Celgene Corp (CELG)

Celgene is a biopharmaceutical company focused on novel therapies to treat a broad range of hematopoietic, immunological, neuronal, and cancerous conditions. Celgene currently markets Thalomid for ENL and multiple myeloma, Revlimid for myelodysplastic syndromes and multiple myeloma, Alkeran for multiple myeloma, and Focalin/Focalin XR for attention deficit disorder.

The company has posted impressive results for fiscal 2006 with its topline growing 67% from $536.5 million to $898.9 million. The key driver for this stock in the medium term would be the performance of its potential block buster drug, Revlimid. The drug, mostly prescribed for multiple myeloma, could exceed $2 billion in annual sales within a few years if it is approved for additional disease categories. The additional clinical data for Revlimid in chronic lymphocytic leukemia (CLL) has also been encouraging, influencing the optimism for the same.

Celenge is bound to have strong 2007 on back of robust performance of Revlimid. However many a times stock prices run ahead of fundamentals and this seems to be a perfect example of that. The stock is trading at around 300 times its fiscal 2006 earnings which is much ahead of its peers. The stock has appreciated more than 50% in the last year. Thus it seems that the market has already discounted the promising future of the company. Moreover it seems that the current stock price has not built in potential regulatory risks and the risks associated with clinical trials. Thus the stock despite being on growth trajectory and promising future may not out perform the market.