Just to note that I added a little bit of Celgene (CELG) to my prior holdings. I lost sold some Celgene (because it had become near 10% of my portfolio) at $156.74 on October 1, 2013. I believe the news since then indicates it is a very good buy at what I paid today, $156.42. Of course it could go lower in the short run, but see Celgene going over $300 in 2017 if not earlier.
I originally bought Celgene for $59.43 in June of 2007. I held it through the market crash, bought more, and it has been a key stock for my portfolio. Hopefully I am right about CELG's future.
Showing posts with label CELG. Show all posts
Showing posts with label CELG. Show all posts
Monday, January 27, 2014
Tuesday, January 14, 2014
Celgene in 2017: $375 per share or more
Recently
Goldman Sachs panned Celgene (CELG), downgrading the company to a "Sell."
A few days later Nomura started Celgene as a "Buy". Celgene is one of
my key long-term investments and has provided a lot of alpha for my portfolio.
Lately it (or at least the stock price) has been outrunning my cautiously
optimistic projections. Should I sell,
take profits, and reinvest when or if the price normalizes? Or is there a
factual basis to revise my past calculations upward?
I last
wrote about Celgene on July 30, 2013 in "Celgene Up
Over 100% In A Year: Still A Buy?"
I concluded then that even at over $140 per share a prudent investor would buy
Celgene, based on my estimated minimum $200 per share price in 2017. But
Celgene closed on Friday, January 10, 2013 at $169.81. Its 52 week high was
$173.80. Even if it were to reach $200 in 2013, that would only require a $10
advance per year, or about 6%. That is not what I consider good alpha, though
it still beats bonds.
As
always, the truth resides in the fundamentals. At pharmaceutical companies fundamentals
have their foundation in future sales of currently approved therapies and in
pipelines. There were quite a few developments at Celgene in the second half of
2013 that effect these foundations. The pace of sales of its key current drug,
Revlimid for multiple myeloma (MM), increased, while new data indicating a
label expansion to newly diagnosed MM is
possible was positive. Abraxane was approved for pancreatic cancer, in addition
to its earlier approval for breast cancer. Pomalyst/Imnovid was approved for MM
and sales have ramped quicker than expected.
Apremilast
turned in good data for psoriasis and related diseases in 2013. Its market name
will be Otezla, and FDA approval is expected this year (of course there is no
guarantee of that). Celgene expects Otezla sales to reach $1.5 billion, or
perhaps as high as $2 billion, in 2017.
On
January 13 Celgene released preliminary Q4 and full 2014 results, as well as
2014, 2015 and 2017 estimates. Short term investors will want to focus on the
Q4 results and 2014 estimates. Short-term, I'll just note that Celgene has a
high P/E (price to earnings) ratio; maintaining it requires investor confidence
in a high rate of profit growth.
As a
long-term investor my interest is in where Celgene stock could reasonably be at
the end of 2017. The easy answer comes from not doubting any of the parts, but
accepting Celgene's 2017 estimate. Celgene projects revenues of $11.5 to $12.5
billion in 2017, up from $6.5 billion in 2013. Given operating margin
estimates, the resulting non-GAAP EPS is expected to be in the vicinity of
$15.00, compared to near $6.00 in 2013.
One way
to project forward is to take the gain in EPS and multiply that by the current
stock price. $15.00 / $6.00 = 2.50. Using a stock price rounded to $170, that
would give us $425 per share. The percentage rate of increase, non-compounding,
to reach that would be 37.5%. If this were guaranteed, no investor would want
to miss out on that kind of growth rate.
Being
more conservative, I would guess that today's high P/E will have normalized
somewhat by 2017. Maybe the pipeline and projected earning s increases will
have decelerated by then. I'll use a PE of 25, which still assumes Celgene is
growing at a fair clip in 2017. 25 x $15.00 = $375 per share. That gives a
non-compounding growth in the stock price of 30% per year. Still something not
to be passed up.
In
looking out four years to 2017 we need to recognize that a lot of things could
go wrong. Private insurers or government health plans (particularly outside the
U.S.) could demand lower prices for therapies. A new competing therapy could
come to market and take market share. An unexpected adverse reaction to a
therapy could be discovered. Or operating costs might exceed estimates,
lowering profits.
Being
aware of all that, I also note that the picture could be even rosier than
outlined by Celgene management. As far as I can tell, the 2017 figures do not
include any revenues from the pipeline except for Otezla. It is worth taking a
brief look at the pipeline (excluding expanding current therapies to new
targets):
For
lymphomas, there is the Btk inhibitor CC-292 in Phase I; it is also in Phase I
trials for Chronic Lymphocytic Leukemia. Sotatercept is in Phase 2 trials for a
variety of anemias. CC-122, CC-115, CC-122 and CC-486 are in Phase I trials for
solid tumors. In the anti-inflammatory segment we have CC-11050 in Phase II for
cutaneous lupus erythematosus and CC-220 for undisclosed targets in Phase I.
For Crohn's disease Celgene has PDA-001 in Phase I. Last on my list, a cellular
therapy for organ transplants, UCB + HPDSC is in Phase I.
So, at
least balancing the possibility that Celgene will not hit its 2017 estimates,
there is the possibility that one or more of these earlier-stage therapies will
gain FDA approval and begin generating significant revenue, or at least
foreseeable revenue, before the end of 2017.
Celgene also can buy or generate (internally or with partners) new
potential therapies, or advance preclinical candidates to human trials, but I
don't see those as generating income by 2017.
In
conclusion, while there are risks involved, I see no reason I should not hold
my Celgene stock until 2017, when my expected value would be $375 per share. I
also see no impediment to long term investors buying at current prices. Of
course, if Goldman's negative view of biotechnology, or of the market in
general prevails, there could be better price entry points than the $160 to
$170 price range we have mostly been in lately.
I would
like to buy more Celgene, especially since I sold some shares in October (at
$156.74) in order to keep CELG within my portfolio limits for holding any
single stock. I bought my CELG mostly in 2007 and 2008. I have to weigh that
possible action against the benefits of diversifying into other biotech stocks
and other classes of stocks. I hope sharing my thoughts will help other
long-term investors with their thinking about Celgene. As to short-termers,
what they do seldom affects the long run. But I thank them for providing
liquidity and an air of excitement to investing in stocks.
Friday, October 4, 2013
Celgene partial sale
I am still a big fan of Celgene, but it again did so well that it violated my portfolio rules limiting the % of any one stock I hold. So I sold about 16% of my CELG holdings recently for $156.74 per share.
I last bought Celgene on June 24, 2013 for $111.40 per share. My rules allow me to buy more shares if for some reason the stock price drops again.
The shares I sold were originally bought for $38.59 per share back on May 4, 2009.
I continue to believe that for long-term investors like myself, CELG is a good bet. But I also recognize that every stock has its risks, and so limit my risks by following my portfolio rules.
Celgene will be reporting Q3 2013 results and holding its analyst call on October 24. As usual I will take a post notes which you can access at Celgene analyst call summaries.
I am pretty busy with other projects right now, so don't expect to write much in the way of articles for here or Seeking Alpha until early November.
I last bought Celgene on June 24, 2013 for $111.40 per share. My rules allow me to buy more shares if for some reason the stock price drops again.
The shares I sold were originally bought for $38.59 per share back on May 4, 2009.
I continue to believe that for long-term investors like myself, CELG is a good bet. But I also recognize that every stock has its risks, and so limit my risks by following my portfolio rules.
Celgene will be reporting Q3 2013 results and holding its analyst call on October 24. As usual I will take a post notes which you can access at Celgene analyst call summaries.
I am pretty busy with other projects right now, so don't expect to write much in the way of articles for here or Seeking Alpha until early November.
Tuesday, July 30, 2013
New Celgene (CELG) article
I have a new article published today at Seeking Alpha:
Celgene Up Over 100% in a Year. Still a Buy?
I also have an article under editorial review on Gilead (GILD).
Today I hope to write up my thoughts on Biogen Idec as well.
On the whole Celgene, Biogen, and Gilead, plus Onyx Pharmaceutical, have been my best investment segment. Buying them goes back to the time I wrote:
Choosing a Biotechnology Stock
Which, while the specifics have changed, still gives some good tips on what tips to look for if you want to choose individual stocks instead of a biotechnology fund.
Celgene Up Over 100% in a Year. Still a Buy?
I also have an article under editorial review on Gilead (GILD).
Today I hope to write up my thoughts on Biogen Idec as well.
On the whole Celgene, Biogen, and Gilead, plus Onyx Pharmaceutical, have been my best investment segment. Buying them goes back to the time I wrote:
Choosing a Biotechnology Stock
Which, while the specifics have changed, still gives some good tips on what tips to look for if you want to choose individual stocks instead of a biotechnology fund.
Thursday, July 25, 2013
Celgene analyst conference call notes
I have posted my notes on today's Celgene (CELG) analyst conference call:
Celgene (CELG) Q2 analyst call
The key takeaway was updated 2013 guidance.
I'll also be taking notes on Biogen Idec and Gilead today. I have a Xilinx article in the Seeking Alpha queue that needs some links to be added. I will probably write about Celgene next, then Akamai, Biogen, Gilead, and Intel and Altera updates, if I have time.
Celgene (CELG) Q2 analyst call
The key takeaway was updated 2013 guidance.
I'll also be taking notes on Biogen Idec and Gilead today. I have a Xilinx article in the Seeking Alpha queue that needs some links to be added. I will probably write about Celgene next, then Akamai, Biogen, Gilead, and Intel and Altera updates, if I have time.
Monday, June 24, 2013
Bought More Celgene (CELG)
In the interest of full disclosure, this is a note that I bought Celgene stock today at $111.40.
I had sold 17% of my CELG on June 7, 2013 for $126.80. Today I bought twice as much as I sold on June 7. Celgene is now the largest position by value in my portfolio.
I acquired my long Celgene position over time as follows:
6/7/2007 at $59.34
5/4/2009 at $38.59
1/28/2011 at $52.40
For my latest analysis of Celgene see:
Celgene 2013 Guidance: Two Times 2013 Revenue
Note that while I like and own Celgene, my portfolio is constructed to balance risks and opportunities as a whole.
Keep diverfied!
I had sold 17% of my CELG on June 7, 2013 for $126.80. Today I bought twice as much as I sold on June 7. Celgene is now the largest position by value in my portfolio.
I acquired my long Celgene position over time as follows:
6/7/2007 at $59.34
5/4/2009 at $38.59
1/28/2011 at $52.40
For my latest analysis of Celgene see:
Celgene 2013 Guidance: Two Times 2013 Revenue
Note that while I like and own Celgene, my portfolio is constructed to balance risks and opportunities as a whole.
Keep diverfied!
Saturday, January 26, 2013
Celgene (CELG) 2017 Guidance: Two Times 2013 Revenue
Celgene, based in Summit, New Jersey, is a biotechnology and pharmaceutical company best known for its Revlimid therapy for multiple myeloma (MM). At its analyst call to discuss fourth quarter 2012 results, CEO Robert Hugin projected that revenue would hit $6 billion in 2013 and grow to $12 billion by 2017. He believed profits (non-GAAP EPS, earnings per share) would grow even faster, at an average of 25% per year through 2017.
Last night I heard a high-level twit on NPR's Marketplace say that he would not buy stocks at this level because they have gone up so much in the last year, and in over the years since the 2008 collapse. Would he say the same about Celgene in particular?
Celgene's stock price took a hit during and following the 2008 selloff, reaching a low of $38.33 in 2009. Here are end-of year closing prices since then:
2009: $55.68
2010: $59.43
2011: $67.60
2012: $78.47
A naive investor might think that after a run up over four years buying at $78.47 would be a very risky thing to do. But in less than a month Celgene jumped to Friday's closing price of $99.76.
This is not idle speculation. Celgene stock has risen because revenue and profits have risen. It will rise further if revenue and profits continue to rise. So the question an investor should be asking is not what the price history is, but what reasonable projections can be made about profits.
