Celgene Positives Priced In

Tags: celg
29 Oct 1:37am
Posted by ZacksResearch
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Celgene Corp. (CELG), based in Summit, New Jersey, is a fully integrated biotechnology company focused on discovery, development and commercialization of drugs in the area of cancer and immune/inflammatory diseases. The acquisition of Pharmion brings three medically meaningful products -- Thalomid, Revlimid and Vidaza -- into market, which will drive growth in 2008 and beyond.

Celgene has all the makings of a Buy-rated stock such as solid new product story, decent pipeline and incredible 84% four-year earnings growth. However, we are concerned about the tough competition from Velcade and other products for myelodysplastic syndrome and multiple myeloma. Label expansion on Revlimid and Vidaza into other hematological cancers should offer upside for Celgene. We believe all this is currently reflected in the stock.

Based on our model, Celgene will post an EPS of $1.38 in 2008. Based on current price of $57.5, the stock is trading at 42 x 2008 EPS. This is a huge premium to the big pharma and the biotechnology peer group. Our target price of $60 corresponds to a 43.5x P/E to our estimated 2008 EPS of $1.38; 29x P/E to 2009 EPS of $2.09 and 25 x P/E to 2010 EPS of $2.43. Celgene is one of the few biotech companies which are fully integrated and profitable. We believe the name is a core holding in biotech.

Read the full analyst report on CELG




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