are expected to be down, $687.3 million. Meanwhile, its cancer drug Thalomid, used to treat newly diagnosed multiple myeloma patients, slid on sales of $75 million, down 10%. Total 2012 sales are estimated to come in at $302.3 million, and sales projections for 2013 are expected to drop to $263.7 million.
Celgene has a number of highly promising drugs in late-stage trials within its pipeline. Pomalidomide, an immunomodulatory drug, which is given orally, is designed to battle multiple myeloma where other drugs have failed. Pomalidomide is in a late Phase III study for people who have already taken Revlimid or Takeda Pharmaceuticals' Velcade and found little or no success. Patients taking pomalidomide plus a low dose of the steroid dexamethasone were found to have progression-free survival that was significantly longer compared with those who received just high-dose dexamethasone. In an interim analysis, pomalidomide, plus low-dose dexamethasone, showed a highly statistically significant improvement in overall survival that exceeded the upper boundary for superiority. As a result, the Data Monitoring Committee recommended that patients who had not yet progressed in the high-dose dexamethasone arm should be moved over to pomalidomide plus low-dose dexamethasone.
A lot will be determined about the future of the drug on February 10th, when the FDA is expected to decide on whether to approve its use. European regulators are expected to decide later in the second half of the year. Pomalidomide has the potential to be another blockbuster drug for Celgene. According to estimates compiled by Bloomberg, annual sales could reach $1 billion by 2017.
Another drug nearing the end of its clinical Phase III PALACE 1 study is apremilast, an oral small-molecule inhibitor of phosphodiesterase 4 used for the treatment of psoriatic arthritis and psoriasis. In the PALACE 1 study apremilast showed significant improvement in suffers of psoriatic arthritis who did not respond to previous drugs, including disease-modifying antirheumatic agents and biologics. Celgene expects to file a New Drug Application (NDA) with the FDA in the first half of 2013 for the treatment of psoriatic arthritis.
Apremilast has also demonstrated, through its ESTEEM 1 and 2 Phase III studies, success in treating psoriasis, achieving 75% improvement in the psoriasis area-and-severity index. Celgene expects to file a NDA for the treatment of psoriasis with the FDA in the second half of 2013. Apremilast is also in a Phase III study for the treatment of ankylosing spondylitis, a chronic inflammatory disease of the axial skeleton, and the company is delving into other indications for the drug.
On Friday, January 18th Celgene continued its climb as the stock broke $100.00 per share closing at its all-time high of $100.03. The company has a market cap of $41.94 billion, and a P/E of 27.1, well below the industry average. However, the industry average is skewed by some very high speculative ratios; so I would prefer to analyze it with the broader healthcare sector, which has an average P/E ratio of 20.6. Though profitable, Celgene does not offer a stock dividend, but does offer well-established products and the ability to generate strong cash flow and very strong growth due to its present line of therapies, along with a number of new drugs in late-stage tests. The growth is expected to top 20% per year compounded over the next five years.
In a January 16th Jags Report covering Celgene, analysts at Brean Murray raised its target price from $100.00 to $112.00. Similarly, Analysts at Bank of America also upgraded Celgene from a neutral to a buy, raising its target price from $88.00 to $115.00 per share. Earlier, Cantor Fitzgerald upped its target price from $96.00 to $115.00. However, Robert W. Baird, while reaffirming its outperform rating, dropped its previous target price of $107.00 down to $92.00.
I like what Celgene has to offer. The company has the stability of a giant corporation while it still has the growth potential that smaller companies have to offer. The question is: Will Celgene continue its strong rise in 2013? Though I don't expect the stock to double as it almost did over the past year, I do see that the stock has plenty of room to rise, especially with such a strong group of drugs that may soon come on the marketplace. And even though Celgene is a bit pricey compared to three weeks ago, due to its sales potential over the next five years, I still see Celgene as a solid buy.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.