The rise of Celgene to a top-level company has been driven largely by Revlimid sales, which accounted for $1.0 billion in revenue in the fourth quarter, or 70% of overall revenue of $1.42 billion. That might indicate a risky concentration in a single drug. Drugs typically pick up competitors over time, and eventually go generic. Should we discount the value of profits coming from Revlimid?
Revlimid's original approval was not for MM, but for MDS, myelodsplastic syndromes, and it is still used for that indication. Revlimid received FDA approval for MM in 2006, so it is a relatively new drug. Revlimid revenue is projected to continue to mount for three reasons. Revlimid has not yet fully penetrated the global market for its current label, which is for second line therapy, in other words for "patients who have received at least one prior therapy." There are still nations in the process of approving the therapy, of approving reimbursement, or of ramping commercially. A bigger factor is clinical trial data suggesting that Revlimid should have its label expanded to include first line therapy, which would give it a bigger share of the MM market. The length of therapy has been increasing and should bet a good bump from the shift to first line. Longer therapy means more revenue per patient.
Yet most of the projected expansion of Celgene revenue does not come from Revlimid. Revenue in Q4 from Vidaza was $216 million; from Abraxane was $106 million; and from Thalomid was $73 million. Except for Thalomid, all these therapies should see revenue growth. Abraxane, in particular, has clinical data showing it is effective for two hard-to-treat cancers, pancreatic and melanoma, in addition to its current label for breast cancer and its recent FDA approval for non-small cell lung cancer. FDA approvals are likely some time in 2013.
Apremilast for psoriasis and psoriatic arthritis, ankylosing spondylitis, and rheumatoid arthritis will likely be a blockbuster, with good clinical data in psoriatic arthritis likely leading to FDA approval this year. and Istodax has already received FDA approval and will generate revenue in 2013. Pomalidomide is in a Phase III trial for myelofibrosis and reported good results for MM. The FDA should complete its review by February 10, 2013.
Beyond these leaders, Celgene has a potential product pipeline so deep I'll just suggest you click on the link and gape at it.
Of course, the future could hold twists we cannot foresee. Celgene's Hugin is not guaranteeing a certain level of profit for 2017, or any particular stock price.
I find Celgene's 2017 revenue and earnings guidance quite credible. Given that, the price per share in 2017 should be in the $200 to $230 dollar range, given a typical stock market with typical price-to-earnings ratios. Also assuming that in 2017 it looks like there is more growth ahead.
Celgene is in the Nasdaq 100 and S&P 500, so several index funds include it. It is in most biotechnology funds as well, for instance the Nasdaq Biotechnology Index (IBB).
Remember, no matter how good you think a single company's future look, diversified portfolios can provide much more safety while retaining a high degree of potential growth. Keep diversified!
See also:
www.celgene.com
My Celgene main analyst conferences page.
My Celgene Q4 2012 conference notes
Disclaimer: I have owned Celgene stock since 2007. I will not trade in CELG for at least 3 days from this article's publication date.
Last night I heard a high-level twit on NPR's Marketplace say that he would not buy stocks at this level because they have gone up so much in the last year, and in over the years since the 2008 collapse. Would he say the same about Celgene in particular?
Celgene's stock price took a hit during and following the 2008 selloff, reaching a low of $38.33 in 2009. Here are end-of year closing prices since then:
2009: $55.68
2010: $59.43
2011: $67.60
2012: $78.47
A naive investor might think that after a run up over four years buying at $78.47 would be a very risky thing to do. But in less than a month Celgene jumped to Friday's closing price of $99.76.
This is not idle speculation. Celgene stock has risen because revenue and profits have risen. It will rise further if revenue and profits continue to rise. So the question an investor should be asking is not what the price history is, but what reasonable projections can be made about profits.
The rise of Celgene to a top-level company has been driven largely by Revlimid sales, which accounted for $1.0 billion in revenue in the fourth quarter, or 70% of overall revenue of $1.42 billion. That might indicate a risky concentration in a single drug. Drugs typically pick up competitors over time, and eventually go generic. Should we discount the value of profits coming from Revlimid?
Revlimid's original approval was not for MM, but for MDS, myelodsplastic syndromes, and it is still used for that indication. Revlimid received FDA approval for MM in 2006, so it is a relatively new drug. Revlimid revenue is projected to continue to mount for three reasons. Revlimid has not yet fully penetrated the global market for its current label, which is for second line therapy, in other words for "patients who have received at least one prior therapy." There are still nations in the process of approving the therapy, of approving reimbursement, or of ramping commercially. A bigger factor is clinical trial data suggesting that Revlimid should have its label expanded to include first line therapy, which would give it a bigger share of the MM market. The length of therapy has been increasing and should bet a good bump from the shift to first line. Longer therapy means more revenue per patient.
Yet most of the projected expansion of Celgene revenue does not come from Revlimid. Revenue in Q4 from Vidaza was $216 million; from Abraxane was $106 million; and from Thalomid was $73 million. Except for Thalomid, all these therapies should see revenue growth. Abraxane, in particular, has clinical data showing it is effective for two hard-to-treat cancers, pancreatic and melanoma, in addition to its current label for breast cancer and its recent FDA approval for non-small cell lung cancer. FDA approvals are likely some time in 2013.
Apremilast for psoriasis and psoriatic arthritis, ankylosing spondylitis, and rheumatoid arthritis will likely be a blockbuster, with good clinical data in psoriatic arthritis likely leading to FDA approval this year. and Istodax has already received FDA approval and will generate revenue in 2013. Pomalidomide is in a Phase III trial for myelofibrosis and reported good results for MM. The FDA should complete its review by February 10, 2013.
Beyond these leaders, Celgene has a potential product pipeline so deep I'll just suggest you click on the link and gape at it.
Of course, the future could hold twists we cannot foresee. Celgene's Hugin is not guaranteeing a certain level of profit for 2017, or any particular stock price.
I find Celgene's 2017 revenue and earnings guidance quite credible. Given that, the price per share in 2017 should be in the $200 to $230 dollar range, given a typical stock market with typical price-to-earnings ratios. Also assuming that in 2017 it looks like there is more growth ahead.
Celgene is in the Nasdaq 100 and S&P 500, so several index funds include it. It is in most biotechnology funds as well, for instance the Nasdaq Biotechnology Index (IBB).
Remember, no matter how good you think a single company's future look, diversified portfolios can provide much more safety while retaining a high degree of potential growth. Keep diversified!
See also:
www.celgene.com
My Celgene main analyst conferences page.
My Celgene Q4 2012 conference notes
Disclaimer: I have owned Celgene stock since 2007. I will not trade in CELG for at least 3 days from this article's publication date.
Thursday, September 6, 2012
Celgene Benefits from Psoriatic Arthritis Trial Data
Celgene (CELG) stock closed up $3.53 or 5% today to $74.49. This was not just from the general enthusiasm for the ECB plans to save the Euro, although a week Euro has been hurting Celgene's revenues and earnings as Europe is its second largest market after the United States. CELG's 52 week high was $80.42 on April 4 and the 52 week low was $56.79 on September 6, 2011.
When I last wrote about Celgene, on April 27, I said: "Celgene (CELG), a biopharmaceutical company therapy company, provides a double dose of growth potential: further revenue growth with its currently approved therapies and a rich pipeline with some therapies closing in on FDA approval and commercialization." See the whole article at Disappointed by Celgene's Q1?
Today Celgene announced that Phase III results from three studies. I believe those results were strong enough that Apremilast is likely to be approved for the treatment of psoriatic arthritis. Of course we won't know for sure until the final FDA vote, and even the actual submission to the FDA will not be made until Q1 2013. Apremilast is an inflammation modulator that could be usefull in other diseases caused by inflammation.
Given that Q2 numbers, reported back in late July, were pretty solid, I think that the focus will shift again to the potential value of Celgene's pipeline. Revenue was $1.37 billion, up 8% sequentially from $1.27 million and up 16% from $1.18 billion year-earlier. GAAP net income was $367.4 million, down 8% sequentially from $401.5 million but up 32% from $279.2 million year-earlier. EPS (earnings per share) were $0.82, down 9% sequentially from $0.90, but up 39% from $0.59 year-earlier.
Celgene raised its full year guidance for non-GAAP EPS to $4.80 to $4.85, up $0.05 from prior guidance.
Celgene has many therapies in its pipeline, from pre-clinical through Phases I, II, and III, but I can only cover a few specific examples that are likely to greatly increase the value of Celgene in the 2012 to 2015 timeframe. I'll focus on Abraxane and Pomalidomide, since I already covered the Apremilast news.
Abraxane is an improved formulation based on paclitaxel, which is already approved in the U.S. and Europe for breast cancer. It competes with generic paclitaxel. Revenues in Q1 were $104 million. It gave good data in trials for non-small cell lung cancer (NSCLC), and now has an application pending with the FDA, with decision due in October. In addition two Phase III trials are now fully enrolled with patients. One, in combination with gemcitabine is for pancreatic cancer, the other is for metastatic melanoma (skin cancer). Approval by the FDA would greatly increase the use of, and revenue from, Abraxane.
Pomalidomide data for relapsed and refractory multiple myeloma has been submitted to the FDA for marketing approval. It is also in a Phase III trial for myelofibrosis. Again, approval in either indication could eventually generate hundreds of millions in revenue.
Against the healthy growth in revenue from older therapies and the potential for new approvals, the current trailing price to earnings (P/E) ratio of 21.6 seems to fail to capture the train of future profits that appears to be coming down the track.
I don't see any substantial short-term down side risk for Celgene, other than normal market fluctuations. I see a number of new therapies that could be approved. If even one is approved the company would become significantly more valuable. If a number of them are approved there are going to be some really big numbers floating around for Celgene by 2015.
Keep diversified!
See also my notes on the Celgene Q2 2012 analyst call
Disclaimer: I am long (own stock in) Celgene. I will not buy or sell Celgene for at least one week after this is published.
When I last wrote about Celgene, on April 27, I said: "Celgene (CELG), a biopharmaceutical company therapy company, provides a double dose of growth potential: further revenue growth with its currently approved therapies and a rich pipeline with some therapies closing in on FDA approval and commercialization." See the whole article at Disappointed by Celgene's Q1?
Today Celgene announced that Phase III results from three studies. I believe those results were strong enough that Apremilast is likely to be approved for the treatment of psoriatic arthritis. Of course we won't know for sure until the final FDA vote, and even the actual submission to the FDA will not be made until Q1 2013. Apremilast is an inflammation modulator that could be usefull in other diseases caused by inflammation.
Given that Q2 numbers, reported back in late July, were pretty solid, I think that the focus will shift again to the potential value of Celgene's pipeline. Revenue was $1.37 billion, up 8% sequentially from $1.27 million and up 16% from $1.18 billion year-earlier. GAAP net income was $367.4 million, down 8% sequentially from $401.5 million but up 32% from $279.2 million year-earlier. EPS (earnings per share) were $0.82, down 9% sequentially from $0.90, but up 39% from $0.59 year-earlier.
Celgene raised its full year guidance for non-GAAP EPS to $4.80 to $4.85, up $0.05 from prior guidance.
Celgene has many therapies in its pipeline, from pre-clinical through Phases I, II, and III, but I can only cover a few specific examples that are likely to greatly increase the value of Celgene in the 2012 to 2015 timeframe. I'll focus on Abraxane and Pomalidomide, since I already covered the Apremilast news.
Abraxane is an improved formulation based on paclitaxel, which is already approved in the U.S. and Europe for breast cancer. It competes with generic paclitaxel. Revenues in Q1 were $104 million. It gave good data in trials for non-small cell lung cancer (NSCLC), and now has an application pending with the FDA, with decision due in October. In addition two Phase III trials are now fully enrolled with patients. One, in combination with gemcitabine is for pancreatic cancer, the other is for metastatic melanoma (skin cancer). Approval by the FDA would greatly increase the use of, and revenue from, Abraxane.
Pomalidomide data for relapsed and refractory multiple myeloma has been submitted to the FDA for marketing approval. It is also in a Phase III trial for myelofibrosis. Again, approval in either indication could eventually generate hundreds of millions in revenue.
