The following message was updated on 4/13/2012 12:49:23 AM.
Here is the MUST VIEW Cramer segment on CELG today - simply the most comprehensive review of CELG ever on CNBC - full ten minute spot - together with transcript....
The following transcript has not been checked for accuracy.(Actually Rob Cos has checked for accuracy and editted the many many typos including many important numbers)
With the market rebounding beautifully again today -- ♪♪ hallelujah ♪♪ -- just about everything can feel like a winner. Don't trust those feelings! it's important to keep your eye on the prize. in this market the prize is in fact, would i use the strength in this market to sell some of the big industrials that are around and buy in growth at a discount is what i'd be saying you should be doing right now. this market is finally giving high quality turbo charged secular growth stocks the appreciation they deserve, which is why all week long i've been focused on getting you into the right kind of growth stocks at the right levels. while the market wasn't all that kind of growth stocks today, that's precisely where the opportunity comes in. we've been making a shopping list of growth names can you buy in weakness. some have exploded since we featured them. monday we gave you apple. that is down today. starbucks is up, tuesday chipolte up very big. yesterday we hit the racks at ross starts. of course you just got allergan. now that growth is back in style, you need to be able to put them through a rigorous inspection of your own so can you identify long-term winners and feel comfortable if they go down. we don't just want companies with fast growth. we want fast growth that's sustainable and consistent enough to endure the spanish bond turmoil, italian yields going higher, chinese hard landing fears, unfounded as they might be.
With that in mind, please allow me to introduce Celgene, it remains incredibly cheap up here, even though it's not even 2 points off its 52-week high. It has a $34 billion market gap, deep pocket and a host of drugs on the market for cancer and blood disorders. It's the polar opposite of those speculative one-drug wonders, that many of you call in on. I don't mind it in the lightning round but this is a breed apart. let's run it through our ten-point checklist. First, does it have multi-year growth potential with high visibility? Oh, yeah. Celgene is the fastest growth rate among large cap biotechs. They're forecasting annual revenues and earnings growth in the mid teens. Those numbers could be conservative. The analysts expect the company 24.5% earnings growth for five years. That puts them among the handful of the fastest growing companies I follow. Celgene has the drugs in the pipeline to back these numbers up. And there's a bunch of catalysts coming this yr that could potentially drive the stock much higher. The company's biggest franchise is a blockbuster drug called Revlimid - that treats various cancers of the blood like Multiple Myeloma and Non-Hodgkins Lymphoma. Right now the drug is approved as a second line treatment for patients who don't see benefit from first line drugs but it's coming up for FDA approvals in front line this year and it already has 40% of the front line market as doctors prescribe it off label because it's so good. In 2014, Revlimid's expected to generate nearly $5 billion in revenues, up from $3.5 billion last year. As it gets approved for new indications and Celgene introduces it to new geographies, peak sales $7 billion expected if 2019. in short, sales of revilmid could double. Talk about highly visible multi-yr growth! Guys, this is amazing. I look at so many companies. A handful have this kind of growth. That’s just one drug of a company with multiple revenue streams. There’s Abraxane, Celgene's $384 million breast cancer drug, potential for multiple indications. It could get approval for nonsmall cell lung cancer and it's in phase three trials for melanoma with another phase three study for pancreatic cancer on the way. Celgene thinks this could boost sales by $1.5 billion through 2015. Overall the company is conducting nine phase two and phase three studies, phase three being the last one, to expand the use of its products that are already on the market. ...and each one of these has the potential to produce more than $1 billion in additional sales. That’s why I like this company. People stop me in the street, I need a biotech, they need a drug stock - I think of Celgene. They’ve got a deep pipeline - 19 drugs in preclinical development, 18 programs in phases two or three. This quarter they plan to submit a new drug to the FDA for Pomalidomide another drug cancer drug with multi-billion dollar potential that could be approved later this year. Catalyst, catalyst, catalyst. I’m betting the FDA smiles on this one. It’s already received fast track designation to speed up the approval process. . We should get some important data on Celgene's psoriasis drug this year too, the CEO mentioned this drug on TV today. There's so much going on here. No other drug company I follow, biotech or otherwise has this robust an fda calendar for 2012. Checklist item number two. Are the end markets big enough? Absolutely. The market for cancer drugs in alone is currently worth $50 billion and expanding rapidly. With blood cancers, celgene's specialty $10 billion and growing even faster than oncology in general. Three, can they stay competitive? It's very important for a drug company. The answer is yes. Why? because the patent doesn't expire until 2019 and they may able to extend further to 2023 thank so their patent on the drug's mechanism use. Celgene's fabulous pipeline plus a terrific track record of making smart acquisitions - that should provide them with many new opportunities as the current crop of drugs matures in eight to ten years. That's a long way off - we talk about these patent cliffs for so many drug companies and they're staring them in the face. Celgene is miles away. Fourth, is there any chance for dividends or does it make more sense for them to invest and grow the business? Well the growth generated from their R&D and expanding their sales force is just too good to pass up, so I don't see a dividend in their future any time soon. Last year Celgene did spend $2.2 billion on buybacks but they were opportunistic. They were well timed. They got them at an average price of a little below 58. That's more than 20 points lower than where they are right now. They are smart about their buyback. Not just buying everyday because they think the stock is cheap. Fifth, can the company expand internationalally - in celgene is an international power house.
Rather than partnering up with Big Pharma firms to resell their drugs overseas like many biotechs do, Celgene decided to go it alone. The company is now fully integrated with affiliates in over 50 companies. Right now they're working on getting Revlimid approved in Brazil and China. And every time they start selling a new drug in a new country, well I gotta tell you, its almost pure profit. Last year 42% of their sales were international and their overseas revenue should increase by more than 50% over the next two to three years. Sixth, balance sheet - is it strong enough to sustain the growth? Heck, yeah! I mean, they've got a rock solid balance sheet. $2.6 billion in cash at the end of the third quarter and only $1.25 billion in senior debt. Plus they should generate more than $2 billion in cash flow this year. Seven, is the stock expensive on what we call the out years, in other words, 2014, 2015, 2016? Not only is it cheap based on its earnings in 2015 say, it's selling only 13.8 of next year's earnings. Even though it’s got that 24.5 % long term earnings growth rate.
If Celgene simply traded in line with its peers, which by the way – I regard it as peerless because peers aren't that good, it would would be add 91 stock and be 12 points higher. If it got a multiple commensurate with its growth rate, it would be at $139. That’s right – 60 points higher, Eighth, can management execute their plan? Another resounding “Yes”. Celgene’s CEO Bob Hugin who was on Maria’s show and I thought did a great job today, has held every important management position in the company. He was CFO from 1999 to 2006, and then he served as President and Chief Operating Officer before taking the helm as Chief Executive in June 2010. Of course he has been a frequent guest on the show and has made us a ton of money, with Celgene up 55% since I got behind it in November of 2009…up 30% since the last time we spoke with Hugin in June of 2011. And don’t forget, he was with that at that terrific university of Virginia show we did – DardenBusinessSchool. Nine, is it hostage to economic growth, foreign or domestic? So many companies are. No way! This is a drug company that works even when the economy stinks. Ten, can the company grow its margins? Celgene already has a spectacular 90% gross margin but it's still increasing. And they don’t have to worry about input costs, these are pills! The bottom line is this market is embracing growth and Celgene is one of the greatest growth stocks out there? I prefer buying into weakness, but the stock was down $1.64 yesterday and barely moved today. So I am blessing picking up some Celgene here, so long as you don't chase it on the way up. Hop on Celgene before it gets hot again! Mad Money is back after the break.
