One of the most notable seasonal tendencies ahead of summer is the move into defensive sectors ahead of summer. Baskets including healthcare historically post solid results during the second quarter as investors rein in risk ahead of summer doldrums.
While there are plenty of ideas to own across healthcare, Celgene (CELG) offers plenty of shareholder friendly reasons to be long.
Celgene has moved up strongly since making lows last fall.
I last discussed Celgene back in November, highlighting the potential growth from Abraxane as a treatment for pancreatic cancer. Shares have rallied 62% since making lows in the low $70s late last year.
In November, Celgene reported its drug Abraxane, when used in combination gemcitabine, a drug previously sold by Eli Lilly (LLY) as the blockbuster drug Gemzar, significantly improved survival rates. Celgene plans to file for the pancreatic cancer indication shortly.
If approved, Abraxane sales should move up significantly from the $106 million it generated in Q4. The label expansion would build upon the drug's success last year, which includes the October approval of Abraxane for non-small cell lung cancer, which accounts for 85% of all lung cancer cases and 150,000 deaths annually.
In non-small cell, Abraxane competes with Bristol Myers (BMY) Taxol. In Celgene's Phase III trials, progression free survival for Abraxane patients was 12.1 months versus 11.2 months for Taxol, with 33% responding versus 25%, respectively. Importantly, since Abraxane isn't combined with cremophor to solubolize the drug, patients can be treated with larger doses and suffer fewer side effects.
Abraxane also has opportunity as a treatment for metastatic melanoma. In Phase III data presented in November at the Society of Melanoma Research meeting, progression free survival on Abraxane was 4.8 months versus 2.5 months for patients on dacarabzine. If the drug eventually gets approval for this indication, it will compete with Bristol-Myers' Yervoy and Roche's (OTCQX:RHHBY) Zelboraf.
In addition to Abraxane, the company also has high hopes for Apremilast as a treatment for autoimmune diseases including psoriatic arthritis.
The company plans to file for the indication shortly. And, Apremilast is also being studied as a treatment for psoriasis and rheumatoid arthritis. The company hopes to launch Apremilast for psoriatic arthritis in Q1 2014 with a filing for approval likely submitted this quarter or next.
In addition to Abraxane and Apremilast, Celgene also got good news in February with the FDA's approval of pomalidomide, which will be sold under the brand name Pomalyst.
This drug will provide an alternative therapy to Onyx Pharm's (ONXX) Kyprolis for relapsed and refractory myeloma patients. Celgene expects the drug to gain approval in Europe later this year.
Data from a Phase III trial studying Pomalyst as a treatment for myelofibrosis is expected in the first half of 2013 too.
Finally, Celgene thinks its flagship Revlimid, which had $1 billion in sales in Q4, can be expanded to include mantle cell lymphoma and possibly lymphoma and leukemia. Following positive Phase II trial data for mantle cell lymphoma, the company filed an sNDA for the indication and received a PDUFA date for June 2013.
Overall, Celgene's robust pipeline is paying off handsomely. Earnings per share have grown 47% compounded annually over the past 5 years. Celgene expects to generate annualized top and bottom line growth of 19% and 25% through 2017, respectively. This would push earnings per share to $8-9 per share.
Those expectations suggest now may be a good time to consider Celgene, particularly given it boasts strong Q2 seasonality. Over the past decade, shares have finished the quarter higher 8 times, producing a median 7.50% return.
Source: Seasonal Investor