Against the healthy growth in revenue from older therapies and the potential for new approvals, the current trailing price to earnings (P/E) ratio of 21.6 seems to fail to capture the train of future profits that appears to be coming down the track.
I don't see any substantial short-term down side risk for Celgene, other than normal market fluctuations. I see a number of new therapies that could be approved. If even one is approved the company would become significantly more valuable. If a number of them are approved there are going to be some really big numbers floating around for Celgene by 2015.
Keep diversified!
See also my notes on the Celgene Q2 2012 analyst call
Disclaimer: I am long (own stock in) Celgene. I will not buy or sell Celgene for at least one week after this is published.
Monday, August 13, 2012
3 NASDAQ 100 Biotechs: Gilead, Celgene, Biogen Idec
When I wrote about Gilead Sciences (GILD), on July 26, 2011, I said "A convergence of factors is driving Gilead profits higher. This trend should accelerate in 2012 and continue through at least 2015." [See Gilead Sciences Readies Pipeline]. Gilead stock that day closed at $42.16. This morning GILD opened at $56.42. While I am a long-term investor, it is encouraging to see these short-term results.
The forward-looking story is now largely about curing Hepatitis C and refreshing Gilead's market-dominating anti-HIV franchise, but first the backward-looking numbers.
In Q2 revenue was $2.41 billion, up 6% sequentially from $2.28 billion and up 13% from $2.14 billion in the year-earlier quarter. GAAP net income was $711.6 million, up 61% sequentially from $442.0 million, but down 5% from $746.2 million in the year-earlier quarter. GAAP earnings per share (EPS) were $0.91, up 60% sequentially from $0.57, but down 2% from $0.93 year-earlier. Eliminating one-time and non-cash items, Non-GAAP EPS was $0.99, up 9% sequentially from $0.91, but down 1% from $1.00 year-earlier.
The y/y EPS showing may make you wonder why the stock is up so much. Bringing the new HIV drugs to the FDA and the hepatitis drugs through clinical trials is adding to expenses. The price of the stock had been beaten down because of fears of expiring patents. The increased revenue promises a healthy dose of future profits since it now appears the HIV franchise will remain strong and hep c revenues may kick in as early as 2014. Recent Phase II hep c trials have been encouraging. The goal is to have a multi-agent, highly effective once-a-day tablet that will completely cure hepatitis C over a reasonably short period of time.
Gilead's P/E Ratio? Just over 17. It's a bargain.
Celgene (CELG) also is generating healthy profits while getting ready to introduce blockbuster therapies over the next few years.
Celgene Q2 revenue was $1.37 billion, up 8% sequentially from $1.27 million and up 16% from $1.18 billion year-earlier. GAAP net income was $367.4 million, down 8% sequentially from $401.5 million but up 32% from $279.2 million year-earlier. GAAP EPS (earnings per share) were $0.82, down 9% sequentially from $0.90, but up 39% from $0.59 year-earlier.
With a 39% y/y growth in GAAP EPS, you might think Celgene would be flying with a higher P/E ratio. Is is just GAAP accounting? No, non-GAAP EPS in Q2 was $1.22, up 13% sequentially from $1.08 and up 37% from $0.89 year-earlier.
Celgene closed a bit down today at $71.85, but a year ago it was selling for under $55. Its P/E Ratio is near 21.
The two new Celgene drugs that could produce revenue in 2013 are Pomalidomide for relapsed and refractory multiple myeloma and Apremilast for psoriatic arthritis and psoriasis. Safety and efficacy look good for both drugs, but there is always a chance that the FDA will disapprove or cause delays by asking for more clinical data.
Biogen Idec has already proven itself to be one of the big winners of late.
Biogen (BIIB) closed today at $144.54. In 2010 you could have bought it in the fifties most of the year. It has a higher P/E Ratio than Celgene or Gilead at just over 26.
So is BIIB more of a product for profit taking? [Disclaimer: I did already take some profits on this one, but it's gone up since then.]
Q2 revenue was $1.421 billion, up 10% sequentially from $1.292 billion and up 17.5% from $1.209 billion in the year-earlier quarter. GAAP net income was $386.8 million, up 28% sequentially from $302.7 million and up 34% from $288.0 million year-earlier. GAAP EPS (earnings per share) were $1.61, up 29% sequentially from $1.25 and up 36% from $1.18 year-earlier.
That alone would seem to justify the P/E, but like Celgene and Gilead, Biogen has a pipeline that could mint money for investors. The first one coming up for an FDA decision is BG-12 (dimethyl fumarate), an oral therapy for multiple sclerosis. The data looks good and a positive FDA decision would mean a commercial launch this year.
While each of these stocks has its risks, as a group they have a large number of profitable drugs and a large number of therapies in their pipelines. Holding all three minimizes risk. They are all in the NASDAQ 100.
Keep Diversified!
Disclaimer: I am a long-term investor in Gilead Sciences, Celgene, and Biogen Idec. I will not trade in the stock for a week from today.
See also:
my Gilead Sciences Q2 2012 analyst call summary
Celgene Q2 2012 analyst call summary
Biogen Idec Q2 2012 analyst call summary
The forward-looking story is now largely about curing Hepatitis C and refreshing Gilead's market-dominating anti-HIV franchise, but first the backward-looking numbers.
In Q2 revenue was $2.41 billion, up 6% sequentially from $2.28 billion and up 13% from $2.14 billion in the year-earlier quarter. GAAP net income was $711.6 million, up 61% sequentially from $442.0 million, but down 5% from $746.2 million in the year-earlier quarter. GAAP earnings per share (EPS) were $0.91, up 60% sequentially from $0.57, but down 2% from $0.93 year-earlier. Eliminating one-time and non-cash items, Non-GAAP EPS was $0.99, up 9% sequentially from $0.91, but down 1% from $1.00 year-earlier.
The y/y EPS showing may make you wonder why the stock is up so much. Bringing the new HIV drugs to the FDA and the hepatitis drugs through clinical trials is adding to expenses. The price of the stock had been beaten down because of fears of expiring patents. The increased revenue promises a healthy dose of future profits since it now appears the HIV franchise will remain strong and hep c revenues may kick in as early as 2014. Recent Phase II hep c trials have been encouraging. The goal is to have a multi-agent, highly effective once-a-day tablet that will completely cure hepatitis C over a reasonably short period of time.
Gilead's P/E Ratio? Just over 17. It's a bargain.
Celgene (CELG) also is generating healthy profits while getting ready to introduce blockbuster therapies over the next few years.
Celgene Q2 revenue was $1.37 billion, up 8% sequentially from $1.27 million and up 16% from $1.18 billion year-earlier. GAAP net income was $367.4 million, down 8% sequentially from $401.5 million but up 32% from $279.2 million year-earlier. GAAP EPS (earnings per share) were $0.82, down 9% sequentially from $0.90, but up 39% from $0.59 year-earlier.
With a 39% y/y growth in GAAP EPS, you might think Celgene would be flying with a higher P/E ratio. Is is just GAAP accounting? No, non-GAAP EPS in Q2 was $1.22, up 13% sequentially from $1.08 and up 37% from $0.89 year-earlier.
Celgene closed a bit down today at $71.85, but a year ago it was selling for under $55. Its P/E Ratio is near 21.
The two new Celgene drugs that could produce revenue in 2013 are Pomalidomide for relapsed and refractory multiple myeloma and Apremilast for psoriatic arthritis and psoriasis. Safety and efficacy look good for both drugs, but there is always a chance that the FDA will disapprove or cause delays by asking for more clinical data.
Biogen Idec has already proven itself to be one of the big winners of late.
Biogen (BIIB) closed today at $144.54. In 2010 you could have bought it in the fifties most of the year. It has a higher P/E Ratio than Celgene or Gilead at just over 26.
So is BIIB more of a product for profit taking? [Disclaimer: I did already take some profits on this one, but it's gone up since then.]
Q2 revenue was $1.421 billion, up 10% sequentially from $1.292 billion and up 17.5% from $1.209 billion in the year-earlier quarter. GAAP net income was $386.8 million, up 28% sequentially from $302.7 million and up 34% from $288.0 million year-earlier. GAAP EPS (earnings per share) were $1.61, up 29% sequentially from $1.25 and up 36% from $1.18 year-earlier.
That alone would seem to justify the P/E, but like Celgene and Gilead, Biogen has a pipeline that could mint money for investors. The first one coming up for an FDA decision is BG-12 (dimethyl fumarate), an oral therapy for multiple sclerosis. The data looks good and a positive FDA decision would mean a commercial launch this year.
While each of these stocks has its risks, as a group they have a large number of profitable drugs and a large number of therapies in their pipelines. Holding all three minimizes risk. They are all in the NASDAQ 100.
Keep Diversified!
Disclaimer: I am a long-term investor in Gilead Sciences, Celgene, and Biogen Idec. I will not trade in the stock for a week from today.
See also:
my Gilead Sciences Q2 2012 analyst call summary
Celgene Q2 2012 analyst call summary
Biogen Idec Q2 2012 analyst call summary
Friday, April 27, 2012
Celgene Q1 Disappoints, but take the long view
Celgene (CELG), a biopharmaceutical company therapy company, provides a double dose of growth potential: further revenue growth with its currently approved therapies and a rich pipeline with some therapies closing in on FDA approval and commercialization.
However, Celgene executives admitted that Q1 disappointed them a bit. Of course it disappointed momentum players who were hoping for better-than-expected results. After the Celgene press release and analyst call on Thursday (April 26) the stock dropped from $77.91 to $72.92. On the other hand the stock has been on a long-term uptrend since it was at $38.01 on April 20, 2009, and is still well up off a 52-week low of $51.70 on August 10, 2011.
Celgene maintained its full year guidance of $4.70 to $4.80 non-GAAP earnings per share. If that outlook proves good, and the price ends the year at today's level of $73.38, it would have a (non-GAAP) P/E of about 15.5, which means the level of risk at this price is low enough for conservative investors looking for growth.
The secret to doing well with Celgene is not in this quarter's numbers. It is in the Celgene pipeline. Winning on that bet takes a long-term view.
Short term Celgene should be fine. Q1 numbers would have been impressive if it were not for higher expectations. Revenue was $1.27 million, down 1% sequentially from $1.28 billion but up 13% from $1.13 million in the year-earlier quarter. GAAP net income was $401.5 million, down 2% sequentially from $410.2 million but up 57% from $255.6 million year-earlier. GAAP EPS (earnings per share) were $0.90, down 1% sequentially from $0.91, but up 67% from $0.54 year-earlier.
Non-GAAP EPS, which is the measure used in guidance (and excludes stock-based compensation expense, acquisitions expenses, and one-time items) was $1.08. Obviously to reach guidance Celgene will have to do better than that in each of the three upcoming quarters.
Most of Celgene's revenue currently comes from REVLIMID, which is approved in combination with dexamethasone for treatment of multiple myeloma patients who have had at least one prior therapy (second-line MM). It is also approved for treating myelodysplastic syndromes (MDS) associated with a deletion 5q genetic abnormality. Revlimid has ramped up sales over the years as it has proven itself to doctors and patients and received regulatory approval around the world. In Q1 Revlimid revenues were $861 million, up 1% sequentially from $855 million and up 17% y/y. It is currently in three Phase III trials, one each for CLL (chronic lymphocytic leukemia), NHL (non-Hodgkin lymphomas), and expanding its MDS indication. Success in any one trial would greatly expand revenues once it is commercialized.
Celgene has many therapies in its pipeline, from pre-clinical through Phases I, II, and III, but I can only cover a few specific examples that are likely to greatly increase the value of Celgene in the 2012 to 2015 timeframe. I'll focus on Abraxane, Pomalidomide, and Apremilast.
Abraxane is an improved formulation based on paclitaxel, which is already approved in the U.S. and Europe for breast cancer. It competes with generic paclitaxel. Revenues in Q1 were $104 million. It gave good data in trials for non-small cell lung cancer (NSCLC), and now has an application pending with the FDA, with decision due in October. In addition two Phase III trials are now fully enrolled with patients. One, in combination with gemcitabine is for pancreatic cancer, the other is for metastatic melanoma (skin cancer). Approval by the FDA would greatly increase the use of, and revenue from, Abraxane.
