It's All Relative for This Biotech Underperformer

Earnings season is off and running, and that means many golden opportunities to check in with the most important stocks in the health care industry.

With new U.S. health care policies going into effect, pressures from European austerity pressuring sales in the Old World, and large but often uncertain opportunities presented in developing markets, there's a lot of noise to distract investors from company-specific dynamics at work.

In the following video, health care bureau chief Brenton Flynn tries to cut through the noise and offers some of his key takeaways from last week's Amgen (NASDAQ: AMGN  ) earnings report.

One of the most exciting stocks in the biotech space is Celgene. With its broad portfolio of drugs and a strong pipeline to boot, many investors see it as a smarter way to play the biotech investing game. While Celgene might be a safer stock than its small biotech brethren, investors need to know about the key opportunities and risks facing the company. We run through them all in The Motley Fool's brand new premium report on Celgene. To claim your copy today, simply click here now.


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  • Report this Comment On January 27, 2013, at 1:24 PM, biotech101invest wrote:

    Excellent article - funny thing is all of the ests are STILL conservative and despite this run - CELG is still very undervalued. CFO noted the $13-$14 eps in 2017 excludes buybacks. Analysts ests with continued buybacks (which will happen given CELG new CFO coms & HUGE cash flow growing to $5 billion a yr after all expenses) real EPS is $15-$16 in '17. This makes growth rate well over 25% - but using 25 % to be conservative - $15-$16 EPS at a 1.0 PEG ratio with 25% growth is $375 - $400. Even at current 0.8 PEG its $300 to $320.

    Right now near $100 CELG is STILL discounted to BIIB & AMGN's current PEG of 1.2 with a ridiculously low 0.8 PEG - if you simply go out to 2016 (also based on very conservative #'s & no buybacks) CELG PEG ratio is 0.3-0.4 - so you get the 25% eps growth at a 60% to 70% discount - its more than a half off sale.

    The revaluation of CELG's undervalued stock is only beginning - the reason? Things are really different this time different. Recent data from Pomalyst (approval coming from FDA any day now), Apremilast and Abraxane makes it clear now that CELG is going from ONE $1 billion a yr drug to FIVE billion dollar a yr drugs (including perhaps a $7 billion a yr drug in Revlimid, and a couple of $2-$3 billion dollar a yr drugs) - Revlimid, Pomalyst, Abraxane, Apremilast and Vidaza (international sales alone will be $1 billion in a few yrs and oral Vidaza version is showing amazing early results and is in ph 3 now).

    Celgene also has the highest margins and lowest tax rates in the entire sector and the highest gross margin in the entire S&P 500. Operating leverage will explode EPS higher than even the raised ests as these margins and tax rates kick in to a doubling of revenues with R&D as a percentage of revenue declining as it always does at this stage of a large biotech's growth phase.

    CELG is going to go much higher imo. Great article

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