Celgene Corporation (CELG): Does This BiotechStudy Matter to You?

One problem for Celgene Corporation (NASDAQ:CELG) could arise if the product is already being used for off-label indications, or those that are being tested in clinical trials. If so, this failed study and the number of deaths that occurred could make prescribing physicians fearful.

To investors, we typically view blockbuster drugs as having little risk, but those additional trials and sought indications are very important for continued success. A company that is trying to fight cancer already faces a disease that evolves rapidly, but in the case of Celgene Corporation (NASDAQ:CELG), it is especially vulnerable because so much of its upside is tied to Revlimid.

Conclusion

Celgene Corporation (NASDAQ:CELG) is a $55 billion company, trading at 10 times sales. Yet, Celgene has top-line growth of just 15%, which makes it the slowest growing biopharmaceutical company that trades over 10 times sales. Therefore, I view Celgene as very risky right now, and I want to see how Revlimid performs over the next several quarters. If sales remain strong, then Celgene didn’t miss a beat with this failed study. But, if sales fall, then this failed study had more than what Wall Street obviously projected. If so, then Celgene’s valuation could fall drastically.

Sherrie Stone has no position in any stocks mentioned. The Motley Fool recommends Celgene.

The article Does This BiotechStudy Matter to You? originally appeared on Fool.com.

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