Celgene: A buy-and-hold in biotech

This leading company is conducting 25 late-stage clinical trials for new drugs.

By TheStockAdvisors Mar 27, 2013 10:55AM

Insurance Money Comstock Images JupiterimagesBy Mike Cintolo, editor Cabot Top Ten Trader


Celgene (CELG) has a firm hold on its position in the biotechnology market. The company sports five major commercialized drugs and more than 25 clinical trials for new drugs (or new uses for existing ones) in Phase III.


Cancer treatment Revlimid is by far the company's biggest seller, raking in $3.77 billion in sales annually. And trials of pancreatic cancer treatment Abrazane have been extremely positive, placing the drug on the fast track to rival Revlimid's revenue.


Celgene has been hot in the wake of news that the company has formed a strategic collaboration with Presage Biosciences for that company's proprietary platform to identify novel drug combinations for solid tumor indications.


The technology allows for faster results leading to the most personalized and effective treatment regime. Looking at the numbers, Celgene has averaged revenue growth of 29% during the past five years, with earnings growth of more than 70% annually during that timeframe.


The company also sports free cash flow of 35% of annual sales, giving Celgene ample cash to divert into research and development. Despite this strong balance sheet, Celgene has a price-to-earnings ratio of just 23, compared to the industry average of 46.3, giving the company an attractive valuation for potential investors.


Technically, CELG has been on the move in 2013; the stock broke out in early January on positive guidance, before breaking out once again in early March. It is currently perched just north of $110, as investors once again pause to digest the stock's breakneck rally.


The stock remains a great buy-and-hold investment, and we think it's buyable here or, preferably, on a little weakness.


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