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3 Compelling Reasons to Buy Celgene Corporation Stock Right Now

By Keith Speights – Updated Nov 22, 2016 at 8:54AM

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Celgene's inflammation and immunology pipeline provides plenty of reasons to buy this biotech stock.

If I didn't already own shares of Celgene (CELG), it would probably be the top stock on my list to buy.

There are plenty of reasons buying this biotech stock makes sense, including sustained growth of its blockbuster blood cancer drug. But Celgene isn't just about Revlimid. Here are three compelling reasons to buy Celgene that have nothing to do with the company's oncology portfolio.

Image source: Getty Images.

1. Otezla

The drug in Celgene's lineup with the fastest sales growth is none other than Otezla. Sales for the anti-inflammatory drug nearly doubled in the third quarter compared to the prior-year period. Otezla appears poised to become yet another blockbuster for Celgene.

Scott Smith, Celgene's president of global inflammation and immunology, spoke at the Stifel Nicolaus Weisel Healthcare Conference in New York City this week. Smith underscored how transformational Otezla has been in the psoriasis and psoriatic arthritis markets. When the drug was first approved, there was some skepticism about how it would compete against a crowded field of powerful biologics. However, Smith said that 80% to 90% of Otezla patients weren't previously treated by biologics. Otezla didn't have to just grab its sliver of pie; it made the pie bigger.

The key for Otezla, according to Smith, is in picking up patients with moderate cases of psoriasis and psoriatic arthritis. That's exactly what the drug appears to be doing.

Celgene also hopes to expand the indications for Otezla. Late-stage studies are underway for treating ankylosing spondylitis (a form of arthritis affecting the spine and large joints) and  Behcet's disease (a rare inflammation of blood vessels). Two mid-stage studies are also in progress for treatment of atopic dermatitis and ulcerative colitis. Celgene expects Otezla to reach peak annual sales of $2 billion if it wins regulatory approval for these additional indications.

2. GED-0301

Scott Smith was also excited about the prospects for another anti-inflammatory candidate, GED-0301 (also known as mongersen). He said that Celgene sees "tremendous opportunity in the marketplace" for the experimental antisense drug. 

GED-0301 is currently in a late-stage study targeting treatment of Crohn's disease. Data is expected from this study in 2018. Celgene also has a mid-stage study going on for GED-0301 as a potential treatment for ulcerative colitis. 

Interim results from a phase 1b study of GED-0301 in treating Crohn's disease were recently announced. This study, according to Smith, was intended to be a more "rough-and-tumble environment" than earlier Crohn's studies. Even though a difficult-to-treat patient population was evaluated in the study and the results were early (after 12 weeks of treatment), the results for GED-0301 were encouraging. 

It's possible that GED-0301 could be even bigger than Otezla. Analysts project peak annual sales between $2 billion and $3 billion.

3. Ozanimod

Scott Smith said that he thinks Celgene "will have a real winner" with ozanimod in two different indications: multiple sclerosis (MS) and ulcerative colitis. Ozanimod was the crown jewel that Celgene wanted with its acquisition of Receptos last year. Celgene thought then and still expects the drug could reach peak annual sales of $4 billion to $6 billion.

When asked about how Celgene might position its three different potential ulcerative colitis treatments in the marketplace (Otezla, GED-0301, and ozanimod), Smith said that he "doesn't like to think about it." He then added that any decisions will be data-driven. Each drug uses a different mechanism of action. Smith said that any of the drugs "could transform the whole marketplace."

Ozanimod would face Novartis' (NVS 0.67%) Gilenya if it gains approval for treating multiple sclerosis. Gilenya generated sales of $790 million just in the third quarter. Can Celgene make any headway against Novartis' juggernaut? Smith said that he expects ozanimod will compete well in a match-up with Gilenya.

A bigger concern might be what happens when generic versions of Gilenya are available in 2019. Smith thinks that the clinical results for ozanimod will show enough differentiation that the MS indication will still present a good opportunity.

Celgene should report initial data for ozanimod in treating MS in the first half of 2017. The company is "confident about being able to commercialize" the drug in a new market by itself. However, Smith stated that Celgene will consider partnering and that there has been a lot of interest in ozanimod by companies in the MS space.

Compelling case

Scott Smith presented a compelling case for Celgene's prospects in the inflammation and immunology market. The biotech's financial results with Revlimid and Pomalyst make a strong argument for its prospects in the oncology market.

Celgene expects to grow earnings at an annual rate of 23%. With its current products and strong pipeline, including additional indications for Otezla plus contenders like GED-0301 and ozanimod, I think the biotech will make its goal. If you don't already own Celgene, this is one biotech stock to seriously consider buying.

Keith Speights owns shares of Celgene. The Motley Fool owns shares of and recommends Celgene. 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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