Having heard about and invested enough in large-cap pharma, I believe it is time to consider funding smaller firms in the sector. Below you will find three interesting mid and small-cap pharmaceutical companies, Celgene Corporation (NASDAQ:CELG), Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN) and Incyte Corporation (NASDAQ:INCY), with solid growth outlooks. Take a look at them, they might be worthy investments.
Celgene: A stock with promising future
A couple weeks ago, Celgene Corporation (NASDAQ:CELG) announced its first quarter earnings, posting very strong results: adjusted earnings rose by 27.1%, year over year to $1.22, and revenue grew 15% to $1.46 billion, mainly driven by its myelodysplastic syndromes drug, Revlimid, which contributed over $1 billion in income. In fact, EPS has increased at a 47% CAGR over the past five years. However, it still trades at 37.5 x P/E, at about a 68% discount to the industry average.
Revlimid’s success is the source of Celgene Corporation (NASDAQ:CELG)’s, and the main factor that makes me, and other analysts, believe in the company’s future–although its potential product pipeline is also impressive. In 2012 Revlimid sales accounted for 68% of Celgene Corporation (NASDAQ:CELG)’s total revenue, reaching $3.8 billion. As the compound continues to retrieve compelling results in for both approved and potential indications, it is expected to generate over $6 billion by 2017.
The recent launch of the drug in Japan and current releases in Brazil and China should contribute significantly to future growth. The pending (but likely) approval of Revlimid in the E.U. provides even more development chances for the years to come.
In addition, the drug is expected to be approved for the treatment of lymphoma, mantle cell lymphoma and leukemia; NDA’s PDUFA date was fixed for June 2013. If successful, this could drive growth in Revlimid sales even further. Abraxane is also expecting FDA approval and has been recently granted a priority review that should be completed within six months, due to its the significant improvement it would provide for the treatment of advanced pancreatic cancer.
Pomalyst, another of the firm’s drugs, was also launched recently and, apart from its strong launch momentum, its sales should help drive growth in the years to come. Meanwhile, several new R&D collaborations and expansions of existing ones also comprise a promising investment for the long-term.
Moreover, the acquisitions of Pharmion and Abraxis have strengthened its already robust product portfolio by incorporating blood-related cancer and broader oncologic drugs.
In line with this encouraging outlook, guidance for 2013 looks good for investors: full year adjusted EPS is expected in the $5.50-$5.60 range, up 13% year over year. In addition, net product sales, projected at $6 billion for 2013, are expected to double their value by 2017. Even better is the forecast for earnings, predicted to reach $13.00 -$14.00 per share by the end of 2017.
Some analysts believe that if the company continues to exhibit such growth and profitability, it might quickly become a takeover target for larger pharmaceuticals, like Novartis or Roche, seeking to widen their oncology drugs portfolio.
Given its strong financials and its relatively cheap valuation, I would recommend buying this stock. Moreover, analyst consensus indicates a projected growth of 22.1% per year over the next five years (versus the 13.14% industry mean)
Alexion: An attractive option
Even before posting a solid fiscal first quarter wherein earnings climbed 78% year over year to $0.41 per share, and net product sales increased by 38% to $338.9 million, Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN) was already an attractive investment option. However, these figures just complement a broader set of reasons to believe that this company will deliver even higher growth figures than Celgene, retrieving a 24.4% rate per year over the next five years (analyst consensus).