Celgene Scores Again

Celgene (Nasdaq: CELG  ) is on a roll, scoring another win with its cancer drug Abraxane. The company announced FDA approval of Abraxane for first-line treatment of non-small cell lung cancer. This news comes on the heels of positive Phase 3 study results for use of the drug in treating metastatic melanoma. 

What it means
Abraxane already is used in second-line treatment for metastatic breast cancer. The drug generated sales of $214 million in the first half of this year. FDA approval for non-small cell lung cancer opens up a major new source of revenue for Celgene.

Lung cancer is the No. 1 cause of cancer deaths in the U.S. The most common type of lung cancer is non-small cell, which accounts for 87% of all lung cancer cases. The National Cancer Institute estimates that over $10 billion is spent annually in the U.S. for lung cancer treatment. Non-small cell lung cancer presents a great opportunity in particular because there have been few treatment advances in recent years.

Celgene's clinical trials showed that Abraxane performed better than paclitaxel, the chemotherapy drug marketed by Bristol-Myers Squibb (NYSE: BMY  ) under the brand name Taxol. The hot drug in the market for non-small cell lung cancer, though, is Pfizer's (NYSE: PFE  ) Xalkori. A recent study showed Xalkori extending patient lives longer than Alimta from Eli Lilly (NYSE: LLY  ) and docetaxel from Sanofi (NYSE: SNY  ) .

Abraxane could generate some heat of its own. Barclays estimates that over time, the drug could add as much as $110 million in annual sales as a treatment for lung cancer on top of current revenue produced. 

Rolling on
Celgene's roll probably won't stop yet. The company is expected to announce results from the Phase 3 study of Abraxane in treating pancreatic cancer in the not-too-distant future. Phase 2 trials are also in progress for use of the drug in treating other types of cancer, including bladder cancer and ovarian cancer.

Other drugs in the pipeline, particularly Apremilast, could help Celgene score more wins down the road. Even the company's well-established drug Revlimid has studies underway for other indications that could boost sales should they be successful.

Celgene looks good from a financial standpoint as well. Earnings growth for last quarter topped 30% compared to last year. Return on equity for the last 12 months stands near 26%. The stock trades at a forward price-to-earnings multiple of 14, which looks attractive considering the company's growth prospects.

Shares are up 17% for the year, but my hunch is that it's not too late to profit from Celgene's winning ways. The stock still looks like a good buy. Investors should also research an alternative way to benefit from Celgene's momentum put forward recently by The Motley Fool's David Williamson. There's more than one way to roll.

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Keith Speights has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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