2 More Good Reasons to Buy Celgene

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Celgene (NASDAQ: CELG  ) shares have soared more than 46% so far in 2013. This booming biotech stock can't go much higher, right? Surely, it's time now to take profits. Actually, the company just announced two developments that add to the reasons to buy Celgene rather than sell.

Facing the giants
For a company known for its blood cancer drugs, Celgene has been quite excited about anti-inflammatory drug apremilast. Clinical results for apremilast have been positive, but some observers have been a little skeptical about the drug's potential in the face of stiff competition. Celgene today announced more results from a phase 3 study of apremilast that could melt some of that skepticism.

Patients with psoriatic arthritis who took 20mg doses of apremilast for 52 weeks showed ACR 20 scores of 63%. Patients taking 30mg doses demonstrated ACR scores of 55%. These ACR scores are measurements established by the American College of Rheumatology that reflect 20% improvement in tender or swollen joint counts as well as 20 percent improvement in three other criteria. Apremilast's 52-week results show significant improvement from earlier results.

There have been some concerns that apremilast wouldn't be able to effectively compete against the "big boys" of rheumatology -- including AbbVie's (NYSE: ABBV  ) Humira, Amgen's (NASDAQ: AMGN  ) Enbrel, and Johnson & Johnson's (NYSE: JNJ  ) Remicade. AbbVie raked in nearly $9.3 billion in sales for Humira last year. Enbrel made $4.2 billion for Amgen and another $3.7 billion for its partner, Pfizer. J&J reported $6.1 billion in 2012 revenue from Remicade. Its marketing partner, Merck, also made a little over $2 billion from the drug.  Could newcomer apremilast really make inroads against these giants?

The latest ACR scores indicate that apremilast just might be able to do so. Humira's 52-week ACR was 57%. Enbrel's score was 50%, while Remicade's ACR was 58%. Apremilast compares well against these scores. Even better, apremilast is taken orally while all of the rival biologics are injected. Efficacy and convenience could catapult the drug to annual revenue of $1.5 billion to $2 billion by 2017.

Stock buyback
The other good news from Celgene is that the company announced a $3 billion stock buyback. This comes on the heels of a previous repurchase of $2.5 billion of shares. Around $1.8 billion of that total was repurchased in 2013. Over the last four years, Celgene has bought back $6.5 billion of its stock.

This new buyback represents around 6% of Celgene's current market cap. Although the company's trailing price-to-earnings multiple of 37 might seem high at first glance, I think Celgene is getting a reasonably good deal in buying its shares at current prices. The biotech should experience earnings growth of at least 20% per year over the next several years.

Looking ahead
Celgene continues to show tremendous momentum. The latest news about apremilast and the share buyback add to a solid list of reasons to buy the stock even after its huge run-up in 2013. Revlimid continues to experience strong growth. Abraxane and Pomalyst are picking up steam. I still rate this stock as a buy.

Can Celgene continue to soar?
Every in-the-know biotech investor has an eye on Celgene. Shares have skyrocketed this year as the company outlined a plan to almost triple its profits in only a few years. But should you buy the story Celgene is selling? Make sure you understand the key opportunities and risks facing this company by picking up 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 June 12, 2013, at 11:49 AM, biotech101invest wrote:

    Lets see CELG bought back $1 bill in Q1-& $834 mill more Q2 through June 11....right before most anticipated data read out (MM-020) in its history that if postive could lead to INCREMENTAL EPS of $3.31 to $7.71...ya think they think MM-020 is positive?

    Perhaps even more important than the $3 billion additional buyback authorized is that they used the remaining $834 million (per Q1 press release) in Q2 through June 11 on top of the $1billion + bought back in Q1.....on pace for over $2 billion through June 30th before the most anticipated data set (MM-020) in the companies history - the company has stated publicly - that they have done a lot of work on previous Rev-dex trials and MPT trials and feel very confident in the MM-020 results and the SPM meta-analyses and other reviews also point to a positive SPM statement by MM-020...

    Talk about putting your money where your mouth is....they have accelerated buyback in Q1/Q2 to levels almost unimaginable pre new CFO Dr Fouse....this plus Board member Dr Mario's early exercise (and significant cash outlay for shares and taxes) of 2017 options speaks loudly of the internal feeling after reviewing all of the supporting data and anecdotal feedback of this MM-020 data...and remember Citi says positive MM-020 data/front line approval could leave to an INCREMENTAL INCREASE in EPS of $3.31 to $7.71 and we know from public comments CFO only has a $500 million increase in sales related to this in 2017 which can be made up elsewhere if imo the entire front line sales lift to 2017 is we know why they are buying with both fists.

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