Celgene Becomes a Bargain Once Again
The latest crash of the financial markets has created some great buying opportunities in the health care sector. You can almost pick any Biotechnology or Pharmaceutical stock and be guaranteed that it is undervalued today. The sell-off was steep and broad and took down good stocks with the bad. It certainly felt like some hedge funds were desperately liquidating anything in their portfolio. The financial stock selling was only exacerbated by a crash in commodities to create a avalanche effect that may not be over yet.
This has created a great buying opportunity in names such as Amgen (AMGN), Genentech (DNA), Genzyme (GENZ) and Celgene (CELG) to name a few.
Celgene recently reported great earnings highlighted by higher than expected sales from its Multiple Myeloma drug, Revlamid. Sales were up 80% from a year ago and translated to a very nice 26 cents per share earnings or double last year's numbers. This was slightly unexpected as analysts were widely expecting to see some signs of weakening of sales due to competition from Velcade from Takeda Pharmaceuticals (TKPHF.PK) (acquired through purchase of Millenium Pharmaceuticals). The company also raised its full year guidance to $1.5 /share from $1.45.
More recently, Celgene announced that its Small Cell Lung Cancer drug, Amrubicin, was given fast track status by the FDA. Amrubicin is being currently tested against GSK's (GSK) Hycamtin in patients with refractory SCLC.
But, the news has not all been positive for Celgene. The FDA recently published a report that Revlimid may have an association with Stevens Johnson. Stevens Johnson has been on the label of Thalidomide as a potential issue and since the two drugs are of the same class, having that warning added to the label should not cause a drop in sales, especially considering that Multiple Myeloma is a deadly disease.
Celgene is trading at $64.3 with a market cap of about $29 billion. It recently hit a high of $76 in August. The recent sell off due to the FDA warning and the financial crisis has created a great buying opportunity for a stock that can trade into the $80s next year.
Disclosure: The author has no position in CELG stock or options.
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This article has 3 comments:
- crimfunk
- 46 Comments
Sep 19 12:56 PMWASHINGTON (Dow Jones)--The Food and Drug Administration said Thursday that Celgene Corp.'s (CELG) blood-cancer drug Revlimid may cause a rare but serious skin reaction in some patients.
The agency released a post-marketing review of Revlimid as part of a quarterly drug-safety newsletter that was posted to the agency's Web site. The review discussed 14 reports of serious skin reactions possibly linked to the drug.
Earlier this month, Revlimid appeared on a list of about 20 drugs that the FDA said it was investigating after receiving reports of various post-marketing safety issues but details weren't released.
The FDA said doctors need to be aware of the possibility that Revlimid could cause serious skin reactions and said the drug should be discontinued if a skin rash appears. The skin-reaction possibility is not currently contained in Revlimid's label, which partly serves as tool to warn doctors about drug risks, the FDA said.
Brian Gill, a spokesman for the Summit, N.J., company, said it was likely that the label for Revlimid would be updated to include reports of the skin reactions. He said about 60,000 patients have been treated with Revlimid.
Revlimid was approved in December 2005 to treat a bone-marrow disorder known as myelodysplastic syndromes and later approved for multiple myeloma, a type of blood cancer.
Since approval, the FDA said it had received 14 reports of serious skin reactions, known as Stevens-Johnson syndrome or toxic epidermal necrolysis, through January 2008. The agency said it received three reports of deaths in patients with the skin conditions, although in one case the cause of death was listed as progression of a type of blood cancer.
The skin conditions are two related skin disorders characterized by blisters that typically result from drug exposure. The agency said eight of the patients had reported either taking or previously being on other drugs that could have also caused the skin reactions. However, the FDA said in at least two cases it appeared that Revlimid played a role in the development of skin reaction.
Revlimid already carries the FDA's toughest black-box drug warning discussing the possibility of birth defects and other serious problems, such as blood clots, and is sold under a restricted distribution system.
- Shiv139
- 14 Comments
My Website
Sep 20 10:17 AMToday energy is in secular ascendancy. After energy, Sam Stovall's sector analysis suggests that the coming secular opportunity will arise in health-care.
The general idea is to identify the present secular bull. The aim is to use economic cycles to position your portfolio to benefit from out-performance in the next up-turn.The energy bull has been running from 2003 and can be expected to run to 2018-2020. The first economic cycle within this secular trend is drawing to a close. Following a cyclical correction, this sector can be expected to out-perform even the out-performers significantly.
The next secular opportunity expected to run from 2018/2020 to 2033/2035 is health-care. The aim is to build positions in this sector for the future. Much of the investment in the energy sector is in place; the rigs have been financed and are being built, refining capacity is financed and expansion of capacity is well underway, exploration of new ultra deep-water opportunities are in full swing.
New money is being deployed in the next secular opportunity (health-care); and it is at this point in time where valuations are closest to green-field.
- XeroJ.
- 258 Comments
Sep 20 06:32 PM