A Biotech Bargain?

Not long ago, biotech company Celgene (Nasdaq: CELG) was a darling in the investment community. That’s no longer the case. Over the past six months, Celgene stock has plunged some 40 percent.

What went wrong? A oncepromising Crohn’s disease drug flopped in a late-stage clinical study, Celgene’s fast-growing psoriasis drug Otezla is facing competition and slowing growth, and the company lowered its financial outlook for 2020.

The market seems to think Celgene is in horrible shape, but the biotech still claims a compelling growth story, with adjusted earnings per share expected to increase by more than 19 percent annually on average over the next few years.

Celgene’s current lineup, featuring blood cancer drugs Revlimid and Pomalyst, continues to perform well. Those two drugs contributed nearly $10 billion to the company’s roughly $13 billion in sales last year. Celgene also markets the blockbuster cancer drug Abraxane. Thanks to label expansions, growing demand and price increases, the company’s sales grew 16 percent year over year in 2017. Meanwhile, many expect Celgene’s multiple sclerosis drug ozanimod to be approved and reach blockbuster status.

With a forward-looking price-toearnings (P/E) ratio recently in the single digits, Celgene’s stock seems a bargain for long-term investors. (The Motley Fool owns shares of and has recommended Celgene.)