Ironically, Celgene (CELG) is a victim of its own success. The biotech company is working on its tenth straight year of revenue growth, and a similarly-impressive string of earnings growth. It’s not chump-change income growth, either. Celgene has managed to pump up its bottom line by an average of 44% per year for the past five years. It is, almost needless to say, the kind of thing investors love to buy into.
The heat has been turned up even more this year, thanks to the euphoria surrounding apremilast. Though the psoriatic arthritis drug has yet to be approved, most observers expect apremilast to get the FDA green light early next year and begin its journey to annual sales of as much as $2 billion. The market is falling in love with the idea — and the company — too. UBS upgraded CELG stock this week, and it has become a favorite momentum play among trader this year; CELG stock is up 109% year-to-date.
So what’s the problem? All of the upside to the drug’s approval, and then some, has been priced in. With a trailing P/E of 47.2, there’s no more room for price appreciation. And with the forward-looking multiple of 22.7, there’s not any room for an FDA or sales misstep either.