Pomalidomide data for relapsed and refractory multiple myeloma has been submitted to the FDA for marketing approval. It is also in a Phase III trial for myelofibrosis. Again, approval in either indication could eventually generate hundreds of millions in revenue.
Apremilast is in Phase III trials for psoriasis and psoriatic arthritis. Data should be in from the trials in 2012. Positive data could mean FDA approval in 2013.
While there is always a potential down side to stocks, especially short term risk due to economic and market conditions, I don't see substantial down side risk for Celgene. I see a large number of new therapies that could be approved. If even one is approved the company would become significantly more valuable. If a number of them are approved there are going to be some really big numbers floating around for Celgene by 2015.
Keep diversified!
See also my notes on the Celgene Q2 2012 analyst call
Disclaimer: I am long (own stock in) Celgene. I will not buy or sell Celgene for at least one week after this is published.
However, Celgene executives admitted that Q1 disappointed them a bit. Of course it disappointed momentum players who were hoping for better-than-expected results. After the Celgene press release and analyst call on Thursday (April 26) the stock dropped from $77.91 to $72.92. On the other hand the stock has been on a long-term uptrend since it was at $38.01 on April 20, 2009, and is still well up off a 52-week low of $51.70 on August 10, 2011.
Celgene maintained its full year guidance of $4.70 to $4.80 non-GAAP earnings per share. If that outlook proves good, and the price ends the year at today's level of $73.38, it would have a (non-GAAP) P/E of about 15.5, which means the level of risk at this price is low enough for conservative investors looking for growth.
The secret to doing well with Celgene is not in this quarter's numbers. It is in the Celgene pipeline. Winning on that bet takes a long-term view.
Short term Celgene should be fine. Q1 numbers would have been impressive if it were not for higher expectations. Revenue was $1.27 million, down 1% sequentially from $1.28 billion but up 13% from $1.13 million in the year-earlier quarter. GAAP net income was $401.5 million, down 2% sequentially from $410.2 million but up 57% from $255.6 million year-earlier. GAAP EPS (earnings per share) were $0.90, down 1% sequentially from $0.91, but up 67% from $0.54 year-earlier.
Non-GAAP EPS, which is the measure used in guidance (and excludes stock-based compensation expense, acquisitions expenses, and one-time items) was $1.08. Obviously to reach guidance Celgene will have to do better than that in each of the three upcoming quarters.
Most of Celgene's revenue currently comes from REVLIMID, which is approved in combination with dexamethasone for treatment of multiple myeloma patients who have had at least one prior therapy (second-line MM). It is also approved for treating myelodysplastic syndromes (MDS) associated with a deletion 5q genetic abnormality. Revlimid has ramped up sales over the years as it has proven itself to doctors and patients and received regulatory approval around the world. In Q1 Revlimid revenues were $861 million, up 1% sequentially from $855 million and up 17% y/y. It is currently in three Phase III trials, one each for CLL (chronic lymphocytic leukemia), NHL (non-Hodgkin lymphomas), and expanding its MDS indication. Success in any one trial would greatly expand revenues once it is commercialized.
Celgene has many therapies in its pipeline, from pre-clinical through Phases I, II, and III, but I can only cover a few specific examples that are likely to greatly increase the value of Celgene in the 2012 to 2015 timeframe. I'll focus on Abraxane, Pomalidomide, and Apremilast.
Abraxane is an improved formulation based on paclitaxel, which is already approved in the U.S. and Europe for breast cancer. It competes with generic paclitaxel. Revenues in Q1 were $104 million. It gave good data in trials for non-small cell lung cancer (NSCLC), and now has an application pending with the FDA, with decision due in October. In addition two Phase III trials are now fully enrolled with patients. One, in combination with gemcitabine is for pancreatic cancer, the other is for metastatic melanoma (skin cancer). Approval by the FDA would greatly increase the use of, and revenue from, Abraxane.
Pomalidomide data for relapsed and refractory multiple myeloma has been submitted to the FDA for marketing approval. It is also in a Phase III trial for myelofibrosis. Again, approval in either indication could eventually generate hundreds of millions in revenue.
Apremilast is in Phase III trials for psoriasis and psoriatic arthritis. Data should be in from the trials in 2012. Positive data could mean FDA approval in 2013.
While there is always a potential down side to stocks, especially short term risk due to economic and market conditions, I don't see substantial down side risk for Celgene. I see a large number of new therapies that could be approved. If even one is approved the company would become significantly more valuable. If a number of them are approved there are going to be some really big numbers floating around for Celgene by 2015.
Keep diversified!
See also my notes on the Celgene Q2 2012 analyst call
Disclaimer: I am long (own stock in) Celgene. I will not buy or sell Celgene for at least one week after this is published.
Monday, November 7, 2011
Celgene Q3 shows model strength
Celgene provides a double dose of growth potential: further growth of its currently approved therapies and a rich pipeline with some therapies closing in on FDA approval and commercialization. Since I last wrote about Celgene on August 2, its stock price has risen from $57.29 to today's close of $64.29. Celgene's 52 week high is $68.25 reached on October 24th.
Consider Celgene's Q3 earnings reported last week. Revenue was $1.22 billion, up 3% sequentially from $1.18 billion and up 41% from $886 million in the year-earlier quarter. GAAP net income was $373.0 million, up 34% sequentially from $279.2 million and up 33% from $281.2 million year-earlier. GAAP EPS were $0.81, 37% sequentially from $0.59 and up 35% from $0.60 year-earlier. Non-GAAP EPS was EPS $1.02.
Most of this rapid growth was based on a single therapy, Revlimid for multiple myeloma (MM) and myelodysplastic syndromes (MDS). Revlimid revenues grew 28% from a year earlier. Expansion is largely international now, with Russia, China and Brazil still ahead. In addition various clinical trials have indicated Revlimid will be beneficial in other types of cancer. Revlimid is in Phase III trials for CLL (chronic lymphocytic leukemia), NHL (non-Hodgkin lymphoma) and prostate cancer.
Thalomid is ancient and had revenues $83 million, down 12% y/y.
VIDAZA for multiple myeloma revenues were $191 million, up 35% y/y. This is despite losing exclusivity in the United States.
The bit new revenue generator is ABRAXANE for breast cancer. Abraxane is also in clinical trials for treating lung, pancreatic, bladder, skin, and ovarian cancers. ABRAXANE revenues were $114 million, up 20% sequentially, that is quarter over quarter; Celgene did not market it a year ago. A Phase III trial comparing it to decarbazine for metastatic melanoma is expecting to read out data in mid 2012. Phase III Pancreatic cancer trial should complete enrollment in Q1 2012. International revenue continues to ramp. For instance, in the quarter Celgene received reimbursement permission for Abraxane in in Greece and the Czech Republic.
Earlier in the pipeline Celgene displays depth-of-field. Of course most pre-clinical drugs don't make it through all the clinical phases and FDA approval; there are likely to be some losers. Celgene's pipeline is so broad and important you could write a book about it.
In Oncology/Hematology we have pomalidomide in Phase III trials for myelofibrosis and nearing the end of Phase II for multiple myeloma. There is Amrubicin, in Phase III for small cell lung cancer. In Phase II we also have ACE-011 for CIA and ABI-008 for prostate cancer. In Phase I we have Tork Inhibitor and ABI-009, both for solid tumors. There are two additional pre-clinical ABI variants for solid tumors.
Apremilast completed enrollment of patients in Phase III trials for psoriasis and psoriatic arthritis, with three more Phase III trials to complete enrollment by year-end. Phase II trial data for ankylosing spondylitis will be presented in November. In inflammation and immunology we also have JNK CC-930, CC-11050 and PDA-001 in Phase II.
Pomalidomide Phase II data for relapsed and refractory myeloma will be presented at ASH in December. The company is conducting a broad clinical program to support global registrations for pomalidomide.
Beyond that Celgene lists over a dozen agents in discovery and pre-clinical phases.
Of course, what will affect Celgene's stock price soonest are the late stage candidates. The first big movers is likely to be expanding the label for Revlimid to first-line (initial) treatment of multiple myeloma. The second would be Abraxane for non-small cell lung cancer, with FDA submission in second half of 2011 and a decision likely in the first half of 2012.
In general it is a very good time to invest in biotechnology, even given the known risks. Celgene is a cash cow that also has unrealized value in its pipeline. Small, risky biotechs aren't commanding the high premiums they used to, which is good because many of their drug candidates don't work out. With the larger biotechs like Celgene if a drug candidate fails it is disappointing and the stock can lose some momentum, but cash flow can be used to buy and develop more candidates. Celgene's cash and equivalents balance ended at $2.58 billion. Cash flow from operations was $602 million. $885 million was spent on share repurchases in the quarter.
Hopefully some time soon Celgene will start paying out a dividend, which is the true gold standard for today's investors.
Keep diversified!
Disclaimer: I am long Celgene. I have no plans to buy or sell Celgene in the next two weeks.
Consider Celgene's Q3 earnings reported last week. Revenue was $1.22 billion, up 3% sequentially from $1.18 billion and up 41% from $886 million in the year-earlier quarter. GAAP net income was $373.0 million, up 34% sequentially from $279.2 million and up 33% from $281.2 million year-earlier. GAAP EPS were $0.81, 37% sequentially from $0.59 and up 35% from $0.60 year-earlier. Non-GAAP EPS was EPS $1.02.
Most of this rapid growth was based on a single therapy, Revlimid for multiple myeloma (MM) and myelodysplastic syndromes (MDS). Revlimid revenues grew 28% from a year earlier. Expansion is largely international now, with Russia, China and Brazil still ahead. In addition various clinical trials have indicated Revlimid will be beneficial in other types of cancer. Revlimid is in Phase III trials for CLL (chronic lymphocytic leukemia), NHL (non-Hodgkin lymphoma) and prostate cancer.
Thalomid is ancient and had revenues $83 million, down 12% y/y.
VIDAZA for multiple myeloma revenues were $191 million, up 35% y/y. This is despite losing exclusivity in the United States.
The bit new revenue generator is ABRAXANE for breast cancer. Abraxane is also in clinical trials for treating lung, pancreatic, bladder, skin, and ovarian cancers. ABRAXANE revenues were $114 million, up 20% sequentially, that is quarter over quarter; Celgene did not market it a year ago. A Phase III trial comparing it to decarbazine for metastatic melanoma is expecting to read out data in mid 2012. Phase III Pancreatic cancer trial should complete enrollment in Q1 2012. International revenue continues to ramp. For instance, in the quarter Celgene received reimbursement permission for Abraxane in in Greece and the Czech Republic.
Earlier in the pipeline Celgene displays depth-of-field. Of course most pre-clinical drugs don't make it through all the clinical phases and FDA approval; there are likely to be some losers. Celgene's pipeline is so broad and important you could write a book about it.
In Oncology/Hematology we have pomalidomide in Phase III trials for myelofibrosis and nearing the end of Phase II for multiple myeloma. There is Amrubicin, in Phase III for small cell lung cancer. In Phase II we also have ACE-011 for CIA and ABI-008 for prostate cancer. In Phase I we have Tork Inhibitor and ABI-009, both for solid tumors. There are two additional pre-clinical ABI variants for solid tumors.
Apremilast completed enrollment of patients in Phase III trials for psoriasis and psoriatic arthritis, with three more Phase III trials to complete enrollment by year-end. Phase II trial data for ankylosing spondylitis will be presented in November. In inflammation and immunology we also have JNK CC-930, CC-11050 and PDA-001 in Phase II.
Pomalidomide Phase II data for relapsed and refractory myeloma will be presented at ASH in December. The company is conducting a broad clinical program to support global registrations for pomalidomide.
Beyond that Celgene lists over a dozen agents in discovery and pre-clinical phases.
