Celgene is a buy, Cramer said Tuesday – but not yet. Investors should wait for the right moment before rushing in.
This biotech firm was the third name that Cramer added to his portfolio of cancer-fighting drug companies after Pfizer and Bristol-Myers Squibb . He sees a strong fundamental case for owning Celgene , namely its profitable treatment franchises and full pipeline. But “there’s nothing so compelling at this moment that makes me want to jump in,” he said of the stock.
The technical analysts have their take, too. One of Cramer’s favorites said that CELG could pull back to $48 from its present level of $50 and change. But if it holds at $48, this chartist predicted, the stock could bounce back. If it doesn’t, then he urged investors to cash out.
Of course, this contradicts one of Cramer’s major investing rules: A stock worth buying at $48 is even more attractive at a lower price, as long as the fundamentals haven’t changed. That’s why he recommended buying Celgene at that level and then adding to a position as it trends downward.
And Celgene is worth buying – it’s just a matter of when. The company’s biggest drug, Revlimid, which pulled in $1.3 billion in sales in 2008, treats multiple myeloma, a cancer of the plasma cells in bone marrow, in patients who have already received one prior therapy and myelodysplastic syndromes, or MDS, another kind of blood cancer. But the indications may not end there. Revlimid is still being evaluated in a number of clinical trials as a treatment for other blood cancers as well.
As good as Revlimid is for Celgene, though – and sales of the drug are still accelerating thanks to an expanding footprint here in the US and new launches overseas – there are other drugs adding to the company’s top line. Thalomid treats newly diagnosed multiple myeloma, and Vidaza is a chemotherapy agent for treating MDS. Vidaza is on track for new EU and Latin American rollouts over the next few quarters.
CELG, trading at about 19 times 2010 earnings, may look expensive relative to its peers, but it’s actually cheap when you factor in the 24% long-term growth rate. That means the stock could add a few points to its share price before it moves into more expensive territory.
So when do you buy CELG? Cramer said that investors could wait until the annual American Society of Hematology meeting on Dec. 5, where Celgene is expected to present “some terrific Revlimid data.”
“I wouldn’t pull the trigger on this trade until the week before the conference,” Cramer said.
Cramer’s charitable trust owns Bristol-Myers Squibb.
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