Celgene Stock Still Has Plenty of Room to Grow Due to a Strong Product Line
The global biopharmaceutical company, Celgene (CELG), has had quite a run this year, and judging by its sales and pipeline of products, the stock should continue to see positive growth. The company develops and commercializes therapies designed to treat cancer and immune-inflammatory related diseases. Recently Abraxane, Celgene's drug that combines the chemotherapy drug paclitaxel with a protein called albumin, has been in the news as the drug received Priority Review designation from the Food and Drug Administration (FDA) for a supplemental New Drug Application (SNDA) to be used in combination with gemcitabine for the first-line treatment of patients with advanced pancreatic cancer. Approved in 2005 for the treatment of breast cancer after failure of combination chemotherapy for metastatic disease or relapse within 6 months of adjuvant chemotherapy, Abraxane has shown improvement in the survival rate of patients suffering from other cancers, including pancreatic cancer, in late stage clinical trials.
The FDA priority review follows the April 2013 decision by the European Medicines Agency (EMA) that accepted for review a Type II Variation to the current Marketing Authorization Application (MAA) for Abraxane, in combination with gemcitabine, for the first-line treatment of advanced pancreatic cancer.
Abraxane is not currently approved for the treatment of advanced pancreatic cancer, but the FDA does grant Priority Review to medicines that, if approved, have the potential to offer significant improvement compared to marketed products or provide a treatment where no adequate therapy exists. The goal for completing a Priority Review is six months.
Pancreatic cancer is the eighth leading cause of cancer-related deaths worldwide. For all stages of pancreatic cancer combined, the five-year overall survival rate is about 6%, which is the lowest five-year overall survival rate of any cancer in the US. In Europe, the reported survival rate is less than 10% at five years.
Currently Eli Lilly's (LLY) Gemzar is the only drug approved by the FDA as a single agent for the treatment of advanced, inoperable pancreatic cancer. Since its approval in 1996, global sales of Gemzar have averaged close to $1.5 billion annually. If Abraxane gains approval for advanced pancreatic cancer, look for the drug to eat away at Gemzar's sales. Gemzar is a nucleoside analogue that interferes with the process of DNA production thereby preventing cancer cells from replicating and, in turn, slows or stops tumor growth. Abraxane is an albumin-bound form of paclitaxel that is manufactured using patented nab technology, and is formulated with albumin, a human protein, and is free of solvents.
Abraxane, which is currently approved for breast and lung cancer, is in various stages of investigation for the potential treatment of the following cancers: melanoma, bladder, ovarian and expanded applications for breast, lung and pancreatic cancer. The drug has the potential to be a blockbuster with sales reaching $1.5 billion to $2 billion annually. And the drug could be the cornerstone therapy in solid tumors with label expansion from metastatic breast cancer to non-small-cell lung cancer, to pancreatic cancer to melanoma.
Though Abraxane has great revenue potential, Revlimed -- Celgene's flagship drug, which is used for patients with multiple myeloma - still accounts for roughly 66% of the company's revenue. In 2012 Revlimed had sales of approximately $4.2 billion, and the company forecasts Revlimed should see sales of $5.9 billion to $6.1 annually by 2017.
Another drug that has the potential to bring in excellent revenue in the future for Celgene is apremilast, which is in late phase testing for psoriasis and psoriatic arthritis. To date there isn't a cure for psoriatic arthritis, so treatment is focused on controlling inflammation to manage the joint pain and, in a Phase III trial, apremilast successfully reduced psoriatic arthritis symptoms by at least 20% versus placebo. The company is expected to submit apremilast for a New Drug Application (NDA) for psoriatic arthritis followed by a second NDA for psoriasis in the second half of 2013. Celgene expects apremilast to be another blockbuster as roughly 7.5 million Americans suffer from psoriasis and upwards of 125 million people worldwide have psoriasis, and of those 125 million sufferers, between 10% and 30% will develop psoriatic arthritis. Though entering an established market, including injectable drugs like Enbrel from Amgen (AMGN) and Pfizer (PFE) or AbbVie's (ABBV) drug Humira, Celgene estimates sales of apremilast will be between $1.5 billion to $2 billion annually, though other analysts estimate sales around $300 million annually. One of the main reasons that the company expects to gain customers is that apremilast is more tolerable than other treatments currently on the market, as apremilast is taken orally as opposed to the other treatments, which are administered via an injection.
Celgene is the world's fourth-largest biotechnology company. It has six successful drugs currently on the market and a pipeline of numerous indications in various stages of development, from eleven in Phase III trials to seven in regulatory filings for approval. The company has a market cap of $51.91 billion, and has seen its stock rise over 80% year over year. It has a P/E of 37.76, which is above the sector average of 20.79; but the high PE ratio is justified as the company is a proven winner in generating cash flow, and has a growth rate expected to exceed 20% compounded per year. Last month Jefferies upped its price target from $140 per share to $152.
In April Celgene announced that for fiscal 2013, it raised adjusted diluted EPS guidance to a range of $5.55 to $5.65 from a range of $5.50 to $5.60, along with total net product sales guidance to $6.0 billion. GAAP diluted EPS is expected to be in the range of $4.32 to $4.47. Forecasting ahead to fiscal 2017, the company expects $12 billion in top-line revenue and $13 to $14 a share of EPS. According to I/B/E/S Estimates, analysts are expecting the company to report revenue of $11.5 billion and EPS of $13.2 for fiscal 2017.
Celgene continues to be a solid buy. The stock rise has slowed lately, but with its strong portfolio of product its stock rise should continue through 2013 and beyond. Celgene continues to develop new products for the market, and I see nothing that will slow the company's progress. This is an excellent stock to have in one's portfolio, and waiting for a larger dip that might not happen may be a mistake. I see Celgene as a buy.