Here is a biotechnology stock with 3 billion dollars in cash, owns all of its drugs and has no debt.  It has a huge pipeline of more than 20 drugs in late stage trails during 2010. 

In fact, three drug trials have been halted in less than a year due to the drugs already hitting their “end points” and this incredible research success will eventually lead to higher sales.

This is no penny stock since it will achieve more than a 20% increase in revenues in 2010 to 3.25 billion dollars. Its gross margins already exceed 90%.

So far, the main drivers in growth are Revlimid which is already a 2 billion dollar drug and a drug recently approved in Europe called Vidaza that gives the firm revenue diversification. This company is predicting earnings per share growth of 25-30 % for the next five years.

The stock we are we are talking about is a company called Celgene (CELG). The company develops and markets pharmaceuticals to treat cancer, immunological disorders and other diseases. Their main product called Revlimid is under patent protection until 2026 and already has sales of 2 billion dollars and testing for other cancer indications indicates that there is much more likely to come.

The drug approved by the FDA in 2005 currently treats MDS patients with a rare chromosomal deletion. The drug has also proven effective in recent phase 3 testing in additional cancer indications. Want yet another reason to buy? Celgene’s production plant in Switzerland was opened last year and the Swiss gave the company a ZERO percent tax rate for the next decade.

The stock currently trades at a very cheap price to earnings ratio of about 20. A very modest valuation in what may be the most compelling earnings growth story in Biotech today. The company plans to hold an Investor Day on March 4th.  It may provide information on new Stem Cell Crohns, ACE-011 and Apremilast Recal Psoriasis data. The risk to the shares is that growth unexpectedly slows in its major drug Revlimid or that the prospects in the pipeline fail.  

However, just one more big drug discovery from that robust pipeline will send the stock much higher. We like the risk/reward and the long term earnings growth of this situation. eWorldvu is buying 300 shares in the Model Growth Portfolio this morning with the weakness in the general market under the price of $57.00.

eWorldvu.com has members that own Celgene. Biotechnology stocks bring a substantial degree of risk so as usual, do your own due diligence.

http://www.eworldvu.com 

Update on Thursday, February 4, 2010 at 10:23AM by Jim Smith

Bought 300 shares at 56.65   S and P 1075