Of course, what will affect Celgene's stock price soonest are the late stage candidates. The first big movers is likely to be expanding the label for Revlimid to first-line (initial) treatment of multiple myeloma. The second would be Abraxane for non-small cell lung cancer, with FDA submission in second half of 2011 and a decision likely in the first half of 2012.
In general it is a very good time to invest in biotechnology, even given the known risks. Celgene is a cash cow that also has unrealized value in its pipeline. Small, risky biotechs aren't commanding the high premiums they used to, which is good because many of their drug candidates don't work out. With the larger biotechs like Celgene if a drug candidate fails it is disappointing and the stock can lose some momentum, but cash flow can be used to buy and develop more candidates. Celgene's cash and equivalents balance ended at $2.58 billion. Cash flow from operations was $602 million. $885 million was spent on share repurchases in the quarter.
Hopefully some time soon Celgene will start paying out a dividend, which is the true gold standard for today's investors.
Keep diversified!
Disclaimer: I am long Celgene. I have no plans to buy or sell Celgene in the next two weeks.
Sunday, October 9, 2011
Earnings Preview: AMD, AKAM, GILD, BIIB, CELG
Earnings season is upon us again. Of the stocks I watch most closely (in this case because I own some of each of them), Akamai (AKAM) has scheduled its analyst conference for October 26, and Advanced Micro Devices (AMD) is on October 27. Gilead Sciences (GILD), Celgene (CELG), and Biogen Idec (BIIB) should also report before month's end, but have not yet set dates.
While the information in analyst conferences comes from management, and so can be biased, it is still essential listening for serious investors. At the end sell-side analysts are allowed to ask questions (some micro-caps even let investors ask questions), and on occasion an answer to a question can give important insights into the company. I take notes while I listen and even post them on the web; listen to management for a couple of years and you may be able to tell a lot from the way they answer or evade questions. Going back a few years and checking on how management's predictions worked out can also be illuminating.
Akamai typically is a high P/E stock that has to justify that ratio by showing continuous growth. Many companies have tried to compete with Akamai at accelerated delivery of web content, yet over a decade later Akamai still has incredible market share and has branched out into adjacent businesses like cloud security. Pricing has been an issue lately. Look to see if Akamai's volume of business is growing fast enough to compensate for falling prices. Q3 is a slowish quarter for content delivery, with a big bump coming from e-commerce in Q4, so Q4 guidance is also a key indicator of the health of this business.
AMD already pre-announced, sending the stock price into free-fall. This was as I predicted in AMD at Earnings Crossroad, but worse. The good side of the news is demand for AMD's new server and APU chips is strong. What we want to know from management is how strong is the demand, and how quickly can they gear up chip production to meet the demand.
Biogen Idec (BIIB) guided to low to mid single digit revenue growth over 2011, which for Q3 would run to roughtly $1.2 billion. Tysabri sales over $280 million would be a positive indicator, but the key question is data or FDA approvals for late-pipeline drugs like BG-12 or Daclizumab for multiple sclerosis, which are likely to be announced on other occasions.
Gilead (GILD) is a cash cow that has a low P/E due to patents expiring on some of its anti-viral drugs over the next decade. If management would pay a dividend, the value of the franchise would be more obvious. They are doing a lot of research on new anti-viral compounds that could kick growth into high gear again if approved. Expect something over $2 billion in revenue, $940 million in cash flow from operations. The key issue would be timelines for Endurant and and the "Quad" regimen. Don't expect the stock to budge much in this market until they pay a dividend or announce positive Phase III data for a hepatitis C multi-drug therapy (they are only in Phase II, so it will be a while).
Celgene (CELG) is another cash cow, but with a rapid revenue and profit growth rate (and a higher P/E). Look for Revlimid revenues over $800 million, Vidaza over $165 million or Abraxane, their newest drug, revenues breaking though $100 million in the quarter. Celgene has a pipeline of potential drugs that is so extensive it would take several articles just to go over them. See Celgene drug pipeline for a list. Unless they mostly strike out, anyone who does not buy Celgene at today's price will wish they had in five years, but long-term investors are hard to find in this market.
Disclaimer: I am long in all of these stocks.
While the information in analyst conferences comes from management, and so can be biased, it is still essential listening for serious investors. At the end sell-side analysts are allowed to ask questions (some micro-caps even let investors ask questions), and on occasion an answer to a question can give important insights into the company. I take notes while I listen and even post them on the web; listen to management for a couple of years and you may be able to tell a lot from the way they answer or evade questions. Going back a few years and checking on how management's predictions worked out can also be illuminating.
Akamai typically is a high P/E stock that has to justify that ratio by showing continuous growth. Many companies have tried to compete with Akamai at accelerated delivery of web content, yet over a decade later Akamai still has incredible market share and has branched out into adjacent businesses like cloud security. Pricing has been an issue lately. Look to see if Akamai's volume of business is growing fast enough to compensate for falling prices. Q3 is a slowish quarter for content delivery, with a big bump coming from e-commerce in Q4, so Q4 guidance is also a key indicator of the health of this business.
AMD already pre-announced, sending the stock price into free-fall. This was as I predicted in AMD at Earnings Crossroad, but worse. The good side of the news is demand for AMD's new server and APU chips is strong. What we want to know from management is how strong is the demand, and how quickly can they gear up chip production to meet the demand.
Biogen Idec (BIIB) guided to low to mid single digit revenue growth over 2011, which for Q3 would run to roughtly $1.2 billion. Tysabri sales over $280 million would be a positive indicator, but the key question is data or FDA approvals for late-pipeline drugs like BG-12 or Daclizumab for multiple sclerosis, which are likely to be announced on other occasions.
Gilead (GILD) is a cash cow that has a low P/E due to patents expiring on some of its anti-viral drugs over the next decade. If management would pay a dividend, the value of the franchise would be more obvious. They are doing a lot of research on new anti-viral compounds that could kick growth into high gear again if approved. Expect something over $2 billion in revenue, $940 million in cash flow from operations. The key issue would be timelines for Endurant and and the "Quad" regimen. Don't expect the stock to budge much in this market until they pay a dividend or announce positive Phase III data for a hepatitis C multi-drug therapy (they are only in Phase II, so it will be a while).
Celgene (CELG) is another cash cow, but with a rapid revenue and profit growth rate (and a higher P/E). Look for Revlimid revenues over $800 million, Vidaza over $165 million or Abraxane, their newest drug, revenues breaking though $100 million in the quarter. Celgene has a pipeline of potential drugs that is so extensive it would take several articles just to go over them. See Celgene drug pipeline for a list. Unless they mostly strike out, anyone who does not buy Celgene at today's price will wish they had in five years, but long-term investors are hard to find in this market.
Disclaimer: I am long in all of these stocks.
Tuesday, August 2, 2011
Celgene Pipeline Value
My nomination for most undervalued stock in the biotechnology segment: Celgene (CELG). Celgene provides a double dose of growth potential: further growth of its currently approved therapies and a rich pipeline with some therapies closing in on FDA approval and commercialization.
Consider Celgene's Q2 earnings reported last week. Revenue was $1.18 billion, up 4% sequentially from $1.13 billion, and up 38% from $852.7 million in the year-earlier quarter. GAAP Net income was $279.2 million, up 9% sequentially from $255.6 million and up 80% from $155.4 million year-earlier. GAAP EPS (earnings per share) were $0.59, up 9% sequentially from $0.54 and up 79% from $0.33 year-earlier. Non-GAAP EPS was $0.89 per share.
Most of this rapid growth was based on a single therapy, Revlimid for multiple myeloma (MM) and myelodysplastic syndromes (MDS). The rate of growth fluctuates, but expansion is largely international now, with Russia, China and Brazil still ahead. In addition various clinical trials have indicated Revlimid will be beneficial in other types of cancer. Revlimid is in Phase III trials for CLL (chronic lymphocytic leukemia), NHL (non-Hodgkin lymphoma) and prostate cancer.
Based on that alone, one might expect Celgene's stock price to be 30 to 50 times earnings per share. As I write you can buy Celgene for $58.12 per share. Even using the lower, GAAP number ($0.59 x 4 quarters = $2.36 per year), the PE ratio right now is under 25 times earnings. Non-GAAP EPS ($0.89 x 4 = $3.56) reads out at a 16.3 ratio.
But Revlimid, and other already-approved therapies Vidaza, Abraxane, and Thalomid, are just part of the story. Thalomid is ancient and has declining revenues, but Abraxane for breast cancer is ramping. Abraxane is also in clinical trials for treating lung, pancreatic, bladder, skin, and ovarian cancers. Vidaza for multiple myeloma grew revenues 23% y/y, and has a lot of room to grow with global launches.
Earlier in the pipeline Celgene displays depth-of-field. Of course most pre-clinical drugs don't make it through all the clinical phases and FDA approval; there will be some losers. Celgene's pipeline is so broad and important you could write a book about it.
In Oncology/Hematology we have pomalidomide in Phase III trials for myelofibrosis and nearing the end of Phase II for multiple myeloma. There is Amrubicin, in Phase III for small cell lung cancer. In Phase II we also have ACE-011 for CIA and ABI-008 for prostate cancer. In Phase I we have Tork Inhibitor and ABI-009, both for solid tumors. There are two additional pre-clinical ABI variants for solid tumors.
In inflammation and immunology we have Apremilast in Phase III and JNK CC-930, CC-11050 and PDA-001, as well as more Apremilast indications, in Phase II.
Beyond that Celgene lists over a dozen agents in discovery and pre-clinical phases.
Of course, what will affect Celgene's stock price soonest are the late stage candidates. The first big movers is likely to be expanding the label for Revlimid to first-line (initial) treatment of multiple myeloma. The second would be Abraxane for non-small cell lung cancer, with FDA submission in second half of 2011 and a decision likely in the first half of 2012.
In general it is a very good time to invest in biotechnology, even given the known risks. Gilead, Celgene, and Biogen Idec are cash cows that also have unrealized value in their pipelines. Small, risky biotechs aren't commanding the high premiums they used to, which is good because many of their drug candidates don't work out. With the larger biotechs when a drug candidate fails, it is disappointing and the stock can lose some momentum, but cash flow can be used to buy and develop more candidates, or buy back stock, or even (hopefully some time soon) start paying out a dividend, which is the true gold standard for value-conscious investors.
See also www.celgene.com
Keep diversified!
Consider Celgene's Q2 earnings reported last week. Revenue was $1.18 billion, up 4% sequentially from $1.13 billion, and up 38% from $852.7 million in the year-earlier quarter. GAAP Net income was $279.2 million, up 9% sequentially from $255.6 million and up 80% from $155.4 million year-earlier. GAAP EPS (earnings per share) were $0.59, up 9% sequentially from $0.54 and up 79% from $0.33 year-earlier. Non-GAAP EPS was $0.89 per share.
Most of this rapid growth was based on a single therapy, Revlimid for multiple myeloma (MM) and myelodysplastic syndromes (MDS). The rate of growth fluctuates, but expansion is largely international now, with Russia, China and Brazil still ahead. In addition various clinical trials have indicated Revlimid will be beneficial in other types of cancer. Revlimid is in Phase III trials for CLL (chronic lymphocytic leukemia), NHL (non-Hodgkin lymphoma) and prostate cancer.
Based on that alone, one might expect Celgene's stock price to be 30 to 50 times earnings per share. As I write you can buy Celgene for $58.12 per share. Even using the lower, GAAP number ($0.59 x 4 quarters = $2.36 per year), the PE ratio right now is under 25 times earnings. Non-GAAP EPS ($0.89 x 4 = $3.56) reads out at a 16.3 ratio.
But Revlimid, and other already-approved therapies Vidaza, Abraxane, and Thalomid, are just part of the story. Thalomid is ancient and has declining revenues, but Abraxane for breast cancer is ramping. Abraxane is also in clinical trials for treating lung, pancreatic, bladder, skin, and ovarian cancers. Vidaza for multiple myeloma grew revenues 23% y/y, and has a lot of room to grow with global launches.
