There are more than 5,700 publicly traded companies in the U.S. Even more are listed on non-U.S. stock exchanges. Investors definitely have plenty of options.
If you could only buy one stock, though, which would it be? It's a very tough decision, because there are quite a few great stocks out there. After thinking about the question and reviewing many stocks, one stock in particular kept coming back to the forefront. Here's why Celgene (NASDAQ:CELG) is the one stock I'd buy right now.
Sustainable product demand
Companies thrive only as long as there is demand for their products and services. You don't see too many eight-track tape manufacturers any more for a reason. Even solid companies can see demand wane for their products, particularly when tough economic times roll around.
Celgene's products definitely have strong demand that isn't likely to decrease anytime soon. Around 13,000 people are diagnosed each year with myelodysplastic syndromes (MDS) in the U.S. alone. There are only half a dozen drugs approved to treat MDS. Celgene markets two of them -- Revlimid and Vidaza. And Revlimid is the most powerful and effective treatment available for the indication.
Over 30,000 new cases of multiple myeloma are diagnosed in the U.S. each year. Around 40 drugs have been approved to treat the rare blood cancer. Two of the top treatments, Revlimid and Pomalyst, are marketed by Celgene.
Even in the relatively crowded psoriasis and psoriatic arthritis markets, Celgene has carved out a niche for Otezla that has resulted in strong demand for the drug. Rather than go head-to-head against established leaders in the more severe cases of the indications, Otezla primarily targets more moderate cases of psoriasis and psoriatic arthritis. Unlike many of the top drugs such as Humira and Enbrel, Otezla is taken orally rather than via injection.
Is demand likely to continue growing for Celgene's best-selling drugs? It seems highly likely. Even better, that demand shouldn't be impacted even if the economy experiences a downturn. Patients need to be treated in both good and bad economic times.
Ecosystem of innovation
I like that Celgene's pipeline is one of the more robust among all biotechs. The company expects to announce results from 19 late-stage clinical studies by the end of 2018. Nine other drugs should advance into pivotal studies that could lead to approval if all goes well.
Celgene isn't just focusing on hitting singles. Several of its pipeline candidates could achieve annual sales of $2 billion or more, including ozanimod, which is being evaluated in late-stage studies for treating multiple sclerosis and ulcerative colitis, and luspatercept, which is late-stage studies for treating MDS and beta-thalassemia.
What I like even more, though, is that Celgene has built an ecosystem of innovation. The biotech has made some smart acquisitions, most notably the 2015 buyout of Receptos that brought ozanimod into its fold. Celgene has also created a collaboration network that stands as one of the best in the biopharmaceutical world.
One partnership that could pay off relatively soon is with Agios Pharmaceuticals (NASDAQ:AGIO). The two biotechs expect a decision on U.S. regulatory approval for acute myeloid leukemia (AML) drug enasidenib by late August 2017. Celgene and Agios are also working together on development of experimental IDH inhibitor AG-881.
Celgene is in great shape financially. The company generated revenue of $11.2 billion last year, up 21% from 2015. Celgene's earnings last year totaled nearly $2 billion, almost 25% higher than the prior year.
Thanks to continued success from its current product lineup plus tremendous prospects for its pipeline, Celgene thinks that it will grow revenue by 17% annually and earnings by 22% annually through 2020. That level of growth should be sustainable into the next decade as well.
The company has long-term debt of around $13.8 billion, but should have no problems whatsoever servicing that debt load. Celgene reported a nice cash stockpile (including cash, cash equivalents, and marketable securities) at the end of 2016 of nearly $8 billion.
About the stock
You might have noticed that everything discussed so far has to do with Celgene's business rather than its stock. That's for a good reason. If you could only buy one stock, the health of the company's business is much more important than any temporary attributes of its stock.
That being said, there are plenty of positives about Celgene's stock. The biotech's share price has more than tripled over the last five years. With strong earnings growth likely, I fully expect Celgene stock to keep on rising.
You might think that this kind of performance and prospects would make Celgene stock expensive. That's not really the case. Although Celgene's trailing-12-month earnings multiple of 49 is high, shares currently trade at less than 14 times expected earnings. That forward price-to-earnings ratio looks even more attractive when factoring in the biotech's projected earnings growth.
Fortunately, I bought Celgene stock several years ago and have enjoyed nice gains. But if I didn't already own it, I'd buy Celgene in a heartbeat right now. In my view, it's without question one of the best stocks in healthcare -- and one of the best on the market, period.