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Celgene downgraded on potential acquisitions

NEW YORK -- An Oppenheimer & Co. analyst downgraded shares of Celgene Corp. on Monday, saying he thinks the biotechnology company is getting ready to make some pricey new acquisitions.

THE OPINION: Analyst Boris Peaker lowered his rating on the Summit, N.J., company to "Perform" from "Outperform" and removed his price target, which had stood at $77 per share. Peaker said he expects continued growth in sales of the cancer drug Revlimid, Celgene's biggest product, in the coming years. However he thinks the company will make several significant acquisitions in the next year or two to bolster its revenue growth and he is not sure those deals will pay off.

Celgene acquired Pharmion Corp. for $2.9 billion in March 2008, and then bought Gloucester Pharmaceuticals for up to $640 million in January 2010 and Abraxis Bioscience for $2.9 billion in October 2010. Those deals gave Celgene the multiple myeloma drug Thalomid, lymphoma drug Istodax, and breast cancer and lung cancer drug Abraxane, respectively.

The deals have added to Celgene's revenue, but Peaker questioned their high price tags.

"These acquisitions had limited, if any, return based on the acquisition price," he wrote. "Given the recent strong performance for the entire biotech sector, we believe that it will be more difficult for Celgene to find good acquisitions."

Celgene did not immediately respond to a request for comment about its strategy.

THE STOCK: Celgene shares lost 48 cents to $77.94 in afternoon trading. The company's stock dropped 11.5 percent on June 21 after it slowed its plans to gain new marketing approvals for Revlimid. The shares are up 31.9 percent since then.