February 1, 2015 NASDAQ: CELG CELGENE CORP BUY A+ A A- HOLD B+ B Annual Dividend Rate NA B- C+ C Annual Dividend Yield NA SELL C- D+ Beta 1.10 Sector: Health Care CELG BUSINESS DESCRIPTION Celgene Corporation, a biopharmaceutical company, discovers, develops, and commercializes therapies to treat cancer and immune-inflammatory related diseases in the United States and internationally. STOCK PERFORMANCE (%) 3 Mo. Price Change 14.96 D D- E+ E E- F BUY Market Capitalization $96.5 Billion Sub-Industry: Biotechnology Weekly Price: (US$) SMA (50) 52-Week Range $66.85-$124.60 RATING SINCE TARGET PRICE 04/29/2011 $158.64 Price as of 1/29/2015 $120.87 Source: S&P SMA (100) 1 Year 2 Years 160 TARGET TARGET TARGETPRICE PRICE PRICE$158.64 $158.64 $158.64 TARGET 140 120 100 1 Yr. 52.55 3 Yr (Ann) 48.80 Last Qtr 18.77 186.33 196.00 12 Mo. 18.11 37.93 42.43 3 Yr CAGR 16.57 14.91 18.98 RETURN ON EQUITY (%) CELG Q4 2014 30.65 Q4 2013 25.93 Q4 2012 25.57 Ind Avg 21.71 19.68 0.12 S&P 500 14.59 13.97 13.23 80 GROWTH (%) 60 Revenues Net Income EPS 40 Rating History BUY Volume in Millions 50 25 2013 2014 2015 0 COMPUSTAT for Price and Volume, TheStreet Ratings, Inc. for Rating History P/E COMPARISON RECOMMENDATION We rate CELGENE CORP (CELG) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth, compelling growth in net income, robust revenue growth and notable return on equity. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated. 50.36 79.56 19.08 CELG Ind Avg S&P 500 HIGHLIGHTS Powered by its strong earnings growth of 196.00% and other important driving factors, this stock has surged by 52.55% over the past year, outperforming the rise in the S&P 500 Index during the same period. Turning to the future, naturally, any stock can fall in a major bear market. However, in almost any other environment, the stock should continue to move higher despite the fact that it has already enjoyed nice gains in the past year. EPS ANALYSIS¹ ($) 2012 2013 Q4 0.74 Q3 0.61 Q2 0.72 Q1 0.33 Q3 0.44 Q2 0.56 Q1 0.45 Q4 0.31 Q3 0.49 Q2 0.41 Q1 0.45 Q4 0.25 CELGENE CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, CELGENE CORP increased its bottom line by earning $2.40 versus $1.69 in the prior year. This year, the market expects an improvement in earnings ($4.83 versus $2.40). 2014 NA = not available NM = not meaningful 1 Compustat fiscal year convention is used for all fundamental data items. The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Biotechnology industry. The net income increased by 186.3% when compared to the same quarter one year prior, rising from $214.40 million to $613.90 million. CELG's revenue growth trails the industry average of 41.2%. Since the same quarter one year prior, revenues rose by 18.8%. Growth in the company's revenue appears to have helped boost the earnings per share. The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Biotechnology industry and the overall market, CELGENE CORP's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500. This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2015. All rights reserved. Report Date: February 1, 2015 PAGE 1 February 1, 2015 NASDAQ: CELG CELGENE CORP Sector: Health Care Biotechnology Source: S&P Annual Dividend Rate NA Annual Dividend Yield NA PEER GROUP ANALYSIS V FA 350% AB OR INCY R VO FA LE AB -100% UN Revenue Growth (TTM) LE REGN -30% 52-Week Range $66.85-$124.60 Price as of 1/29/2015 $120.87 Medical spending is expected to grow significantly in the coming quarters due to an aging population, increasing obesity and demand for quality treatment. Healthcare service providers have shown a willingness to incur higher costs to treat diseases and this supports margin expansion for successful treatments. US healthcare spending for the next decade is expected to be around $4.2 trillion or 20% of GDP. GILD BMRN Market Capitalization $96.5 Billion INDUSTRY ANALYSIS The biotechnology industry employs biological and biochemical knowledge to develop, manufacture and trade products and processes for the diagnosis and treatment of diseases and ailments. It also develops genetically modified