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
Showing posts with label MDS. Show all posts
Showing posts with label MDS. Show all posts
Sunday, June 15, 2008
Saturday, November 24, 2007
Celgene (CELG) and Pharmion (PHRM)
I own Celgene (CELG) stock, so naturally I am wanting to know whether the Pharmion (PHRM) acquisition will be a good thing. The rational question to ask is: would I buy Pharmion at its price prior to the Celgene offer, and would I buy it at the agreed price of $2.9 billion ($72 per share) if I were running Celgene. Truth be told, I have never paid any attention to Pharmion in the past.
In October Pharmion, which has just under 37 million shares outstanding, was running mostly between $45 and $50 per share, so its market capitalization was roughly between $1.7 billion and $1.9 billion. But as late as in July it could be bought for under $25 per share, or the whole lot for well under a billion dollars. Congratulations to those brave souls who bought at under $25.
The numbers only tell part of the story of a company like Pharmion, but they are worth looking at. Q3 2007 revenues were $67.3 million. Annualized that is $269 million. Revenues have been growing, but not at the kind of rate that awes: revenues for all of 2005 were $221 million.
As to net income or earnings, there are none. But losses are substantial, amounting to only $21.4 million in Q3 2007 (after an only $9 million loss in Q2). That is a number that makes it look like break even could be a long way away. But it includes "a charge of $8 million for a milestone payment triggered by the acceptance of our marketing authorization application (MAA) for Satraplatin for the treatment of second-line hormone-refractory prostate cancer by the European Medicines Agency (EMEA)."
Where do the revenues come from, and how much might they grow in the next couple of years? Vidaza for myelodysplastic syndromes (MDS) is marketed in the U.S. and had $43.2 million in Q3 2007 sales. Sales of Thalidomide were $20.2 million.
End of Q3 Pharmion had $258 million in cash in its coffers, so it could have gone on alone, without a partner, until expanded sales took it to profitability.
Pharmion more buys rights to drugs and markets them (if they are approved by the FDA or EMEA or other nations) than develops them from scratch. It has the right to sell Celgene's Thalomid (Thalidomide) for multiple myeloma in Europe. It is seeking approval of Vidaza in Europe, where it is already sold on a compassionate use basis. The latest clinical results for Vidaza are very encouraging; it is hoped that physicians will be impressed and use it more than competitors.
Pharmion has a pipeline of promising drugs as well, notably including Amrubicin for small cell lung cancer in a Phase 3 study, MGCD0103 early studies in solid tumors and CLL for and it has commenced a program targeting sirtuin inhibitors.
How do you value all that? Truthfully, you can go in many directions. Pipelines should always be heavily discounted because most drugs fail to reach market for one reason or another; even drugs with promising Phase III results may not be approved by the FDA. For instance in an 8-K filed 10/31/2007, Pharmion said Satraplatin failed to achieve its goals in a Phase III trial when combined with Prednisone for treatment of patients with hormone-refractory prostate cancer. But that does not mean Satraplatin will not prove effective for other types of cancer.
Approval of Vidaza in Europe are highly probably; that is worth quite a bit, since revenues from Europe should help cover overhead and push Pharmion to profitability. Apparently approval for Thalomid for multiple myeloma in Europe is also very likely.
Still, as a Celgene stockholder I wish the price were more conservative. Celgene feels it is buying an international sales operation, but I suspect they could have put one together for far less than the price of Pharmion.
In the last couple of years two of my companies have made major acquisitions that were supposed to be long term strategic, and might still out to be, but killed the stock price in the short run. One was AMD, which bought ATI (which I also owned). The other was Marvell, which bought Intel's cell phone microprocessor division. I'm not going to sell my Celgene stock just because of those bad experiences (and I kept the MRVL and AMD stock, too), but I am not inspired with confidence.
I felt I had a grip on Celgene's history and prospects when I bought it. Now I feel it is a far riskier proposition. I am not at my limit for Celgene in my portfolio model, so I might have bought more on the dips. Now I'll leave it alone, at least until the acquisition is complete and we start seeing more meaningful Vidaza revenue.
More data:
My Celgene page (with links to Celgene Analyst Conference summaries)
www.celgene.com
www.pharmion.com
In October Pharmion, which has just under 37 million shares outstanding, was running mostly between $45 and $50 per share, so its market capitalization was roughly between $1.7 billion and $1.9 billion. But as late as in July it could be bought for under $25 per share, or the whole lot for well under a billion dollars. Congratulations to those brave souls who bought at under $25.
The numbers only tell part of the story of a company like Pharmion, but they are worth looking at. Q3 2007 revenues were $67.3 million. Annualized that is $269 million. Revenues have been growing, but not at the kind of rate that awes: revenues for all of 2005 were $221 million.
As to net income or earnings, there are none. But losses are substantial, amounting to only $21.4 million in Q3 2007 (after an only $9 million loss in Q2). That is a number that makes it look like break even could be a long way away. But it includes "a charge of $8 million for a milestone payment triggered by the acceptance of our marketing authorization application (MAA) for Satraplatin for the treatment of second-line hormone-refractory prostate cancer by the European Medicines Agency (EMEA)."
Where do the revenues come from, and how much might they grow in the next couple of years? Vidaza for myelodysplastic syndromes (MDS) is marketed in the U.S. and had $43.2 million in Q3 2007 sales. Sales of Thalidomide were $20.2 million.
End of Q3 Pharmion had $258 million in cash in its coffers, so it could have gone on alone, without a partner, until expanded sales took it to profitability.
