Financial Advisors Pay Closer Attention to Celgene Corporation As Its Stock Sells Off on Analyst Downgrade

The main US stock indices moved higher last week, although the S&P 500 and the Dow Jones Industrial Average both inched lower on Friday, ending their multi-day winning streaks. Both the S&P 500 and the Dow Jones advanced by 1.25% and 1.65% between October 2 and October 6. The NASDAQ Composite appreciated by 1.45%, reaching a nine-day gaining streak and hitting a new record high on Friday.


The S&P 500 and the Dow Jones Industrial Average declined on Friday after the Bureau of Labor statistics released a disappointing jobs report that showed that the US lost 33,000 jobs in September. This was lower than the addition of 90,000 jobs expected by analysts polled by Reuters and marked the first contraction in the labor market since 2010.


On the other hand, last week was also marked by some positive economic data. The US automakers recorded their best sales month in September, as consumers flocked to replace vehicles that were destroyed by the Hurricane Harvey. Moreover, the Institute for Supply Management’s Manufacturing Index went to 60.8 in September, topping the expectations of 58.1 and registering the highest level since September. ISM’s Non-Manufacturing Index showed a reading of 59.8, the highest since 2005 (when in August the index reached 61.3), and beating the estimates of 55.5.


In the meantime, financial advisors seemed to be more focused on the healthcare sector last week. According to data from TrackStar, Investing Channel’s official newsletter capturing and analyzing the trends of Financial Advisors, the list of the 20 most-searched tickers among financial advisors included three healthcare stocks and one healthcare-focused ETF, Health Care SPDR (ETF) (NYSEARCA:XLV). More notable is that one healthcare stock, Celgene Corporation (NASDAQ:CELG)  ranked as the second most-searched stock and the XLV ETF ranked as the fourth most-searched ticker. Other stocks that made the list included Apple Inc (NASDAQ:AAPL) and Amazon.com, Inc. (NASDAQ:AMZN), which ranked on the first and third spot, respectively, having led the list in the previous weeks as well.   


In this article, we are going to take a closer look at Celgene Corporation (NASDAQ:CELG), the second most-searched ticker among financial advisors last week. The stock of one of the largest biotech companies in the US lost over 4.5% between Monday and Friday, mainly due to a 5% drop registered in the last two trading days of the week.


The decline came on the back of a downgrade from Morgan Stanley analysts. The analysts cut the rating on Celgene Corporation (NASDAQ:CELG)’s stock to ‘Underweight’ from ‘Equal Weight’, but maintained a price target of $120. The reason for the downgrade was the threat for Celgene’s top-selling drug, Revlimid. According to the analysts, the generic competition will start challenging Revlimid in 2020, which is much sooner than anticipated by the market, which projects competition to emerge in 2026.


Revlimid is the commercial name for Lenalidomide, which is used for treatment of a variety of cancers, including multiple myeloma, a cancer of plasma cells. The drug was introduced in 2004 and its current cost is estimated at around $163,400 per patient. Due to its efficacy, Revlimid has become the most prescribed drug used to treat multiple myeloma.


Even though Revlimid is just one drug in Celgene Corporation (NASDAQ:CELG)’s pipeline, it’s clear why investors got spooked by the analysts’ remarks about it and led the stock to a small sell-off. Revlimid represents the bulk of Celgene’s drug sales. In the first six months of 2017, Revlimid’s sales amounted to $3.92 billion (up by 19.7% on the year), while total drug sales amounted to $6.20 billion.


However, it’s unlikely that over the long run, Celgene Corporation (NASDAQ:CELG) will be significantly impacted by generic competition to Revlimid. Celgene is one of the most successful biotech companies and its stock has surged by 248%. In addition, the management seems to be aware of the company’s reliance on a single drug, so it’s working to expand its pipeline. Celgene has another drug for the treatment of multiple myeloma, Pomalyst/Imnovid, which was launched in 2013 and had sales of $755 million in the first half of 2017, having increased by 27.5% on the year. It is also exploring the expansion of some of its existing drugs. Abraxane, which is used for the treatment of breast cancer, lung cancer, and pancreatic cancer, is currently under studies for other types of solid tumors. Otezla, which is already a fast-growing psoriasis drug is in a phase III trial for Behcet’s disease and is also evaluated as a treatment for ankylosing spondylitis, psoriatic arthritis and plaque psoriasis.


Moreover, Celgene Corporation (NASDAQ:CELG) also has a variety of other drugs under phase III trials, such as Ozanimod for the treatment of relapsing multiple sclerosis and ulcerative colitis. Another drug is GED-0301 for the treatment of Crohn’s disease. The company also has phase III trials for several products for the treatment of acute myeloid leukemia and beta-thalassemia.


In this way, given that Celgene Corporation (NASDAQ:CELG)’s stock hasn’t bounced back from the levels that it had been trading at before Morgan Stanley’s downgrade, it may still represent a good entry opportunity. In fact, on Friday, Jim Cramer recommended the stock on his ‘Mad Money’ show, pointing out that, whenever Celgene’s shares sold off, they managed to bounce back.

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