plant and animal species and food varieties. The industry has a noncyclical growth profile, which is insensitive to overall economic conditions. The industry focuses on specialty markets with primary sales and efforts targeted towards specialists such as hematologists, oncology physicians, rheumatologists and dermatologists. Consequently, the industry is highly reliant on research and development (R&D). US biotech companies dominating the market include larger players like Amgen (AMGN), Gilead (GILD) and Biogen (BIIB). REVENUE GROWTH AND EBITDA MARGIN* PCYC Beta 1.10 70% The biotechnology pipeline has become an important consideration for the pharmaceutical industry and its suppliers. The industry has witnessed an increase in financing and multi-billion-dollar mergers and acquisitions. R&D spending remains robust. The US continues to dominate in R&D spending, with approximately 81 cents of global expenditures being domestic. EBITDA Margin (TTM) Companies with higher EBITDA margins and revenue growth rates are outperforming companies with lower EBITDA margins and revenue growth rates. Companies for this scatter plot have a market capitalization between $12.7 Billion and $157.2 Billion. Companies with NA or NM values do not appear. *EBITDA – Earnings Before Interest, Taxes, Depreciation and Amortization. PEER GROUP: Biotechnology 350% REVENUE GROWTH AND EARNINGS YIELD V FA PCYC AB OR R VO FA VRTX INCY REGN ALXN BIIB CELG AMGN GRFS LE AB -100% UN Revenue Growth (TTM) LE GILD BMRN -3% An average drug takes about 10 to 15 years from pre-clinical development to market approval. According to the FDA, for every 20 drugs that enter the clinical testing stage, only a few pass trial and gain approval. The traditional sales and profit metrics do not completely reveal the biotech companies’ otherwise lengthy, cost-intensive product-development periods. It is essential for investors to consider the number of products the biotech companies have in their pipeline, the time necessary for development and the potential market size of drugs. Patents held, effectiveness of these patents to protect market share, cash position, and current leverage position all impact biotech company outlook. Finally, R&D effectiveness, management competency and potential synergies from new or proposed M&A activities are important factors for investors to consider. 6% Ticker CELG BIIB REGN ALXN VRTX GILD BMRN INCY GRFS PCYC AMGN Recent Company Name Price ($) CELGENE CORP 120.87 BIOGEN IDEC INC 353.25 REGENERON PHARMACEUTICALS 414.64 ALEXION PHARMACEUTICALS IN 188.05 VERTEX PHARMACEUTICALS INC 114.14 GILEAD SCIENCES INC 104.18 BIOMARIN PHARMACEUTICAL INC 99.65 INCYTE CORP 81.34 GRIFOLS SA 34.61 PHARMACYCLICS INC 167.47 AMGEN INC 156.37 Market Cap ($M) 96,539 83,422 41,336 37,288 27,595 157,173 15,666 13,742 13,520 12,651 118,841 Price/ Earnings 50.36 28.51 140.08 57.68 NM 18.37 NM NM 22.19 153.64 23.34 Net Sales TTM ($M) 7,670.40 9,703.32 2,627.64 2,233.73 580.42 20,695.56 667.06 484.59 4,086.63 563.09 20,063.00 Net Income TTM ($M) 1,999.90 2,934.78 334.70 656.91 -738.56 9,405.69 -126.16 -54.41 542.77 86.88 5,158.00 The peer group comparison is based on Major Biotechnology companies of comparable size. Earnings Yield (TTM) Companies that exhibit both a high earnings yield and high revenue growth are generally more attractive than companies with low revenue growth and low earnings yield. Companies for this scatter plot have revenue growth rates between -52.1% and 305.9%. Companies with NA or NM values do not appear. This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2015. All rights reserved. Report Date: February 1, 2015 PAGE 2 February 1, 2015 NASDAQ: CELG CELGENE CORP Sector: Health Care Biotechnology Source: S&P Annual Dividend Rate NA Annual Dividend Yield NA Beta 1.10 Market Capitalization $96.5 Billion 52-Week Range $66.85-$124.60 Price as of 1/29/2015 $120.87 COMPANY DESCRIPTION Celgene Corporation, a biopharmaceutical company, discovers, develops, and commercializes therapies to treat cancer and immune-inflammatory related diseases in the United States and