A Biotech Bar­gain?

The Saratogian (Saratoga, NY) - - BUSINESS -

Biotech stocks are rarely value stocks, but Cel­gene (Nas­daq: CELG) is an ex­cep­tion, with a for­ward­look­ing price-to-earn­ings (P/E) ra­tio re­cently be­low 8. Why haven’t in­vestors been snapping up shares? Well, many worry about Cel­gene’s over­re­liance on mul­ti­ple myeloma drug Revlimid, and about the drug los­ing its patent pro­tec­tion. Revlimid makes up more than 60 per­cent of Cel­gene’s to­tal sales and is ex­pected to gen­er­ate nearly $10 bil­lion in sales in 2018.

But Cel­gene has pro­tected its key prod­uct through set­tle­ments and agree­ments. A De­cem­ber 2015 agree­ment with a hand­ful of generic pro­duc­ers will keep a flood of gener­ics off phar­macy shelves un­til the end of Jan­uary 2026. That leaves sev­eral years in which Cel­gene can profit hand­somely from one of the best-sell­ing drugs in the world.

There’s also been back­lash over Cel­gene’s flub­bing of its new drug ap­pli­ca­tion for the mul­ti­ple scle­ro­sis drug ozan­i­mod, which was be­ing counted on to help di­ver­sify the com­pany’s sales away from Revlimid. But even with the de­lay, ozan­i­mod could still be a multi-bil­lion­dol­lar drug when it does come to mar­ket. Mean­while, the com­pany’s other key cancer and in­flam­ma­tion medicines look to be on track to grow or­gan­i­cally on the bases of vol­ume, price and la­bel-ex­pan­sion, and its pipe­line sports more po­ten­tial block­busters. There seems to be lit­tle for in­vestors to worry about. (The Mot­ley Fool owns shares of and has rec­om­mended Cel­gene.)

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