Celgene Guidance Brings All-Time Highs... What Lies Ahead


Celgene Corporation (NASDAQ: CELG) has issued some long-term guidance which appears to be at the high-end of its previous range. The move is taking shares higher, but not just higher with a small gain on the day. The small gain is to 52-week highs and actually up to all-time highs. As far as what Celgene is looking for, the company now projected its adjusted earnings for 2012 at about $4.90 per share on sales of $5.5 billion. The company previously issued guidance of about $4.85 to $4.90 per share, and its prior sales guidance was $5.45 billion to $5.55 billion.

For 2013, Celgene gave guidance at $5.50 to $5.60 per share and that is versus estimates of $5.56 from Thomson Reuters. The company put its product sales at about $6 billion, which is more or less in line with the Thomson Reuters consensus of $6.05 billion. Our question is really how the company can get there. The answer is Revlimid, and Celgene gave a range of $4.1 billion to $4.2 billion for its Revlimid sales in 2013. That would translate to year-over-year growth of about 9% to 12%.

We are not as concerned with 2013 now that the year has begun. It is the longer-term. Celgene reaffirmed some longer-term targets. For the year 2015, the company sees $13 to $14 per share in earnings. It also put product sales over $12 billion out in 2017. It seems that for this long-term goal to be hit it will take more expanded coverage uses for Revlimid into new cancer treatments as well as new geographies.

Celgene shares are up 1.6% at $83.43 and the prior 52-week range is $58.53 to $83.17. We would caution that valuation has to be a concern. It is not just that the stock hit an all-time high. The analysts who cover Celgene have a consensus price target of $87.92. While that is higher than the $83.43 price today, there is just currently not enough perceived reward for the risk that any biotech and emerging pharmaceutical player has.

The consensus price target of $87.92 barely generates 5% of implied upside. We have seen over and over how news from an outside competitor in the biotech and pharma sector can take out 5% of value in a single day. Sometimes the news that does the big damage does not even have to be that bad.

We would also remind shareholders that the market capitalization is now $35 billion for Celgene. That currently makes this company the third largest biotech by market capitalization. Celgene may not be on the top of the most overvalued large-cap biotech stocks, but it is also not exactly in the club of those great biotechs with the most upside in 2013 either.

Filed under: 24/7 Wall St. Wire, Biotech, Earnings, Healthcare Tagged: CELG