Seeking Alpha
Long/short equity, growth
Profile| Send Message|
( followers)  

In the past month of trading Celgene's (NASDAQ:CELG) stock has risen over 10%. In 2013 the stock more than doubled. And while the company has had an incredible run to date, I think there's plenty of room for the stock to continue its upward trend. Celgene discovers, develops, and commercializes therapies for cancer and immune-inflammatory related disease. Its drug portfolio and pipeline continues to expand; the company has 16 of its drugs in regulatory filing for various indications, and for 9 other indications in late stage trials. The company appears well on its way to have a number of blockbuster drugs on the market in the coming years.

In 2012, Celgene had total revenues of $5.5 billion, a 14% increase over 2011. This year the company again expects to have more than double-digit sales growth, projecting sales at $6.2 billion. And while those are impressive percentages, Celgene s CEO, Bob Hugin, claims those numbers will pale in comparison to what he's forecasting. Earlier this year Mr. Hugin told conference goers at the J.P. Morgan conference he aims to double the company sales to $12 billion by 2017-- and judging by the stock's impressive climb, Wall Street seems to believe he can reach that goal.

CELGENE'S TWO MULTIPLE MYELOMA DRUGS BRINGING IN BILLIONS OF DOLLARS IN REVENUE

The company's flagship drug, Revlimid, is used to treat multiple myeloma (MM), a blood cancer that affects 22,350 new patients annually and contributes to over 10,500 deaths per year. Revlimid had sales of $3.8 billion in 2012, owning a major percentage of the $4.4 billion MM drug market, which is expected to reach $7 billion by 2021. Celgene upped its previous 2013 sales forecast for the drug from $4.2 billion to $4.3 billion.

Revlimid is approved for relapsed or refractory MM, and is currently in two phase III trials for both newly diagnosed MM and for maintenance. Unlike a number of giant pharmaceutical companies that are currently or will soon be losing billions in revenue due to patent expirations on their once-blockbuster drugs, Celgene does not have that issue. Revlimid's patent does not expire until 2027, which means it should continue to be a cash cow for the company for a number of years to come, as it is expected to control 64% of the entire MM drug market by 2021.

Pomalyst, the company's latest MM drug, is forecasted to reach $1 billion in sales annually by 2017. The drug is an immunomodulator and prescribed for patients with relapsed or refractory MM who are unable to take Celgene's other two MM drugs, Thalomid (thalidomide) and/or Revlimid, due to the toxicities of the drugs. Since its FDA approval in February (and subsequently its European approval), Pomalyst sales are off to a solid start, generating revenue of $90 million in the 3rd quarter 2013, up 35% from the previous quarter. So far the drug is beating Amgen's (NASDAQ:AMGN) competing product, Kyprolis, which received FDA approval in July 2012 followed by European approval in August 2013. And while the two drugs battle for the same MM patients, Pomalyst has the edge in the delivery: it is taken orally as opposed to Kyprolis's required injection.

Celgene appears to have a lock on the bulk of the MM drug market. With its three MM drugs-- Revlimid and Thalomid, both used for newly diagnosed and relapsed patients as well as for maintenance therapy, and Pomalyst, used as third line treatment-- Celgene's product line serves the MM population at every stage of the disease.

ABRAXANE GAINS APPROVAL TO EXPAND USAGE FOR LATE STAGE PANCREATIC CANCER

Abraxane, which was approved for treatment of breast cancer in 2005 and non-small cell lung cancer in 2012, received FDA approval in September as a first-line treatment for patients with late metastatic pancreatic cancer. Pancreatic cancer is often diagnosed after the cancer has advanced to a stage where it cannot be surgically removed. The disease will kill 38,460 people in 2013, making it the fourth leading cause of cancer deaths in the U.S. Over 45,000 people will be diagnosed with pancreatic cancer this year.

Abraxane is a chemotherapy drug that can slow the growth of certain tumors and is differentiated from taxols and other chemotherapy; it is human protein, albumin-bound version of paclitaxel with nano-sized particles, enabling vesicle transport to interstitial space in tumors, 10x the free concentration at peak. It was first approved in January 2005 for the treatment of breast cancer after failure of combination chemotherapy for metastatic disease or relapse within 6 months of adjuvant chemotherapy.

Abraxane will be used with Eli Lilly's (NYSE:LLY) gemcitabine, in patients whose pancreatic cancer has spread to other parts of the body. The drug recently received a positive opinion for its pancreatic cancer treatment from the European Medicines Agency's Committee for Medicinal Products for Human Use (CHMP), which generally paves the way for a European approval.

Celgene acquired Abraxane through its purchase of Abraxis Bioscience in 2012 for $2.9 billion. Analysts project the drug could potential have annual sales of $1.5 billion to $2 billion as a cornerstone therapy in solid tumors. Though sales of the drug in 2012 came in at $426.6 million, and were mostly for the indication of breast cancer, the product is a platform drug that should be able to treat a number of other cancers. Thus, the potential is there for Abraxane to be a billion-dollar drug platform. Abraxane becomes the first new pancreatic cancer drug in almost eight years. The global market for pancreatic cancer treatments is roughly $700 million, but is expected to grow to $829 million in the U.S. by 2019. Abraxane is currently in various stages of investigation for the potential treatment of the following cancers: melanoma, bladder, ovarian, and expanded applications for breast and lung cancer.

CELGENE ENTERS THE PSORIATIC ARTHRITIS MARKET

Celgene has a market capitalization of $69 billion. Its stock closed on Friday, December 20th at $167.49, just under $10.00 below its 52-week high of $173.80. And while its cancer drug sales continue to increase, investors should anxiously be waiting for an expected approval of another lucrative product for the company to add to its portfolio. The company expects its psoriatic arthritis drug, apremilast, to gain FDA approval this coming March. Though the new drug will be battling established drugs for the seven million psoriatic arthritis sufferers, including AbbVie's (NYSE:ABBV) top selling drug of all time, Humira, and Pfizer (NYSE:PFE) and Amgen's drug, Enbrel, analysts see sales of apremilast could reach from 1.5 billion to $2 billion.

The company reported revenue of $1.67 billion for the 3rd quarter, up from $1.4 billion in the same quarter the previous year. Net income rose 19% to $669 million compared to $561 million in the same quarter last year, and adjusted diluted earnings increased 21% to $1.56 per share. The company upped its earnings forecast for 2013 on Thursday after reporting slightly higher-than-expected quarterly profit due to robust sales. Celgene expects to earn an adjusted $5.90 to $5.95 a share, up from a previous forecast of $5.80 to $5.90 a share. The company expects revenues for the year to exceed $6.2 billion.

On Thursday, December 19th analysts at Bank of America raised their price target on Celgene to $196.00 per share. While earlier this month Credit Suisse upgraded the stock from a "neutral" to an "outperform" and raised its price target from $165.00 to $210.00, giving the stock over a 25% upside potential. Citigroup also reiterated a "buy" on the stock with a price target of $204.00, and UBS raised its price target from $163.00 to $200.00. Zacks, however, maintains a "neutral" rating and has a price target of $171.00.

CONCLUSION

Celgene as a company continues to fire on all cylinders. Its drug sales continue to rise, it pipeline of quality medicines continues to grow either by in house or through collaborations, and currently it has roughly 10 indications in phase III trials. Though the stock has dipped about 5% from its 52-week high, Celgene still is not a "cheap" stock. While I'd like to see the stock drop a bit more before buying more, that probably won't happen, as I don't see much downside risk at this point. But I do see quite a lot of upside potential for a number of years to come.

Source: Celgene's Stock Should See New All-Time Highs Due To Strong Pipeline