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Celgene Corporation (CELG): Has Multiple Myeloma Met its Match?

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Multiple myeloma is a cancer of plasma cells, a type of white blood cell present in bone marrow. This cancer can lead to abnormally high calcium levels, kidney failure, bone damage, and anemia-related fatigue. However, broad advancements are being made in treating the disease and
Celgene Corporation (NASDAQ:CELG) is leading the charge.

In a late stage study, its flagship blood-cancer drug Revlimid, assisted in extending the time in which newly diagnosed multiple myeloma patients lived without their tumors growing larger. This should act as a spark to drive sales.

Celgene Corporation (NASDAQ:CELG)Celgene Corporation (NASDAQ:CELG) stated that the company would begin discussions with regulators as it attempts to market Revlimid as a front-line treatment. Presently the drug is only approved for patients who have tried and failed one prior treatment. Revlimid is already broadly utilized with new patients in the U.S., where physicians possess substantial leeway in the prescription of medication for unapproved use.

International markets, on the other hand, have more strict laws in place, which offers opportunities, if new approvals were adopted for the drug. News and optimism recently sent the stock up 7% to record highs.

Why the news matters

According the American Cancer Society, more than 20,000 people will be diagnosed with multiple myeloma this year in the U.S. Several major companies have exposure to this space, including Sanofi SA (ADR) (NYSE:SNY), Onyx Pharmaceuticals, Inc. (NASDAQ:ONXX), and Johnson & Johnson (NYSE:JNJ).

Sanofi’s play on the treatment of multiple myeloma is through its drug Mozobil, which in 2012, generated $125 million in revenue, a meager amount compared to its $45.64 billion top line. Onyx Pharmaceuticals, Inc. (NASDAQ:ONXX), Kyprolis, generated $63.95 million in revenue, 17.66% of the company’s sales. Johnson & Johnson’s treatment is Doxil, a drug that produced $83 million in revenue in 2012.

In respect to Celgene Corporation (NASDAQ:CELG), the company possesses the drugs Revlimid and Thalomid. Combined, they produced $4.06 billion in revenue, about 74% of its total sales last year.

Positive news for Revlimid not only affects Celgene Corporation (NASDAQ:CELG), but all the companies that possess a treatment for multiple myeloma. If evidence clearly states that Revlimid is a superior treatment over any of the ones listed, more cash will flow to the banks of Celgene.

How to profit

Celgene Corporation (NASDAQ:CELG)’s top line is projected to rise from $5.51 billion to around $8.5 billion, which represents 15% to 17.5% year-over-year growth by 2015. Net income is expected to rise from $1.45 billion to $3.14 billion by 2015, near a 30% annual growth rate. Presently, the company holds a price to earnings ratio of 40.83 and does not pay out a dividend. In The Motley Fool’s Caps, Celgene earns 5 out of 5 stars, and is an attractive bet despite its rich valuation.

Sanofi SA (ADR) (NYSE:SNY)’s top line growth is predicted to be around 2.5% to 5% over the next few years. Sales are expected to increase from $45.64 billion to near $52 billion. Net income should increase 12.5% to 15% annually and wind up near $10 billion by 2015. The company presently holds a price to earnings ratio of 25.67 and pays out a dividend of 3.42%. Overall, Sanofi earns 4 out of 5 stars in Caps and appears to be a strong, stable dividend paying investment.

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