Morningstar | Raising Our Celgene Fair Value Estimate to $116 on Pipeline Conviction Amid Bearish Sentiment
After conducting a deep dive into Celgene's pipeline prospects and the impact of Revlimid's upcoming patent expiration on the firm's moat and cash flows, we're raising our fair value estimate to $116 from $104. Our DCF firm valuation and NPV analysis of Revlimid imply that the market is fixating on Revlimid declines and failing to account for the potential of the firm's late-stage pipeline. We assign key pipeline drugs (including liso-cel, bb2121, ozanimod, luspatercept, CC-486, and next-generation IMiDs) higher sales projections than consensus, which more than counters our bearish view on Revlimid in our valuation. These products drive a stronger, more diversified foundation for the firm going forward and support our narrow moat and positive trend ratings.Our new $116 fair value estimate (Celgene recently traded at an 30% discount to this) factors in a more bullish take on the longevity of multiple myeloma drug Pomalyst and ozanimod in multiple sclerosis, as well as stronger launches for CAR-T therapies and luspatercept, but more bearish estimates for ozanimod in gastrointestinal indications (limited data) and psoriasis drug Otezla (steeper competition). Using an NPV analysis for Revlimid, we value the drug at $59 per share, and using a DCF analysis, we value "RemainCo" (Celgene minus Revlimid) at $55 per share. This is quite close to our DCF-based valuation for the full firm. While our 2022 estimates for Revlimid sales of $11.5 billion are below the $13 billion consensus estimate, we think the market is overly bearish on Celgene's long-term prospects.
For more details on our analysis, please see "Celgene: Winning the Fight to Preserve a Post-Revlimid Moat."
Celgene is a global biopharmaceutical company engaged primarily in the discovery, development and commercialization of therapies for the treatment of cancer and inflammatory diseases through solutions in protein homeostasis, immuno-oncology, epigenetics, immunology and neuro-inflammation. The company's primary commercial stage products include: REVLIMID?, an oral immunomodulatory drug; POMALYST?/IMNOVID?, a proprietary, small molecule; OTEZLA?, an oral small-molecule inhibitor of phosphodiesterase 4 for cyclic adenosine monophosphate; ABRAXANE?, a solvent-free chemotherapy product; and VIDAZA?, a pyrimidine nucleoside analog. In addition, the company provides other product sales and licensing arrangements.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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