Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

More Upside on this Biotechnology Giant: Celgene Corporation (CELG)

The primary contradictions of Pomalyst revolve around pregnant women, and therefore it will carry a boxed warning for such patients. Pomalyst belongs to the same family as Celgene’s Revlimid, but is successful with patients who have stopped responding to Revlimid. According to the company CEO, the drug has a peak sale potential of $1 billion.

Valuations

The stock is currently trading at a P/E of 14x, which is below the industry average of 25x and market average of 19x. The stock is also trading at a 9% discount to its mean sell side target price of $109. As the table below shows, if we use a P/E of 20x and average EPS, the following price targets can be calculated. If valued on a P/E of 20x, the stock is trading at a 13% discount to its 2013 valuations and at a 36% discount to its 2014 valuations.

2013 2014
EPS est $5.66 $6.82
Target Price $113 $136
Discount 13% 36%

According to sell side estimates, the newly approved drug has the potential to generate approximately $500 million in sales by the end of 2015. The strong pipeline and current dominance of Revlimid over alternatives by J&J and Onyx makes me bullish on Celgene as a long term investment.

The article More Upside on this Biotechnology Giant originally appeared on Fool.com and is written by Mohsin Saeed.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.