One of the more peculiar ways in which this aging bull market has deviated form historical norms is the sheer number of stocks that have literally doubled or even tripled in value almost overnight -- especially in the red-hot biopharmaceutical space. On the flip side, though, a number of these high-flying stocks have been unable to hold on to their monstrous gains due to pipeline setbacks or sizable equity offerings that dilute shareholder value.
Fortunately, there are a handful of names in biopharma that can double your net worth in a far less volatile manner. The only requirement is patience. The large-cap megapharmas AstraZeneca (AZN +0.00%) and Celgene Corporation (CELG +0.00%), for instance, are both slated to produce stellar returns on capital for investors in the next decade. With this in mind, here's a look at each company's key value drivers going forward.
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The tide has finally turned
Over the past four years, AstraZeneca has been battling to regain its footing after the loss of exclusivity for both its acid reflux drug Nexium and cholesterol-lowering medicine Crestor. To do so, the company set its sights on becoming a top player in the high-value oncology space.
While this herculean effort got off to a slower-than-expected start due to its lead checkpoint inhibitor Imfinzi missing the mark in a late-stage study for lung cancer, AstraZeneca has rebounded nicely over the last two years by bringing several other cancer drugs to market and advancing Imfinzi into a slew of other high-dollar indications.
The net result is that AstraZeneca's oncology portfolio has quietly become one of the best in the business. Right now, for instance, the company sports Lumoxiti for patients with hairy-cell leukemia, Calquence as a treatment for mantle cell lymphoma, Iressa for non-small cell lung cancer, Lynparza for ovarian cancer, and Tagrisso for front line lung cancer. In addition, Imfinzi is finally shaping up into a true flagship product -- with multiple approvals already in hand and several more likely on the way over the next 12 months.
The big deal is that AstraZeneca's stock seems to be gearing up for some impressive gains over the next decade, thanks to the company's rapidly emerging footprint in oncology. If all the stars align, for example, the company hopes to more than double its annual revenue as soon as 2023. That's a rather aggressive growth plan for sure, but one that appears to be doable based on AstraZeneca's string of successes in oncology.
Forget the recent speed bumps
Wall Street seems to think that Celgene has lost its touch. After consistently being one of the highly valued biotechs in the industry for well over a decade, Celgene's shares have dropped sharply this year and even came close to testing their five-year lows at one point in 2018. The biotech's stock has struggled this year for four basic reasons:
- Celgene's overreliance on the blood cancer medicine Revlimid to drive growth.
- Revlimid's upcoming bout with generics set to begin as soon as 2022.
- The company's decision to ratchet up its debt load in a big way in order to broaden its core hematology franchise.
- The botched regulatory filing for the multiple sclerosis drug candidate ozanimod, giving would-be competitors a chance to close the gap.
The good news is that, despite these headwinds, Celgene should be able to continue to produce outstanding returns on capital for investors over the long haul. Celgene, after all, is in the process of bringing a whopping five new potential blockbusters to market: bb2121, fedratinib, liso-cel, luspatercept, and of course, ozanimod. Taken together, this all-star lineup is expected to keep Celgene's top line growing at a blistering pace well beyond Revlimid's patent expiration.
That said, Celgene does need a bit more luck than AstraZeneca to achieve its lofty goals on the growth front. After all, the company has painted itself into a corner to a degree with its heavy investments in the adoptive cell therapy arena and the clock is ticking on Revlimid's period of exclusivity. As a result, any additional clinical or setbacks may seriously dampen the company's longer-term outlook.
All told, Celgene obviously needs to diversify ahead of Revlimid's patent expiration in order to regain Wall Street's trust. But the company does appear to be firmly on the path toward reaching this all-important milestone. Celgene's stock thus stands an excellent chance at returning to its winning ways in the not-so-distant future.