Pharmion more buys rights to drugs and markets them (if they are approved by the FDA or EMEA or other nations) than develops them from scratch. It has the right to sell Celgene's Thalomid (Thalidomide) for multiple myeloma in Europe. It is seeking approval of Vidaza in Europe, where it is already sold on a compassionate use basis. The latest clinical results for Vidaza are very encouraging; it is hoped that physicians will be impressed and use it more than competitors.
Pharmion has a pipeline of promising drugs as well, notably including Amrubicin for small cell lung cancer in a Phase 3 study, MGCD0103 early studies in solid tumors and CLL for and it has commenced a program targeting sirtuin inhibitors.
How do you value all that? Truthfully, you can go in many directions. Pipelines should always be heavily discounted because most drugs fail to reach market for one reason or another; even drugs with promising Phase III results may not be approved by the FDA. For instance in an 8-K filed 10/31/2007, Pharmion said Satraplatin failed to achieve its goals in a Phase III trial when combined with Prednisone for treatment of patients with hormone-refractory prostate cancer. But that does not mean Satraplatin will not prove effective for other types of cancer.
Approval of Vidaza in Europe are highly probably; that is worth quite a bit, since revenues from Europe should help cover overhead and push Pharmion to profitability. Apparently approval for Thalomid for multiple myeloma in Europe is also very likely.
Still, as a Celgene stockholder I wish the price were more conservative. Celgene feels it is buying an international sales operation, but I suspect they could have put one together for far less than the price of Pharmion.
In the last couple of years two of my companies have made major acquisitions that were supposed to be long term strategic, and might still out to be, but killed the stock price in the short run. One was AMD, which bought ATI (which I also owned). The other was Marvell, which bought Intel's cell phone microprocessor division. I'm not going to sell my Celgene stock just because of those bad experiences (and I kept the MRVL and AMD stock, too), but I am not inspired with confidence.
I felt I had a grip on Celgene's history and prospects when I bought it. Now I feel it is a far riskier proposition. I am not at my limit for Celgene in my portfolio model, so I might have bought more on the dips. Now I'll leave it alone, at least until the acquisition is complete and we start seeing more meaningful Vidaza revenue.
More data:
My Celgene page (with links to Celgene Analyst Conference summaries)
www.celgene.com
www.pharmion.com
Wednesday, May 23, 2007
Celgene in Hypergrowth
Celgene (CELG) is one of those stocks with a high trailing price-to-earnings ratio (P/E = 234, today according to NASDAQ) that seems to be able to continually justify its price. It is a member of the NASDAQ-100 and one of the stocks in the IBB (iShares Nasdaq Biotechnology Index Fund).
I don't own Celgene but I am sure thinking of buying it when my portfolio allows. If the P/E of 234 scares you, take a look at the much more reasonable forward-looking P/E of 37 (per NASDAQ), then take a look at the company.
Most of Celgene's revenue comes from just two drugs. In Q1 2007 Revlimid had sales of $146.2 million, up 18% sequentially and 351% from year-earlier.
Thalomid had Q1 sales of $106 million, down slightly from year-earlier. Why? Because it is now competing for patients with Revlimid.
Celgene also had Alkeran sales of $16 million while its Ritalin drug familty produced $19.8 million. None of these drugs are expected to grow sales rapidly.
Revlimid is the drug to watch. It is a in a new class of immuno-modulatory drugs. It is currently approved to treat specific types of pre-leukermia or MDS (myelodysplastic syndromes) and to treat patients who had a prior therapy and need another option for treating multiple myeloma. But expectations, both at Celgene and in the medical community, are very high for it to be approved for other indications such as CLL (chronic lymphocytic leukemia) and NHL (Non-Hodgkin lymphoma). There are over 70 trials of Revlimid that are underway or soon to be started for a variety of indications.
While Revlimid is the company's focus at present, it has other potential hits in its pipeline (See Celgene pipeline).
Still, there is a lot of risk involved in buying biotech and pharmaceutical company stock, even when drugs are producing good and growing income. This is amplified when a stock has a high price to earnings ratio.
Here are some helpful links for more research on Celgene:
Celgene Corporate web site
My Celgene page with links to summaries of analyst conferences
My biotechnology research page (under construction, but already useful)
I don't own Celgene but I am sure thinking of buying it when my portfolio allows. If the P/E of 234 scares you, take a look at the much more reasonable forward-looking P/E of 37 (per NASDAQ), then take a look at the company.
Most of Celgene's revenue comes from just two drugs. In Q1 2007 Revlimid had sales of $146.2 million, up 18% sequentially and 351% from year-earlier.
Thalomid had Q1 sales of $106 million, down slightly from year-earlier. Why? Because it is now competing for patients with Revlimid.
Celgene also had Alkeran sales of $16 million while its Ritalin drug familty produced $19.8 million. None of these drugs are expected to grow sales rapidly.
Revlimid is the drug to watch. It is a in a new class of immuno-modulatory drugs. It is currently approved to treat specific types of pre-leukermia or MDS (myelodysplastic syndromes) and to treat patients who had a prior therapy and need another option for treating multiple myeloma. But expectations, both at Celgene and in the medical community, are very high for it to be approved for other indications such as CLL (chronic lymphocytic leukemia) and NHL (Non-Hodgkin lymphoma). There are over 70 trials of Revlimid that are underway or soon to be started for a variety of indications.
While Revlimid is the company's focus at present, it has other potential hits in its pipeline (See Celgene pipeline).
Still, there is a lot of risk involved in buying biotech and pharmaceutical company stock, even when drugs are producing good and growing income. This is amplified when a stock has a high price to earnings ratio.
Here are some helpful links for more research on Celgene:
Celgene Corporate web site
My Celgene page with links to summaries of analyst conferences
My biotechnology research page (under construction, but already useful)
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