Earlier in the pipeline Celgene displays depth-of-field. Of course most pre-clinical drugs don't make it through all the clinical phases and FDA approval; there will be some losers. Celgene's pipeline is so broad and important you could write a book about it.
In Oncology/Hematology we have pomalidomide in Phase III trials for myelofibrosis and nearing the end of Phase II for multiple myeloma. There is Amrubicin, in Phase III for small cell lung cancer. In Phase II we also have ACE-011 for CIA and ABI-008 for prostate cancer. In Phase I we have Tork Inhibitor and ABI-009, both for solid tumors. There are two additional pre-clinical ABI variants for solid tumors.
In inflammation and immunology we have Apremilast in Phase III and JNK CC-930, CC-11050 and PDA-001, as well as more Apremilast indications, in Phase II.
Beyond that Celgene lists over a dozen agents in discovery and pre-clinical phases.
Of course, what will affect Celgene's stock price soonest are the late stage candidates. The first big movers is likely to be expanding the label for Revlimid to first-line (initial) treatment of multiple myeloma. The second would be Abraxane for non-small cell lung cancer, with FDA submission in second half of 2011 and a decision likely in the first half of 2012.
In general it is a very good time to invest in biotechnology, even given the known risks. Gilead, Celgene, and Biogen Idec are cash cows that also have unrealized value in their pipelines. Small, risky biotechs aren't commanding the high premiums they used to, which is good because many of their drug candidates don't work out. With the larger biotechs when a drug candidate fails, it is disappointing and the stock can lose some momentum, but cash flow can be used to buy and develop more candidates, or buy back stock, or even (hopefully some time soon) start paying out a dividend, which is the true gold standard for value-conscious investors.
See also www.celgene.com
Keep diversified!
Thursday, January 27, 2011
Celgene Reports Q4 Results, answers analyst questions
I just posted my summary of the Celgene analyst call and results for Q4 2011.
Celgene just acquired Abraxis and has a large number of clinical trials underway. It looks to me like it could double its revenues again by 2015. Great for a long-term investor, but there is always the risk that drug candidates will fail to be approved.
Celgene just acquired Abraxis and has a large number of clinical trials underway. It looks to me like it could double its revenues again by 2015. Great for a long-term investor, but there is always the risk that drug candidates will fail to be approved.
Saturday, December 11, 2010
Celgene (CELG) ASH Data Points
Revlimid, used to treat MDS (myelodysplastic syndromes) and multiple myeloma, saw revenues increase 44% from Q3 2009. Vidaza, also used to treat MDS, had revenue up 37% y/y. In 2010 Celgene (CELG) stock began at $55.68, yesterday (Friday) it closed at $57.46, so this year has not had a big run up.
That is mainly due to a plunge from some of the data presented at the American Hematological Society (ASH) meeting last weekend. Celgene is trying to show that Revlimid should be used both earlier in the treatment of multiple myeloma and myelodysplastic syndromes (before or coincidental with other therapies) and for a longer duration. Right now "REVLIMID or lenalidomide in combination with dexamethasone is indicated for the treatment of multiple myeloma or MM patients who have received at least one prior therapy." What Celgene wants is Revlimid to be prescribed to new MM patients, without trying any other therapy first.
The data presented in that regard was very positive. See, for instance, Analysis of Revlimid Phase III Study Reports a Significant Improvement in Survival for del(5Q) Myelodysplastic Syndromes and Phase III Study Evaluating Revlimid in Patients with High-Risk Smoldering Multiple Myeloma Reported Statistically Significant Reduction in Risk of Disease Progression. There were many more reports on Celgene products at ASH.
The plunge was due to some data suggesting that patients taking Revlimid for long periods of time had an increased risk for secondary cancers compared to patients taking placebos. This is certainly something to look at; if the increased secondary malignancies are actually caused by Revlimid, rather than a statistical fluctuation (so far the numbers are small), then that would have to be weighted negatively. But Revlimid is not a diet drug, where a few deaths would be weighed against limited benefits. Death is still par for the course with untreated blood cancer patients, and even with treatment. The survival data on patients in the trials has consistently shown that Revlimid prolongs life, and that would include an adverse events, including the development of other cancers.
Mark Shoenebaum, the former Bear Stearns analyst who wrote pointed out the negative data, also pointed out that the results may have been skewed by not looking for secondary tumors in patients whose myeloma progressed, so that Revlimid patients, who had longer times before their myeloma progressed, were not actually compared to a like set of patients.
Celgene stock fell rather dramatically on December 6 (from $60.59 on the prior close to $55.64) as a result of the "news." What this mainly shows is the danger of pricing by auction markets. No one knows if the news is even true, or how significant it is. Buyers disappear, so even normal selling can tank a stock.
Celgene is already trading at a very reasonable forward price to earnings multiple of 22. Most likely Revlimid will be approved for use as a first-line treatment in 2011. In addition, Celgene has an extensive, high-quality pipeline. So my guess is that in a few months the December 6 drop will just look like background noise on the stock charts.
See also:
www.celgene.com
My Celgene Analyst Conference Call summary for Q3 2011
That is mainly due to a plunge from some of the data presented at the American Hematological Society (ASH) meeting last weekend. Celgene is trying to show that Revlimid should be used both earlier in the treatment of multiple myeloma and myelodysplastic syndromes (before or coincidental with other therapies) and for a longer duration. Right now "REVLIMID or lenalidomide in combination with dexamethasone is indicated for the treatment of multiple myeloma or MM patients who have received at least one prior therapy." What Celgene wants is Revlimid to be prescribed to new MM patients, without trying any other therapy first.
The data presented in that regard was very positive. See, for instance, Analysis of Revlimid Phase III Study Reports a Significant Improvement in Survival for del(5Q) Myelodysplastic Syndromes and Phase III Study Evaluating Revlimid in Patients with High-Risk Smoldering Multiple Myeloma Reported Statistically Significant Reduction in Risk of Disease Progression. There were many more reports on Celgene products at ASH.
The plunge was due to some data suggesting that patients taking Revlimid for long periods of time had an increased risk for secondary cancers compared to patients taking placebos. This is certainly something to look at; if the increased secondary malignancies are actually caused by Revlimid, rather than a statistical fluctuation (so far the numbers are small), then that would have to be weighted negatively. But Revlimid is not a diet drug, where a few deaths would be weighed against limited benefits. Death is still par for the course with untreated blood cancer patients, and even with treatment. The survival data on patients in the trials has consistently shown that Revlimid prolongs life, and that would include an adverse events, including the development of other cancers.
Mark Shoenebaum, the former Bear Stearns analyst who wrote pointed out the negative data, also pointed out that the results may have been skewed by not looking for secondary tumors in patients whose myeloma progressed, so that Revlimid patients, who had longer times before their myeloma progressed, were not actually compared to a like set of patients.
Celgene stock fell rather dramatically on December 6 (from $60.59 on the prior close to $55.64) as a result of the "news." What this mainly shows is the danger of pricing by auction markets. No one knows if the news is even true, or how significant it is. Buyers disappear, so even normal selling can tank a stock.
Celgene is already trading at a very reasonable forward price to earnings multiple of 22. Most likely Revlimid will be approved for use as a first-line treatment in 2011. In addition, Celgene has an extensive, high-quality pipeline. So my guess is that in a few months the December 6 drop will just look like background noise on the stock charts.
See also:
www.celgene.com
My Celgene Analyst Conference Call summary for Q3 2011
Monday, November 1, 2010
Celgene (CELG) Gathers Momentum
Celgene reported third quarter (Q3) 2010 results on October 28th that showed impressive strength in sales of its current drugs, Revlimid and Vidaza. Just as important to future profit growth are a variety of new therapies in the pipeline at various stages of clinical trials.
Revenue was $910 million, up 7% sequentially from $852.7 million and up 31% from $695.1 in the year-earlier quarter.
GAAP Net income was $281.2 million, up 81% sequentially from $155.4 and up 30% from $216.8 million year-earlier. That equates to EPS (earnings per share) of $0.60, up 82% sequentially from $0.33 and up 30% from $0.46 year-earlier.
Revlimid, used to treat MDS (myelodysplastic syndrome) and multiple myeloma, saw revenues increase 44% from Q3 2009. Vidaza, also used to treat MDS, had revenue up 37% y/y. Thalidomid and ritalin revenues continued to decline.
What is exciting about Celgene, besides its stock price being very reasonable in this risk-averse environment, is that Revlimid and Vidaza are both likely to be approved by the FDA (and international equivalents) for more indications. Throw in known sales of Abraxane for breast cancer, obtained from the recent purchase of Abraxis Bioscience, with good Phase III data for non-small cell lung cancer and Phase II data for other cancers. Otherwise in oncology (cancer) besides Revlimid there is Amrubicin, Tork Inhibitor, ACE-011, and a whole series of ABI compounds. In hematology there are istodax and pomalidomide.
In Immunology Celgene has apremilast, JNK-930, CC-11050, pomalidomide, and PDA-001.
There are also a 15 compounds that have not made it to Phase I trials yet.
To see diseases targetted and how far each therapy is along in the clinical process, see the Celgene product pipeline.
Celgene, at the close today at $61.90, was selling at 23 times trailing non-GAAP earnings. That is very cautious investing, typical of the climate we are in today. Of course many compounds never get FDA approval, and so their R&D dollars go down the drain. There will be some of that with Celgene. With the very solid Revlimid and Vidaza profits, Celgene has undertaken an expensive but well-targetted research and development effort. In the biotechnology industry you can't stand still: you need to keep discovering better medicines. Celgene is doing just that, and that is what, as a long-term investor, I like to see.
See also:
http://www.celgene.com/
My Celgene Analyst Conference Call summary for Q3 2011
Revenue was $910 million, up 7% sequentially from $852.7 million and up 31% from $695.1 in the year-earlier quarter.
GAAP Net income was $281.2 million, up 81% sequentially from $155.4 and up 30% from $216.8 million year-earlier. That equates to EPS (earnings per share) of $0.60, up 82% sequentially from $0.33 and up 30% from $0.46 year-earlier.
Revlimid, used to treat MDS (myelodysplastic syndrome) and multiple myeloma, saw revenues increase 44% from Q3 2009. Vidaza, also used to treat MDS, had revenue up 37% y/y. Thalidomid and ritalin revenues continued to decline.
What is exciting about Celgene, besides its stock price being very reasonable in this risk-averse environment, is that Revlimid and Vidaza are both likely to be approved by the FDA (and international equivalents) for more indications. Throw in known sales of Abraxane for breast cancer, obtained from the recent purchase of Abraxis Bioscience, with good Phase III data for non-small cell lung cancer and Phase II data for other cancers. Otherwise in oncology (cancer) besides Revlimid there is Amrubicin, Tork Inhibitor, ACE-011, and a whole series of ABI compounds. In hematology there are istodax and pomalidomide.
In Immunology Celgene has apremilast, JNK-930, CC-11050, pomalidomide, and PDA-001.
There are also a 15 compounds that have not made it to Phase I trials yet.
To see diseases targetted and how far each therapy is along in the clinical process, see the Celgene product pipeline.
Celgene, at the close today at $61.90, was selling at 23 times trailing non-GAAP earnings. That is very cautious investing, typical of the climate we are in today. Of course many compounds never get FDA approval, and so their R&D dollars go down the drain. There will be some of that with Celgene. With the very solid Revlimid and Vidaza profits, Celgene has undertaken an expensive but well-targetted research and development effort. In the biotechnology industry you can't stand still: you need to keep discovering better medicines. Celgene is doing just that, and that is what, as a long-term investor, I like to see.
See also:
http://www.celgene.com/
My Celgene Analyst Conference Call summary for Q3 2011
Thursday, May 28, 2009
Celgene Growth Outlook
2008 and 2009 look like good years for speculators willing to try to sift babes from bathwater. One of the babies, in my opinion, is Celgene, a biotechnology stock.
Celgene (CELG) is one of the few stocks whose price has held up relatively well during the recent meltdown. At the beginning of 2008 it was selling at roughly $47 per share. Today it well over $41 per share. In between it hit a low of $36.90 and a high last August near $77 per share.
