The biotechnology industry is one of the favorite industries for investing in up-and-coming companies. A lot of them offer promise, but few end up making it to the finish line. In this article, I will discuss why Celgene Corporation (NASDAQ:CELG) has been so strong and why it will continue to do so in the future. Before we get to that, let's go over an example of how the biotechnology industry can provide big rewards, but also big risk.
One of the hottest stocks of 2012 and January 2013 was Celsion Corporation (NASDAQ:CLSN). The company was completing its Phase III trial of ThermoDox. As the chart below shows, Celsion had run up several hundred percent heading into January 2013 when it was scheduled to announce its results.
However, when Celsion announced the Phase III results on January 31, 2013, the results were a complete disaster. The official announcement contained the dreaded words that the trial failed to meet the primary endpoint in the liver cancer study. After all the hype and promise that investors were banking on, the share price collapsed by more than 80%. This is a cautionary tale of risk and the need for investors to risk only what they can afford to lose, especially when dealing with biotechnology stocks.
For a large-cap stock, Celgene Corporation (NASDAQ:CELG) has had one of the most impressive runs over the past 52 weeks. As the chart below shows, Celgene has had a heck of a run.
Celgene shares have increased by more than 86% during the previous 52 weeks. This compares extremely favorable to both the overall market and the most popular biotech ETF, iShares Dow Jones US Pharmaceuticals. IHE has shown a return of approximately 25% over the past 52 weeks. Celgene Corporation (NASDAQ:CELG) has appreciated because of new drugs and strong earnings. One of Celgene's most anticipated drugs is Abraxane, used in advanced stages of pancreatic cancer. On May 30, 2013, the FDA granted priority review for Abraxane in combination with gemcitabine for first-line treatment of patients with advanced pancreatic cancer. If the company can manage to get FDA approval, the shares will likely see a significant pop.
Fundamentally, Celgene appears to be sitting in a fairly strong position as well. The company reported first-quarter earnings on April 24, 2013. The results were very favorable. It also provided a guide as to how the company can continue to outperform well into the distant future. For the first quarter 2013, Celgene Corporation (NASDAQ:CELG)’s revenue totaled $1.46 billion, a 15% increase compared to the first quarter 2012. A few highlights include the following:
--REVLIMID sales for the first quarter increased by roughly 16% to $1 billion and were driven by overall market share gains and increased duration of therapy.
--VIDAZA first quarter sales increased by roughly 10% to $204 million. Sales were driven by increased demand in the U.S., Europe and Latin America.