internationally. The company's commercial stage products include REVLIMID, an oral immunomodulatory drug for the treatment of multiple myeloma, myelodysplastic syndromes (MDS), and mantle cell lymphoma; VIDAZA, a pyrimidine nucleoside analog to treat intermediate-2 and high-risk MDS, and chronic myelomonocytic leukemia, as well as acute myeloid leukemia (AML); ABRAXANE, a solvent-free chemotherapy product for the treatment of breast, non-small cell lung, pancreatic, and gastric cancers; and POMALYST/IMNOVID for the treatment of multiple myeloma. Its commercial stage products also comprise THALOMID for the patients with multiple myeloma and for the acute treatment of the cutaneous manifestations of erythema nodosum leprosum; ISTODAX to treat cutaneous T-cell lymphoma; and FOCALIN, FOCALIN XR, and RITALIN LA products. The company's pre clinical and clinical stage products consist of OTEZLA for the treatment of psoriatic arthritis, psoriasis, and ankylosing spondylitis; CC-122 and CC-220 to treat hematological and solid tumor cancers; cellular therapies, such as PDA-001 and PDA-002 for Crohn's and peripheral arterial diseases; CC-486, to treat MDS, AML, and solid tumors; Sotatercept and ACE-536 for the treatment of anemia in patients with rare blood disorders; CC-223 and CC-115 for lymphomas, hepatocellular, and prostate cancers; and CC-292 for the treatment of chronic lymphocytic leukemia and lymphomas. It has strategic drug discovery collaboration with Abide Therapeutics to enhance the treatment paradigm for patients with immune disorders; strategic collaboration with Sutro Biopharma, Inc. to discover and develop antibodies and antibody drug conjugates; and strategic alliance with Forma Therapeutics. Celgene Corporation was founded in 1980 and is headquartered in Summit, New Jersey. STOCK-AT-A-GLANCE Below is a summary of the major fundamental and technical factors we consider when determining our overall recommendation of CELG shares. It is provided in order to give you a deeper understanding of our rating methodology as well as to paint a more complete picture of a stock's strengths and weaknesses. It is important to note, however, that these factors only tell part of the story. To gain an even more comprehensive understanding of our stance on the stock, these factors must be assessed in combination with the stock’s valuation. Please refer to our Valuation section on page 5 for further information. CELGENE CORP 86 Morris Avenue Summit, NJ 07901 USA Phone: 908-673-9000 Fax: 908-673-9001 http://www.celgene.com THESTREET RATINGS RESEARCH METHODOLOGY FACTOR SCORE 5.0 Growth out of 5 stars weak Measures the growth of both the company's income statement and cash flow. On this factor, CELG has a growth score better than 90% of the stocks we rate. strong 5.0 Total Return out of 5 stars weak Measures the historical price movement of the stock. The stock performance of this company has beaten 90% of the companies we cover. strong 5.0 Efficiency out of 5 stars weak Measures the strength and historic growth of a company's return on invested capital. The company has generated more income per dollar of capital than 90% of the companies we review. strong 4.5 Price volatility out of 5 stars weak Measures the volatility of the company's stock price historically. The stock is less volatile than 80% of the stocks we monitor. strong 5.0 Solvency out of 5 stars weak Measures the solvency of the company based on several ratios. The company is more solvent than 90% of the companies we analyze. strong 0.5 Income out of 5 stars weak Measures dividend yield and payouts to shareholders. This company pays no dividends. strong TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates. While our model is quantitative, it utilizes both subjective and objective elements. For instance, subjective elements include expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings. Objective elements include volatility of past operating revenues, financial strength, and company cash flows. Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown as compared to potential profit volatility, i.e.how much one is willing to risk in order to earn profits; the level of acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's performance. These and many more derived observations are then combined, ranked, weighted, and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of selecting stocks. This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2015. All rights reserved. Report Date: February 1, 2015 PAGE 3 February 1, 2015 NASDAQ: CELG CELGENE CORP Sector: Health Care Biotechnology Source: S&P Annual Dividend Rate NA Annual Dividend Yield NA Consensus EPS Estimates² ($) IBES consensus estimates are provided by Thomson Financial Market Capitalization $96.5 Billion 52-Week Range $66.85-$124.60 Price as of 1/29/2015 $120.87 FINANCIAL ANALYSIS CELGENE CORP's gross profit margin for the fourth quarter of its fiscal year 2014 is essentially unchanged when compared to the same period a year ago. The company has grown its sales and net income during the past quarter when compared with the same quarter a year ago, and although its growth in net income has outpaced the industry average, its revenue growth has not. During the same period, stockholders' equity ("net worth") has increased by 16.72% from the same quarter last year. 1.05 Q1 FY15 Beta 1.10 4.83 E 6.21 E 2015(E) 2016(E) STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. To learn more visit www.TheStreetRatings.com. INCOME STATEMENT Net Sales ($mil) EBITDA ($mil) EBIT ($mil) Net Income ($mil) Q4 FY14 2,085.50 NA 789.40 613.90 Q4 FY13 1,755.90 511.10 417.50 214.40 Q4 FY14 7,546.70 17,340.10 6,871.60 6,524.80 Q4 FY13 5,687.00 13,378.20 4,741.30 5,589.90 Q4 FY14 92.00% NA 37.85% 0.44 11.53% 30.65% Q4 FY13 96.30% 29.10% 23.78% 0.49 10.83% 25.93% Q4 FY14 NA 0.51 51.70 15.27 Q4 FY13 3.88 0.46 30.10 13.87 Q4 FY14 800 0.00 0.74 8.16 NA 5,130,265 Q4 FY13 819 0.00 0.25 6.82 NA 4,805,477 BALANCE SHEET Cash & Equiv. ($mil) Total Assets ($mil) Total Debt ($mil) Equity ($mil) PROFITABILITY Gross Profit Margin EBITDA Margin Operating Margin Sales Turnover Return on Assets Return on Equity DEBT Current Ratio Debt/Capital Interest Expense Interest Coverage SHARE DATA Shares outstanding (mil) Div / share EPS Book value / share Institutional Own % Avg Daily Volume 2 Sum of quarterly figures may not match annual estimates due to use of median consensus estimates. This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2015. All rights reserved. Report Date: February 1, 2015 PAGE 4 February 1, 2015 NASDAQ: CELG CELGENE CORP Sector: Health Care Biotechnology Source: S&P Annual Dividend Rate NA Annual Dividend Yield NA RATINGS HISTORY Our rating for CELGENE CORP has not changed since 4/29/2011. As of 1/29/2015, the stock was trading at a price of $120.87 which is 3.0% below its 52-week high of $124.60 and 80.8% above its 52-week low of $66.85. 2 Year Chart Beta 1.10 BUY: $49.60 $125 Price/Earnings $75 $50 2014 MOST RECENT RATINGS CHANGES Date Price Action 1/29/13 $49.60 No Change 1 2 3 premium Price reflects the closing price as of the date listed, if available RATINGS DEFINITIONS & DISTRIBUTION OF THESTREET RATINGS (as of 1/29/2015) 1 2 3 29.29% Hold - We do not believe this stock offers conclusive evidence to warrant the purchase or sale of shares at this time and that its likelihood of positive total return is roughly in balance with the risk of loss. 22.83% Sell - We believe that this stock is likely to decline by more than 10% over the next 12 months, with the risk involved too great to compensate for any possible returns. TheStreet Ratings 14 Wall Street, 15th Floor New York, NY 10005 www.thestreet.com Research Contact: 212-321-5381 Sales Contact: 866-321-8726 5 4 5 CELG 19.46 Peers 27.85 • Discount. A lower price-to-projected earnings ratio than its peers can signify a less expensive stock or lower future growth expectations. • CELG is trading at a discount to its peers. Price/Book 1 2 3 4 5 1 2 premium 3 4 5 3 4 5 discount CELG NA Peers 30.14 • Neutral. The P/CF ratio is the stock’s price divided by the sum of the company's cash flow from operations. It is useful for comparing