Seeking Alpha
Long only, deep value, special situations
Profile| Send Message|
( followers)  

Celgene Corporation (NASDAQ:CELG) wants to double its revenues by 2017 and is moving quickly and aggressively to implement a three-pronged strategy. The three-pronged expansion includes growing Revlimid, its core product, development of new blockbuster drugs in-house and boosting its pipeline through partnership with early stage development companies.

Financials

For the year 2012, the company reported net income of $1.5 billion up 11% year-over-year on sales of $5.4 billion, a growth rate of 15%. The main contributors were Revlimid, which treats blood-related cancers such as multiple myeloma and leukemia ($3.8 billion), Vidaza which treats a bone marrow condition called myelodysplastic syndrome and acute myeloid leukemia ($823 million), and Abraxane which treats solid tumor cancers ($427 million). The first quarter 2013 results continue to be impressive, with total revenues at $1.4 billion up 15% from the prior year period and net income of $592 million, an increase of 22%. The company ended the first quarter with $3.5 billion in cash and cash equivalents. For the year 2013, sales are expected to grow by 11% from the prior year to $6 billion with EPS growth of approximately 14%, estimated to be between $5.55 and $5.56 per share.

Regenerative medicine

The latest deal was finalized between Celgene and the biotechnology company Tengion Inc. (OTCQB:TNGN), indicating that Celgene is adding regenerative medicine, with Tengion's expertise, to its product portfolio. Celgene is investing $15 million in Tengion for first rights to Tengion's technology of creating new kidney tissue for people with chronic kidney disease. In chronic kidney disease, the kidney gradually loses the ability to filter waste and water from the body, resulting in a buildup. The condition is most commonly caused by diabetes and heart disease, and the end result could be kidney failure, for which the only options are dialysis or a kidney transplant. The Centers for Disease Control and Prevention estimate that 26 million Americans currently suffer from this condition. Tengion's technology creates tissues from the patient's own cells, reducing the chances of rejection, which could arise from a transplant and removing the complications of dialysis. An earlier deal between the two focused on creating new tissue for patients without a bladder.

Blood cancer

Celgene has recently acquired the license for an early stage drug to treat myeloma and leukemia from the German company MorphoSys and acquired a stake. Multiple myeloma is a cancer affecting the plasma cells, and is one of the most significant types of blood cancer in Europe and the United States. The American Society of Cancer estimates approximately 21,700 new cases of multiple myeloma were diagnosed in 2012 and 10,710 deaths occurred; currently there is no cure. Celgene is gaining worldwide rights to MOR202, which is currently in Phase I and IIa trials involving patients with relapsed or refractory myeloma. The success of MorphoSys in new compound discovery rests on the platform of HuCAL (Human Combinatorial Antibody Library) which can generate billions of human antibodies in the lab without using animals.

Apremilast

The company announced that its own pipeline candidate, Apremilast, has done well in Phase II studies for the treatment of Behçet's disease, a chronic inflammatory condition. The condition, the cause of which is unknown, can end up causing ulcers in the genitals and the mouth. There are no presently improved therapies for the condition in Europe and the United States, and the company is evaluating the process of approvals in multiple countries. The drug is also being developed for the treatment of other indications, and approval for psoriatic arthritis and psoriasis will be sought in the United States, Canada and Europe.

The bottom line

The company is well on course to achieve its stated objectives for 2017, and this would be quite an achievement when other major healthcare companies are struggling with declining revenues because of patent cliff problems. The large exposure to development stage companies may be considered by some to be risky, but the risk is mitigated by the sheer number of these partnerships and the healthy condition of the company's own drug development pipeline combined with the strong performance of its existing core portfolio. This is a growth company with exciting future prospects and should be given further consideration in the biotechnology sector.

Source: Celgene Is An Exciting Growth Prospect