Celgene Corporation (CELG) is about to get a name above and beyond its Revlimid at its first R&D analyst and investor day in several years. The company plans to show its start beyond the single key identifier of Revlimid, its multiple myeloma drug, as well as Thalomid. Celgene is not a one-hit wonder with no pipeline, but the company and the drug Revlimid are almost synonymous. The company hopes to change that Thursday.
At the R&D presentation, Celgene will give updated information on its experimental drug pipeline. This is for lung cancer, Crohn’s disease, psoriasis and psoriatic arthritis, and also in chemo-induced anemia.
As far as looking backwards, Thalomid and Revlimid were responsible for almost 80% of its $2.689 billion in 2009 revenues. It had nearly 20% revenue growth in 2009 versus 2008, down from 60% growth from 2008 over 2007. This stock is getting close to a 300% rise over the last five years.
What is interesting about Revlimid is that most of the key data on its new study results showing that Revlimid as a maintenance therapy could improve results is not due until late in 2010. If the maintenance therapy is approved, this could double in sales by some calculations. The company is also in tests now to see how effective Revlimid is in prostate cancer, colorectal cancer, leukemia, and in non-Hodgkin’s Lymphoma.
That leaves the pipeline as the focus….
Amrubicin will be a focus as its potential and late-stage experimental drug in the fight against relapsed small cell lung cancer.
Apremilast is its drug under study for psoriasis and psoriatic arthritis, and this is headed into late-stage trials. A Reuters figure poined that this could be a $500 million sales drug, although this may be a low-ball figure. Psoriasis is severely under-treated and there has effectively been no significant cure nor any significant help.
Its PDA-001 using stem cells to treat Crohn’s disease is also going to be covered, which is either the first or one of the first promising candidates from its portfolio of stem cell therapies. Its ACE-011 will also be reviewed as a treatment potentially against anemia that is caused by the chemotherapy.
What else, elsewhere?
RBC Capital Markets has recently called Celgene its best idea of large-cap stocks for 2010, although it does highlight that it is not a stock without risk due to its high valuations. And in March it was started as Outperform at Piper Jaffray with a $77 price target. The highest seen target on the street is $78 per share.
Thomson Reuters has 2010 estimates of $2.62 EPS and $3.26 billion in revenues; and it has 2011 estimates of $3.27 EPS and $3.76 billion in revenues. With a $63.50 price and a $29.2 billion market cap its multiples for 2010 are 24-times earnings and almost 9-times revenues. Those multiples for 2011 are estimated to be about 19.5-times earnings and about 7.75-times revenues. Even by biotech standards, Celgene cannot miss many drum beats.
Tea leaves and stock options….
Options are actually not that pricey at $63.50 for the stock. A $62.50 straddle costs about $2.75 for the put and call, which would give a break even price of “under $59.75” or “over $65.20. Its 52-week trading range is $37.62 to $65.79. Creating a synthetic out of the money straddle with the April $60 Puts and April $65 Calls would cost only about $0.95. That implies a break even above $65.90 or under $59.10, which requires you to be “more correct” on your call but for one-third of the dollar risk. The open interest seems a bit higher than normal, but there has been surprisingly very little options betting so far.
A potentiality….
One issue which has not been discussed is a stock split. The company split its shares 2 for 1 back in 2004, which is when the stock was in the $60’s and then 2 for 1 back in 2006 when shares were in the $60’s and $70’s. It seems logical that it might consider another split this week.
Color on recent trading…
Celgene had its move yesterday and shares are up again today. The stock went above $65.00 to that $65.79 high in mid-March and it has effectively been treading water ever since. So far the stock is up over 14% year to date.
Celgene is a high-multiple stock, that is hard to argue against. But it is a favorite because it has growth expectations. The company has not had a stellar history of late in any blowing out of the estimates, but it has not stumbled either.
The big focus ahead is not just on the current Thalomid and Revlimid. The pipeline is key. Some used to consider this a takeover target, but at $29+ billion in market cap it is probably willing to be more of a buyer than a seller.