Once Celgene was a high-multiple stock, and today it is trading at a P/E of 25.5 excluding special items. Two years ago that was not a high multiple, but in today's market it is. You can argue for buying stocks with lower multiples if they are growing revenue and profits; there are lots of choices out there today. So why buy Celgene at this price?
Celgene's latest quarter reported, the first quarter of 2009, showed revenues of $605 million, up 31% from the year-earlier quarter. Net income was $163 million, compared to a loss year-earlier.
Can that growth be sustained? Q1 2009 did show a 4% sequential revenue decline from Q4 2008. That might be the beginning of the end, but management attributes it to inventory management by pharmacies and a negative currency exchange rate impact.
Stepping back, the curve looks to continue to trend strongly upward. Right now Celgene stands on three legs: Revlimid, Thalomid, and Vidaza. Thalomid for multiple myeloma has some short term growth potential since it is launching in Europe. Revlimid, a newer analog, is approved for treatment of multiple myeloma and some kinds of myelodysplastic sysndrome. It is relatively new on the market, and new clinical data of a positive nature continues to be released. So it is gaining market share and being introduced in new countries.
Vidaza is also for myelosyplastic syndromes, or MDS. Management claims it is the only MDS therapy to show an actual survival advantage. If that claim holds up, Vidaza sales should ramp rather nicely.
For now the currently approved drugs should keep Celgene growing at a good clip. The big potential future value of the company is in its pipeline. Of course, many promising pipeline drugs end up not getting FDA approval, or failing in the market even if approved. Celgene has a variety of therapies undergoing clinical trial.
Apremilast for psoriatic arthritis completed its Phase II study. Results are expected soon. It is also in a Phase II study for psoriasis and is being tested for other inflammatory diseases.
CC-930 for serious fibrotic diseases completed Phase Ib dosing study. Azacitidine for hematologic malignancies initiated Phase I/II study. PDA001 Phase I study for Crohn's Disease is now enrolling. Amrubicin for SCLC is enrolling both Phase I and Phase II trials.
In addition several Revlimid for CLL (chronic lymphocytic leukemia) trials continue.
The worst case scenario would be if all the new therapies fail to get approval and if the current drugs get knocked out of the market by some competitor. I don't think that is very likely, but it is a good idea to consider worst cases before you invest. I already own some Celgene stock, and have no plans to buy or sell at this time.
For a higher level of detail, see my Summary of the Celgene April 30, 2009 analyst conference.
And keep diversified!
Celgene (CELG) is one of the few stocks whose price has held up relatively well during the recent meltdown. At the beginning of 2008 it was selling at roughly $47 per share. Today it well over $41 per share. In between it hit a low of $36.90 and a high last August near $77 per share.
Once Celgene was a high-multiple stock, and today it is trading at a P/E of 25.5 excluding special items. Two years ago that was not a high multiple, but in today's market it is. You can argue for buying stocks with lower multiples if they are growing revenue and profits; there are lots of choices out there today. So why buy Celgene at this price?
Celgene's latest quarter reported, the first quarter of 2009, showed revenues of $605 million, up 31% from the year-earlier quarter. Net income was $163 million, compared to a loss year-earlier.
Can that growth be sustained? Q1 2009 did show a 4% sequential revenue decline from Q4 2008. That might be the beginning of the end, but management attributes it to inventory management by pharmacies and a negative currency exchange rate impact.
Stepping back, the curve looks to continue to trend strongly upward. Right now Celgene stands on three legs: Revlimid, Thalomid, and Vidaza. Thalomid for multiple myeloma has some short term growth potential since it is launching in Europe. Revlimid, a newer analog, is approved for treatment of multiple myeloma and some kinds of myelodysplastic sysndrome. It is relatively new on the market, and new clinical data of a positive nature continues to be released. So it is gaining market share and being introduced in new countries.
Vidaza is also for myelosyplastic syndromes, or MDS. Management claims it is the only MDS therapy to show an actual survival advantage. If that claim holds up, Vidaza sales should ramp rather nicely.
For now the currently approved drugs should keep Celgene growing at a good clip. The big potential future value of the company is in its pipeline. Of course, many promising pipeline drugs end up not getting FDA approval, or failing in the market even if approved. Celgene has a variety of therapies undergoing clinical trial.
Apremilast for psoriatic arthritis completed its Phase II study. Results are expected soon. It is also in a Phase II study for psoriasis and is being tested for other inflammatory diseases.
CC-930 for serious fibrotic diseases completed Phase Ib dosing study. Azacitidine for hematologic malignancies initiated Phase I/II study. PDA001 Phase I study for Crohn's Disease is now enrolling. Amrubicin for SCLC is enrolling both Phase I and Phase II trials.
In addition several Revlimid for CLL (chronic lymphocytic leukemia) trials continue.
The worst case scenario would be if all the new therapies fail to get approval and if the current drugs get knocked out of the market by some competitor. I don't think that is very likely, but it is a good idea to consider worst cases before you invest. I already own some Celgene stock, and have no plans to buy or sell at this time.
For a higher level of detail, see my Summary of the Celgene April 30, 2009 analyst conference.
And keep diversified!
Wednesday, January 14, 2009
Celgene Projects Continued Growth
Celgene (CELG), a biotechnology company specializing in drugs for blood cancers such as multiple myeloma, on January 12, 2009 updated investors on its progress and guidance for 2009. In 2008 revenues grew 58% to $2.23 billion, and are expected to grow another 20% in 2009. Profits (net income) for 2008 was about $1.55 per share.
The key to growth in 2008 and 2009 is the drug Revlimid, which grew revenues 71% from the prior year to $1.32 billion. Revlimid is still being introduced on a global scale, so it has room for more growth. Celgene is also hoping that Revlimid, which is primarily for multiple myeloma, will be approved for more indications, such as solid tumors, as trial data comes in.
It also expects VIDAZA sales to double in 2009 to about $400 million.
Some investors were disappointed that revenue growth is expected to slow to 20% in 2009, up from the astounding 58% of 2008. However, it should be noted that sales increases in new drugs come in waves after indications get FDA (or foreign) approval. Also Celgene's base of sales is much larger, so 20% is still quite impressive.
As with all drugs, Celgene's pharmaceuticals carry some risks for investors as well as patients. Each drug is subject to competition, including pricing pressures. Each drug may turn out to have previously undetected adverse affects on patients. Governments may change the rates of reimbursement that are allowed.
Still, given those risks, Celgene has turned out to be a relatively stable bet in this years remarkably declining stock market. Its 52 week high was $77.39, and it is selling right now at $48.70. But in the mean time a lot of the risk has been taken out because of increased earnings causing its price-to-earnings ratio to decline (NASDAQ gives it a PE of 34 and a forward PE of 17).
We will know more after the analyst conference and report of Q4 results later in January. As usual I will be writing a summary of the results and conference that you can find at my main Celgene page.
I own some Celgene stock.
Keep diversified!
Celgene January 12, 2009 press release
www.celgene.com
Q3 2008 Celgene analyst conference summary
The key to growth in 2008 and 2009 is the drug Revlimid, which grew revenues 71% from the prior year to $1.32 billion. Revlimid is still being introduced on a global scale, so it has room for more growth. Celgene is also hoping that Revlimid, which is primarily for multiple myeloma, will be approved for more indications, such as solid tumors, as trial data comes in.
It also expects VIDAZA sales to double in 2009 to about $400 million.
Some investors were disappointed that revenue growth is expected to slow to 20% in 2009, up from the astounding 58% of 2008. However, it should be noted that sales increases in new drugs come in waves after indications get FDA (or foreign) approval. Also Celgene's base of sales is much larger, so 20% is still quite impressive.
As with all drugs, Celgene's pharmaceuticals carry some risks for investors as well as patients. Each drug is subject to competition, including pricing pressures. Each drug may turn out to have previously undetected adverse affects on patients. Governments may change the rates of reimbursement that are allowed.
Still, given those risks, Celgene has turned out to be a relatively stable bet in this years remarkably declining stock market. Its 52 week high was $77.39, and it is selling right now at $48.70. But in the mean time a lot of the risk has been taken out because of increased earnings causing its price-to-earnings ratio to decline (NASDAQ gives it a PE of 34 and a forward PE of 17).
We will know more after the analyst conference and report of Q4 results later in January. As usual I will be writing a summary of the results and conference that you can find at my main Celgene page.
I own some Celgene stock.
Keep diversified!
Celgene January 12, 2009 press release
www.celgene.com
Q3 2008 Celgene analyst conference summary
Sunday, September 7, 2008
Celgene to Grow Rapidly
Celgene (CELG) is a pharmaceutical company, usually seen as a biotechnology company, known for selling Revlimid, a derivative of thalidomide for the treatment of multiple myeloma. Earlier this year Celgene completed the acquisition of Pharmion, which sold thalidomide in Europe for the treatment of multiple myeloma. Celgene also markets Alkeran, which has been used to treat multiple myeloma since 1962, and Vidiza for MDS (myelodisplastic syndrome). It no longer markets Focalin and Ritalin, having sold the rights to Novartis.
Celgene has a very high price to earnings ratio, listed at almost 50 at the close of trade Friday, September 5, 2008. Very few companies have PE's like that in this market. But Celgene's Q2 revenues were up 34% from Q1 and up 64% from year-earlier. Part of that increase was due to the acquisition of Pharmion, but Pharmion itself was growing revenue rapidly before it was acquired.
The excitement is due partly to continuing good clinical results both for currently approved drugs in new (or at least varying) indications and for Celgene's extensive pipeline. Before getting carried away, keep in mind the usual risks for drug companies. The discovery of previously unknown side effect (or adverse reaction) can cause a drug to be pulled from the market or restricted in its use. Even approved drugs will not sell well if insurance companies refuse to reimburse for them. And anything in the pipeline can fail to become profitable due to a failure in the market or expenses exceeding revenues, or competitive pressures.
Ambrucin is leading the list for new future profit generation at Celgene. According to Celgene, "Ambrucin has demonstrated substantial clinical efficacy in the treatment of small cell lung cancer. Amrubicin is a potent topoisomerase II inhibitor and is being studied as a single agent and in combination with anti-cancer therapies for a variety of solid tumors, including lung cancer." Ambrucin was given Fast Track status by the FDA last week. While many experimental drugs get Fast Track status, Ambrucin is already being used to treat lung cancer in Japan, so marketing it in the United States should happen relatively soon.
On August 21, 2008, Celgene announced "VIDAZA (azacitidine) received expanded U.S. Food and Drug Administration (FDA) approval to reflect new overall survival achieved in the AZA-001 survival study of patients with higher-risk myelodysplastic syndromes (MDS). This expanded indication supplements the 2004 FDA authorization of VIDAZA as the first therapy approved in the U.S." Vidaza is also being launched in Europe, which should add substantially to Celgene revenues once it ramps up.
Revlimid has shown good results in trials for CLL (Chronic Lymphocytic Leukemia) and NHL (non-Hodgkin Lymphoma), but approval from the FDA probably won't be possible until late 2009 or 2010.
All of this is on top of the continued expansion of Revlimid for multiple myeloma into more national markets, in particular into Asia.
Revenue growth tends to come in spurts in companies introducing new drugs because each nation has to approve the drug and then approve national health care reimbursement. So you can't just draw a straight line from a prior quarter or a prior year's quarter and say how fast revenues will grow. Stock prices tend to overreact to accelerations and decelerations.
So Celgene is probably best for investors with a good long investment horizon.
I own some Celgene stock.
Keep in mind that there is always risk (as Fannie Mae and Freddie Mac investors just learned), so keep diversified!
More data:
My Celgene page
Summary of Q2 2008 Celgene Analyst Conference
www.celgene.com
Celgene has a very high price to earnings ratio, listed at almost 50 at the close of trade Friday, September 5, 2008. Very few companies have PE's like that in this market. But Celgene's Q2 revenues were up 34% from Q1 and up 64% from year-earlier. Part of that increase was due to the acquisition of Pharmion, but Pharmion itself was growing revenue rapidly before it was acquired.
