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.
Showing posts with label CLL. Show all posts
Showing posts with label CLL. Show all posts
Monday, November 7, 2011
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!
Monday, October 27, 2008
Biogen Idec (BIIB) Growth Accelerating
Biogen Idec just keeps growing revenues and profits. At a time when the entire stock market is melting down, smart people can make money (in the long run) by buying almost anything, but there is a lot of insurance in buying cash rich, rapidly growing companies like Biogen.
Biogen has a lot of cash (and marketable securities), over $2 billion at the end of Q3. Its non-GAAP (cash) net income was $288 million in Q3.
Aside from truly apocalyptic scenarios, I see no reason why profits should not continue to grow rapidly for the foreseeable future. 3rd quarter revenues were up 10% from the second quarter and up 38% from Q3 in 2007. GAAP net income was sequentially flat, but up 73% from $119 million last year, with GAAP EPS at $0.70.
For details of Biogen's Q3, see my Biogen Idec Analyst Conference Summary, Q3 2008.
There are three mostly-independent components to Biogen Idec's future growth. Its main revenue generators include two drugs for Multiple Sclerosis (MS), Avonex ($573 million Q3 sales) and Tysabri ($173 million Q3 sales). Avonex is the older drug, approved and marketed in the U.S., Europe, and many other countries. Tysabri, the newer, even more effective drug, is still in the global approval process. When MS patients switch to a new drug, they switch often switch to Tysabri. In terms of revenue, however, the main component at present is international expansion. It will take years for Tysabri to be approved and for sale in all the world's major markets. MS is a life-long disease at present; you can't stop taking your therapies without it starting to progress, though Tysabri seems to actually cause the disease to regress in many cases.
The second revenue and profit building leg is expanded indications for existing drugs. Rituxan, which had sales of $299 million in the quarter, has been approved for Non-Hodgkin's Lymphoma (NHL) and is in Phase III for Chronic Lymphocytic Leukemia (CLL). Tysabri is in a Phase I trial for multiple myeloma and was recently approved for treatment of Crohn's Disease.
The third leg is the pipeline, which is impressive. There are drugs in every stage of development from pre-clinical to Phase III, and Biogen has the cash to buy rights to promising therapies as well. There are five novel compounds in late stage (Phase III) registrational trials (BG-12, Lumiliximab, Galiximab, Lixivaptan, Adentri).
For those who don't following biotech batting averages, only a relatively few of the drugs that are tried in Phase I trials eventually get good Phase III results and are profitably brought to market. As with any other biotechnology or pharmaceutical company, BIIB will see drugs that don't live up to their early promise. That said, BIIB has a rather exceptional record in actually developing drugs that help patients enough to become revenue blockbusters. Some of BIIBs pipeline candidates will be approved and turn into profit engines in the future.
Every company's stock is risky. Drug candidates can fail, and even successful drugs can be driven off the market by rivals. BIIB should be bought only as part of a portfolio that makes sense to you.
The main risk that remains in BIIB (though I think it has already led to a discount in the stock price) is from the known adverse event associated with Tysabri, PML (Progressive Multifocal Leukoencephalopathy). This was a little-known disease until HIV infections became widespread, resulting in a large pool of people with suppressed immune systems. It is an opportunistic infection, rare even in immune-suppressed patients. There have been several PML cases in patients being treated with Tysabri. Doctors are warned to watch for PML symptoms when they prescribe Tysabri. PML can be deadly.
You might think that would kill sales of Tysabri, but it has not, because doctors and patients, or enough of them, are looking at the bigger picture. MS is an auto-immune disorder. Stopping it involves keying down the immune system. With the choice being between watching MS symptoms progress and taking a drug that stops the progression, most patients are going to want to take the drug. PML is a risk, but a small one, and if detected in time can be survivable. It is sad to have to make choices like that, but when you know you have MS, and what its progress will be if untreated, it is still the best choice for most people.
I hope you have some cash to buy stocks during this giant Wall Street Geniuses' fire sale, but in any case ...
Keep diversified.
More data:
Biogen Idec home page
Biogen has a lot of cash (and marketable securities), over $2 billion at the end of Q3. Its non-GAAP (cash) net income was $288 million in Q3.
Aside from truly apocalyptic scenarios, I see no reason why profits should not continue to grow rapidly for the foreseeable future. 3rd quarter revenues were up 10% from the second quarter and up 38% from Q3 in 2007. GAAP net income was sequentially flat, but up 73% from $119 million last year, with GAAP EPS at $0.70.
For details of Biogen's Q3, see my Biogen Idec Analyst Conference Summary, Q3 2008.
There are three mostly-independent components to Biogen Idec's future growth. Its main revenue generators include two drugs for Multiple Sclerosis (MS), Avonex ($573 million Q3 sales) and Tysabri ($173 million Q3 sales). Avonex is the older drug, approved and marketed in the U.S., Europe, and many other countries. Tysabri, the newer, even more effective drug, is still in the global approval process. When MS patients switch to a new drug, they switch often switch to Tysabri. In terms of revenue, however, the main component at present is international expansion. It will take years for Tysabri to be approved and for sale in all the world's major markets. MS is a life-long disease at present; you can't stop taking your therapies without it starting to progress, though Tysabri seems to actually cause the disease to regress in many cases.
The second revenue and profit building leg is expanded indications for existing drugs. Rituxan, which had sales of $299 million in the quarter, has been approved for Non-Hodgkin's Lymphoma (NHL) and is in Phase III for Chronic Lymphocytic Leukemia (CLL). Tysabri is in a Phase I trial for multiple myeloma and was recently approved for treatment of Crohn's Disease.
The third leg is the pipeline, which is impressive. There are drugs in every stage of development from pre-clinical to Phase III, and Biogen has the cash to buy rights to promising therapies as well. There are five novel compounds in late stage (Phase III) registrational trials (BG-12, Lumiliximab, Galiximab, Lixivaptan, Adentri).
For those who don't following biotech batting averages, only a relatively few of the drugs that are tried in Phase I trials eventually get good Phase III results and are profitably brought to market. As with any other biotechnology or pharmaceutical company, BIIB will see drugs that don't live up to their early promise. That said, BIIB has a rather exceptional record in actually developing drugs that help patients enough to become revenue blockbusters. Some of BIIBs pipeline candidates will be approved and turn into profit engines in the future.
Every company's stock is risky. Drug candidates can fail, and even successful drugs can be driven off the market by rivals. BIIB should be bought only as part of a portfolio that makes sense to you.
The main risk that remains in BIIB (though I think it has already led to a discount in the stock price) is from the known adverse event associated with Tysabri, PML (Progressive Multifocal Leukoencephalopathy). This was a little-known disease until HIV infections became widespread, resulting in a large pool of people with suppressed immune systems. It is an opportunistic infection, rare even in immune-suppressed patients. There have been several PML cases in patients being treated with Tysabri. Doctors are warned to watch for PML symptoms when they prescribe Tysabri. PML can be deadly.
You might think that would kill sales of Tysabri, but it has not, because doctors and patients, or enough of them, are looking at the bigger picture. MS is an auto-immune disorder. Stopping it involves keying down the immune system. With the choice being between watching MS symptoms progress and taking a drug that stops the progression, most patients are going to want to take the drug. PML is a risk, but a small one, and if detected in time can be survivable. It is sad to have to make choices like that, but when you know you have MS, and what its progress will be if untreated, it is still the best choice for most people.
I hope you have some cash to buy stocks during this giant Wall Street Geniuses' fire sale, but in any case ...
Keep diversified.
More data:
Biogen Idec home page
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
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