Celgene in Hypergrowth

Celgene (CELG) is one of those stocks with a high trailing price-to-earnings ratio (P/E = 234, today according to NASDAQ) that seems to be able to continually justify its price. It is a member of the NASDAQ-100 and one of the stocks in the IBB (iShares Nasdaq Biotechnology Index Fund).

I don't own Celgene but I am sure thinking of buying it when my portfolio allows. If the P/E of 234 scares you, take a look at the much more reasonable forward-looking P/E of 37 (per NASDAQ), then take a look at the company.

Most of Celgene's revenue comes from just two drugs. In Q1 2007 Revlimid had sales of $146.2 million, up 18% sequentially and 351% from year-earlier.

Thalomid had Q1 sales of $106 million, down slightly from year-earlier. Why? Because it is now competing for patients with Revlimid.

Celgene also had Alkeran sales of $16 million while its Ritalin drug familty produced $19.8 million. None of these drugs are expected to grow sales rapidly.

Revlimid is the drug to watch. It is a in a new class of immuno-modulatory drugs. It is currently approved to treat specific types of pre-leukermia or MDS (myelodysplastic syndromes) and to treat patients who had a prior therapy and need another option for treating multiple myeloma. But expectations, both at Celgene and in the medical community, are very high for it to be approved for other indications such as CLL (chronic lymphocytic leukemia) and NHL (Non-Hodgkin lymphoma). There are over 70 trials of Revlimid that are underway or soon to be started for a variety of indications.

While Revlimid is the company's focus at present, it has other potential hits in its pipeline (See Celgene pipeline).

Still, there is a lot of risk involved in buying biotech and pharmaceutical company stock, even when drugs are producing good and growing income. This is amplified when a stock has a high price to earnings ratio.

Here are some helpful links for more research on Celgene:

Celgene Corporate web site
My Celgene page with links to summaries of analyst conferences
My biotechnology research page (under construction, but already useful)