Celgene Still Seems To Be A Good Biotech Ride

No matter how many times I look at Celgene’s (CELG) multiples (trailing P/E = 223 (!), P/S = 24, P/B = 11) and think it’s overpriced, the stock always moves up. This company has done phenomenally well.

Initially Celgene had the foresight to develop Thalidomide (a sedative that caused birth defects) as a treatment for cancer. Celgene’s follow-on compound, Revlimid, is even better.

Celgene has been doing a great job of growing revenue and profit over the past five years. Revenue has nearly doubled each year since 2002: the company is set to easily surpass one billion this year. Operating income has doubled each year since it became profitable (2004).

Clearly, Celgene can’t continue to trade at the premium it is forever, but for now it’s a good ride.

The American Society for Cancer Oncology [ASCO] has its conference later this week in Chicago, and Celgene will be presenting new clinical data on the efficacy of Revlimid both on its own and in combination therapy. Historically, CELG has always done very well as a result of the ASCO, and I think it’s safe to assume it will this year as well. To take advantage of this, and a slight softening in share price over the past week, I think this could be a good time to look into (still quite speculative) June in-the-money calls.

Source: PeterNavarro.com

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