companies with different capital requirements or financing structures. • Ratio not available. Price to Earnings/Growth 1 2 3 premium 4 5 discount CELG 1.16 Peers 0.70 • Premium. The PEG ratio is the stock’s P/E divided by the consensus estimate of long-term earnings growth. Faster growth can justify higher price multiples. • CELG trades at a significant premium to its peers. Earnings Growth 1 2 3 4 lower 5 higher CELG 42.43 Peers 44.37 • Average. Elevated earnings growth rates can lead to capital appreciation and justify higher price-to-earnings ratios. • CELG is expected to keep pace with its peers on the basis of earnings growth. Sales Growth discount CELG 12.61 Peers 194.39 • Discount. In the absence of P/E and P/B multiples, the price-to-sales ratio can display the value investors are placing on each dollar of sales. • CELG is trading at a significant discount to its industry on this measurement. 2 premium discount CELG 14.82 Peers 12.21 • Premium. A higher price-to-book ratio makes a stock less attractive to investors seeking stocks with lower market values per dollar of equity on the balance sheet. • CELG is trading at a premium to its peers. Price/Sales 1 Price/CashFlow discount premium 47.87% Buy - We believe that this stock has the opportunity to appreciate and produce a total return of more than 10% over the next 12 months. Price as of 1/29/2015 $120.87 discount premium To Buy 4 CELG 50.36 Peers 79.56 • Discount. A lower P/E ratio than its peers can signify a less expensive stock or lower growth expectations. • CELG is trading at a significant discount to its peers. Price/Projected Earnings From Buy 52-Week Range $66.85-$124.60 VALUATION BUY. The current P/E ratio indicates a significant discount compared to an average of 79.56 for the Biotechnology industry and a significant premium compared to the S&P 500 average of 19.08. For additional comparison, its price-to-book ratio of 14.82 indicates a significant premium versus the S&P 500 average of 2.69 and a significant premium versus the industry average of 12.21. The price-to-sales ratio is well above the S&P 500 average, but well below the industry average. The valuation analysis reveals that, CELGENE CORP seems to be trading at a discount to investment alternatives within the industry. $100 2013 Market Capitalization $96.5 Billion 1 2 3 lower 4 5 higher CELG 18.11 Peers 73.15 • Lower. A sales growth rate that trails the industry implies that a company is losing market share. • CELG significantly trails its peers on the basis of sales growth DISCLAIMER: The opinions and information contained herein have been obtained or derived from sources believed to be reliable, but TheStreet Ratings cannot guarantee its accuracy and completeness, and that of the opinions based thereon. Data is provided via the COMPUSTAT® Xpressfeed product from Standard &Poor's, a division of The McGraw-Hill Companies, Inc., as well as other third-party data providers. TheStreet Ratings is a division of TheStreet, Inc., which is a publisher. This research report contains opinions and is provided for informational purposes only. You should not rely solely upon the research herein for purposes of transacting securities or other investments, and you are encouraged to conduct your own research and due diligence, and to seek the advice of a qualified securities professional, before you make any investment. None of the information contained in this report constitutes, or is intended to constitute a recommendation by TheStreet Ratings of any particular security or trading strategy or a determination by TheStreet Ratings that any security or trading strategy is suitable for any specific person. To the extent any of the information contained herein may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. Your use of this report is governed by TheStreet, Inc.'s Terms of Use found at http://www.thestreet.com/static/about/terms-of-use.html. This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2015. All rights reserved. Report Date: February 1, 2015 PAGE 5
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