According to recent news, Onyx Pharmaceuticals, Inc. (NASDAQ:ONXX) is on the market and the street is speculating on potential buyers. There is a strong possibility that Celgene Corporation (NASDAQ:CELG) can target Onyx Pharmaceuticals, Inc. (NASDAQ:ONXX)’s Kyprolis to ensure its complete domination of the blood cancer treatment market. Any developments in this regard will positively impact its valuation. Even if it doesn’t acquire Kyprolis, Celgene is still a buy due to the high growth potential of its Revlimid franchise.
Business model
Celgene Corporation (NASDAQ:CELG) is a biotechnology company involved in discovering, developing and commercializing treatments for cancer and ‘immune inflammatory’ diseases. It most famous drug is REVLIMID for the treatment of myeloma and transfusion-dependent anemia. Other known drugs include VIDAZA, ABRAXANE, THALOMID, POMALYST and ISTODAX.
The company has a vast pipeline that contains approximately 27 different compounds divided into 9 treatment areas. These compounds are already available in the market as approved drugs or are still undergoing multiple clinical trials. The company is working to expand its Revlimid franchise and expand its pipeline into multiple treatment areas. It has adopted the strategy of partnering with small development companies that have promising candidates in pre-clinical/ early stages.
Fundamentals
Despite tough competition from Healthcare giants, Revlimid has been exceeding analyst expectations. The street was expecting Celgene to post an EPS of $1.35, but it beat expectations by posting EPS of $1.37 per share. This is the fourth quarter in a row that Celgene Corporation (NASDAQ:CELG) has exceeded expectations. The revenue was also impressive at $1.5 billion, marking a 15% improvement year over year. Net income came in at $592 million, a 22% year-over-year improvement.
The company has also revised expectations for 2013. It now expects EPS in the range of $5.55 to $5.65 on revenue of $6 billion. The street expects Celgene to post revenue of $6.16 billion and earnings of $5.74 per share. Revlimid is the key factor behind the stellar financial performance of Celgene; it contributes approximately $3.8 billion to sales. The second highest selling drug is Vidaza at approximately $820 million.
Pipeline news
Celgene Corporation (NASDAQ:CELG) has one of the richest pipelines in the entire biotechnology sector. The company is still working to further improve its pipeline by making partnerships with small biotechnology companies. This year the biggest news for Celgene investors was the FDA approval of Pomalyst. The FDA has approved Pomalyst for treating cancer patients which have shown resistance to other cancer treatments. The drug is in the same class as Revlimid, but unlike Celgene’s star drug it is able to treat patients that don’t show response to the first-line treatments. The company expects that the peak sales potential of Pomalyst can reach $1 billion. Revlimid and Pomalyst both face competition from Onyx Pharmaceuticals Kyprolis. Luckily for Celgene, it is currently only approved as a third-line treatment. However, there are reports that it is increasingly being used off-label as a second-line prescription. The company is also pursuing trials to get FDA approval for Kyprolis as a second-line drug.
Celgene has also acquired the cancer treatment MOR202 from MorphoSys. The company will develop the drug to treat leukemia and myeloma. According to analysts, the myeloma market is enormous, and there are approximately 27,000 new cases diagnosed every year.
Celgene Corporation (NASDAQ:CELG) is also investing in regenerative medicines under its cellular therapy units. It has signed a deal with Tengion to invest $15 million for first rights on its kidney tissue regeneration technology. Tengion has acquired $33.6 million in funding for Neo-Kidney Augment product candidate.
