Please ensure Javascript is enabled for purposes of website accessibility

When Will the Good News End for This Biotech?

By Keith Speights – Sep 5, 2013 at 1:50PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Celgene's latest Pomalyst update is just another round in a string of good news.

They say that bad news comes in threes. I'm not sure if there's a similar saying for good news, but for Celgene (CELG) it seems to come in spades.

The big biotech announced on Thursday that updated results from its phase 3 study of Pomalyst in treating relapsed or refractory multiple myeloma had been published online in The Lancet Oncology ahead of its print edition. And those results brought more good news.

On a roll
Actually, there wasn't really much new information with the latest update. Initial results from the phase 3 study of Pomalyst were announced last December. Celgene also provided another update in June. Everyone already knew that the drug easily met its primary endpoint of progression-free survival in multiple myeloma patients and showed significant improvement in overall survival. However, the announcement underscores the roll that Celgene has been on lately.

This late-stage clinical study formed the basis on which Celgene obtained approval for Pomalyst from the European Medicines Agency, or EMA, last month. Celgene will market the drug using the brand name Imnovid in Europe. Approval by the EMA wasn't a surprise, since Celgene received a positive recommendation from the Committee for Medicinal Products for Human Use, or CHMP, in May.

European success was only the latest in a string of good news about Pomalyst for Celgene. The U.S. Food and Drug Administration approved the drug in February. As of the end of June, Pomalyst had generated sales of nearly $95 million. That's not a bad start for a new drug on the market.

Celgene's good fortunes haven't been limited to Pomalyst, though. Abraxane gained a priority review designation from the FDA in May as a potential treatment for advanced pancreatic cancer. Revlimid picked up a new approved indication in June for mantle cell lymphoma. Celgene reported positive findings from a phase 3 study of apremilast in June and more positive results from a phase 3 study of Revlimid in July.

And what about Celgene's stock? It's more than doubled in the past year. Yep -- life's been good for this biotech.

When will it end?
All of this brings to mind another old saying: All good things must come to an end. Could Celgene's hot streak be in jeopardy of screeching to a halt?

There don't appear to be any serious competitive threats looming on the horizon. Onyx Pharmaceuticals (NASDAQ: ONXX) markets Kyprolis as a multiple myeloma treatment. Kyprolis could be viewed as a rival to Pomalyst, but I expect both drugs will be successful.

Celgene's biggest moneymaker, Revlimid, doesn't look to be in any imminent danger. Revlimid has emerged as the winner in the multiple myeloma market over Velcade, which is marketed by Johnson & Johnson (JNJ -0.71%) and Takeda. AbbVie (ABBV -5.96%) and Bristol-Myers Squibb (BMY -0.86%) have a couple of phase 3 studies under way for elotuzumab. They're also testing the experimental drug in a phase 2 study in combination with Revlimid. It's quite possible that the two companies could ultimately gain approval for elotuzumab and still not impact Celgene's sales too much.

You might look at Celgene's dependence on Revlimid and see it as the company's Achilles' heel. The drug accounts for nearly two-thirds of total revenue. However, Abraxane, Pomalyst, and apremilast seem poised to reduce Celgene's dependence on Revlimid in the future.

Valuation isn't worrisome yet, either. Celgene's trailing price-to-earnings multiple is over 40 -- the highest it's been in nearly four years. However, considering the biotech's solid potential for earnings growth, that's not too high in my view.

The good string of events for Celgene will surely come to an end at some point. From all appearances, though, that end will be later rather than sooner.

Fool contributor Keith Speights has no position in any stocks mentioned. The Motley Fool recommends Celgene and Johnson & Johnson. The Motley Fool owns shares of Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. 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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Celgene Corporation Stock Quote
Celgene Corporation
CELG
Johnson & Johnson Stock Quote
Johnson & Johnson
JNJ
$163.36 (-0.71%) $-1.17
Bristol Myers Squibb Company Stock Quote
Bristol Myers Squibb Company
BMY
$71.09 (-0.86%) $0.62
AbbVie Inc. Stock Quote
AbbVie Inc.
ABBV
$134.21 (-5.96%) $-8.51

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
326%
 
S&P 500 Returns
102%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/03/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.