The excitement is due partly to continuing good clinical results both for currently approved drugs in new (or at least varying) indications and for Celgene's extensive pipeline. Before getting carried away, keep in mind the usual risks for drug companies. The discovery of previously unknown side effect (or adverse reaction) can cause a drug to be pulled from the market or restricted in its use. Even approved drugs will not sell well if insurance companies refuse to reimburse for them. And anything in the pipeline can fail to become profitable due to a failure in the market or expenses exceeding revenues, or competitive pressures.
Ambrucin is leading the list for new future profit generation at Celgene. According to Celgene, "Ambrucin has demonstrated substantial clinical efficacy in the treatment of small cell lung cancer. Amrubicin is a potent topoisomerase II inhibitor and is being studied as a single agent and in combination with anti-cancer therapies for a variety of solid tumors, including lung cancer." Ambrucin was given Fast Track status by the FDA last week. While many experimental drugs get Fast Track status, Ambrucin is already being used to treat lung cancer in Japan, so marketing it in the United States should happen relatively soon.
On August 21, 2008, Celgene announced "VIDAZA (azacitidine) received expanded U.S. Food and Drug Administration (FDA) approval to reflect new overall survival achieved in the AZA-001 survival study of patients with higher-risk myelodysplastic syndromes (MDS). This expanded indication supplements the 2004 FDA authorization of VIDAZA as the first therapy approved in the U.S." Vidaza is also being launched in Europe, which should add substantially to Celgene revenues once it ramps up.
Revlimid has shown good results in trials for CLL (Chronic Lymphocytic Leukemia) and NHL (non-Hodgkin Lymphoma), but approval from the FDA probably won't be possible until late 2009 or 2010.
All of this is on top of the continued expansion of Revlimid for multiple myeloma into more national markets, in particular into Asia.
Revenue growth tends to come in spurts in companies introducing new drugs because each nation has to approve the drug and then approve national health care reimbursement. So you can't just draw a straight line from a prior quarter or a prior year's quarter and say how fast revenues will grow. Stock prices tend to overreact to accelerations and decelerations.
So Celgene is probably best for investors with a good long investment horizon.
I own some Celgene stock.
Keep in mind that there is always risk (as Fannie Mae and Freddie Mac investors just learned), so keep diversified!
More data:
My Celgene page
Summary of Q2 2008 Celgene Analyst Conference
www.celgene.com
Sunday, June 15, 2008
Celgene Trial Data: REVLIMID, VIDAZA, Amrubicin
There has been a fair amount of new data analysis coming from Celgene (CELG) in the past two weeks. All of it reinforces the case for the continued growth of Celgene revenues. Before looking at the results, a review of Celgene's financials are in order.
At the latest quarter results and analyst conference (See my Summary of the May 8, 2008 Celgene analyst conference and Q1 2008 results), Celgene reported revenue was $462.6 million, up 12% sequentially from $414.6 million and up 58% from $293.4 million year-earlier.
GAAP net income was negative $1.64 billion, down sequentially from positive $75.3 million and down from positive $57 million year-earlier. However, the GAAP loss was due to Celgene's acquisition of Pharmion. Non-GAAP net income was $159.3 million; EPS was $0.36.
Even if Celgene pauses in revenue and earnings growth, Q1 results annualize to $637 million of non-GAAP net income. At market close on Friday (6/13/2008) Celgene's market capitalization was $22.6 billion. Using those numbers for forward Price to earnings, you get a PE ratio of 35.5. That sounds pretty pricey in today's illiquid stock market.
The case for the stock valuation is one of proven rapid revenue growth and its likely continuation. Since the global market of Celgene's major products, Revlimid and Thalomid, are still expanding on a country by country basis, and since Revlimid's revenues almost doubled between Q1 2007 and Q1 2008, this is not an unwarranted assumption. But at some point there will be market saturation. To grow beyond that either one or more of the currently approved therapies has to by approved for treating another disease (or variation of a disease) or new drugs will have to be brought to market. Celgene already is reporting revenue of Alkeran, Focalin, Ritalin, and Vidaza in addition to the blockbuster drugs. Vidaza, which was picked up in the Pharmion acquisition, is believed to have potential revenues of over $200 million this year.
In that context the three recent data announcements are go-go indicators for investors.
Vidaza (azacitidine) was reported to provide "a significant overall survival benefit for patients with higher-risk myelodysplastic syndromes (MDS) regardless of whether patients were treated with low-dose Ara-C or best supportive care in the control arm. In aggregate, the survival benefit for VIDAZA across all countries was 24.4 months versus 15.3 months (hazard ratio 0.36) (95% Cl: 0.20-0.65) (p=0.0006)) compared to the other treatment arms." Vidaza is already approved in the U.S. for treating MDS. This is the kind of data that convinces doctors to use it rather than, or in addition to, other therapies. If you look at the Celgene product pipeline page, you will see that Vidaza is also in trials for treatment of solid tumors and AML (Acute Myeloid Leukemia).
The Amrubicin announcement was probably the most exciting. Two different Phase II clinical studies of amrubicin in patients with extensive-disease small-cell lung cancer (SCLC) either sensitive to platinum-based first-line therapy or refractory (non-responsive) to platinum-based first-line therapy. Results of the studies demonstrated improved overall response rates that compare favorably with topotecan, as well as no evidence of anthracycline-induced cardiotoxicity.
In the first study, the primary endpoint was response rate, and secondary endpoints were time to disease progression, progression-free survival, overall survival and safety. This was met with patients receiving amrubicin demonstrating an overall response rate of 34 percent, compared to 3.8 percent of patients receiving topotecan and the median progression-free survival time for amrubicin patients is 138 days compared to 106 days for topotecan. In the second multi-center international study, patients with SCLC who were refractory to first-line platinum based chemotherapy were treated with IV amrubicin . The primary endpoint was response rate, and secondary endpoints were time to disease progression, progression-free survival, overall survival and safety. The overall response rate for the study was 17.4 percent with one complete response, which compares favorably with those seen historically with topotecan. Additionally, median progression-free survival is 97 days. Amrubicin is generally well tolerated in both studies.
Of course, this is only Phase II data; Amrubicin is already in a Phase III trial, and often drugs that do well in Phase II fail in Phase III. With that warning in mind, the announced results are bullish, but actual approval and revenues from the drug are out in the post 2010 domain.
Finally, more proof came in of the efficacy of Revlimid came in. A pooled study presented at the 13th European Hematology Association (EHA) congress showed "multiple myeloma patients taking REVLIMID(R) (lenalidomide) plus dexamethasone significantly increased their survival rates. A lifetime simulation yielded an estimated mean survival of 5.6 life-years with REVLIMID in combination with dexamethasone (2.2 life-years with dexamethasone alone) for patients with one prior therapy, and 4.2 life-years (1.5 life-years for dexamethasone alone) for patients with multiple prior therapies."
Again, this just pushes doctors to get Revlimid going as a therapy earlier, rather than trying it only as a second or third line defense.
It takes time for knowledge to spread among the medical community, and of course it sometimes seems to take forever to get a new drug approved. Celgene is in the enviable position of having several approved drugs in the marketplace, a couple growing revenues very rapidly, as well as a variety of promising drugs in its pipeline. As biotechnology companies go, it is a relatively safe bet on growth.
I own a bit of Celgene stock.
Keep diversified.
More data: www.celgene.com
At the latest quarter results and analyst conference (See my Summary of the May 8, 2008 Celgene analyst conference and Q1 2008 results), Celgene reported revenue was $462.6 million, up 12% sequentially from $414.6 million and up 58% from $293.4 million year-earlier.
GAAP net income was negative $1.64 billion, down sequentially from positive $75.3 million and down from positive $57 million year-earlier. However, the GAAP loss was due to Celgene's acquisition of Pharmion. Non-GAAP net income was $159.3 million; EPS was $0.36.
Even if Celgene pauses in revenue and earnings growth, Q1 results annualize to $637 million of non-GAAP net income. At market close on Friday (6/13/2008) Celgene's market capitalization was $22.6 billion. Using those numbers for forward Price to earnings, you get a PE ratio of 35.5. That sounds pretty pricey in today's illiquid stock market.
The case for the stock valuation is one of proven rapid revenue growth and its likely continuation. Since the global market of Celgene's major products, Revlimid and Thalomid, are still expanding on a country by country basis, and since Revlimid's revenues almost doubled between Q1 2007 and Q1 2008, this is not an unwarranted assumption. But at some point there will be market saturation. To grow beyond that either one or more of the currently approved therapies has to by approved for treating another disease (or variation of a disease) or new drugs will have to be brought to market. Celgene already is reporting revenue of Alkeran, Focalin, Ritalin, and Vidaza in addition to the blockbuster drugs. Vidaza, which was picked up in the Pharmion acquisition, is believed to have potential revenues of over $200 million this year.
In that context the three recent data announcements are go-go indicators for investors.
Vidaza (azacitidine) was reported to provide "a significant overall survival benefit for patients with higher-risk myelodysplastic syndromes (MDS) regardless of whether patients were treated with low-dose Ara-C or best supportive care in the control arm. In aggregate, the survival benefit for VIDAZA across all countries was 24.4 months versus 15.3 months (hazard ratio 0.36) (95% Cl: 0.20-0.65) (p=0.0006)) compared to the other treatment arms." Vidaza is already approved in the U.S. for treating MDS. This is the kind of data that convinces doctors to use it rather than, or in addition to, other therapies. If you look at the Celgene product pipeline page, you will see that Vidaza is also in trials for treatment of solid tumors and AML (Acute Myeloid Leukemia).
The Amrubicin announcement was probably the most exciting. Two different Phase II clinical studies of amrubicin in patients with extensive-disease small-cell lung cancer (SCLC) either sensitive to platinum-based first-line therapy or refractory (non-responsive) to platinum-based first-line therapy. Results of the studies demonstrated improved overall response rates that compare favorably with topotecan, as well as no evidence of anthracycline-induced cardiotoxicity.
In the first study, the primary endpoint was response rate, and secondary endpoints were time to disease progression, progression-free survival, overall survival and safety. This was met with patients receiving amrubicin demonstrating an overall response rate of 34 percent, compared to 3.8 percent of patients receiving topotecan and the median progression-free survival time for amrubicin patients is 138 days compared to 106 days for topotecan. In the second multi-center international study, patients with SCLC who were refractory to first-line platinum based chemotherapy were treated with IV amrubicin . The primary endpoint was response rate, and secondary endpoints were time to disease progression, progression-free survival, overall survival and safety. The overall response rate for the study was 17.4 percent with one complete response, which compares favorably with those seen historically with topotecan. Additionally, median progression-free survival is 97 days. Amrubicin is generally well tolerated in both studies.
Of course, this is only Phase II data; Amrubicin is already in a Phase III trial, and often drugs that do well in Phase II fail in Phase III. With that warning in mind, the announced results are bullish, but actual approval and revenues from the drug are out in the post 2010 domain.
Finally, more proof came in of the efficacy of Revlimid came in. A pooled study presented at the 13th European Hematology Association (EHA) congress showed "multiple myeloma patients taking REVLIMID(R) (lenalidomide) plus dexamethasone significantly increased their survival rates. A lifetime simulation yielded an estimated mean survival of 5.6 life-years with REVLIMID in combination with dexamethasone (2.2 life-years with dexamethasone alone) for patients with one prior therapy, and 4.2 life-years (1.5 life-years for dexamethasone alone) for patients with multiple prior therapies."
Again, this just pushes doctors to get Revlimid going as a therapy earlier, rather than trying it only as a second or third line defense.
It takes time for knowledge to spread among the medical community, and of course it sometimes seems to take forever to get a new drug approved. Celgene is in the enviable position of having several approved drugs in the marketplace, a couple growing revenues very rapidly, as well as a variety of promising drugs in its pipeline. As biotechnology companies go, it is a relatively safe bet on growth.
I own a bit of Celgene stock.
Keep diversified.
More data: www.celgene.com
Subscribe to:
Posts (Atom)
