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Bloomsburg Investment GroupEquity Analysis

Celgene Corporation (CELG)

Analyst:Coby Stout, Class of 2018Vito Amato, Class of 2019Jill Beidler, Class of 2021

James Wiskemann, Class of 2021Bryce Wandell, Class of 2021

Corporate Details:

Name

Ticker

Domicile

Sector

Industry

Exchange

Last Close

Price 52 Wk High

Price 52 Wk Low

Latest Dividend

Dividend Yield % TTM

Beta 5 Yr (MoEnd)

Avg Daily Volume (3 Mo)

Shares Outstanding (mil)

Number of Analysts

Celgene Corp

CELG

United States

Healthcare

Biotechnology

NASDAQ

104.50

147.17

94.55

1.79

6,949,423.22

787.32

8

Corporate Summary:

Celgene is a biotechnology company that operates within healthcare development, product manufacturing, and the distribution of new medications. The corporation’s main business is to research and develop new medications to help cure serious diseases, like cancer and immune-inflammatory issues. With the help of some of their research partners like Juno Therapeutics, Bluebird bio, and AstraZeneca Celgene is able to accomplish its goal of improving the quality of its customer’s lives. Besides research and development Celgene also handles the manufacturing of new prescriptive and OTC medicines and distributes it to customers such as CVS, McKesson, and AmerisourceBergen.

Bloomsburg Investment Group Opinion: BuyThe Healthcare Sector believes that Celgene is a strong buy with a price target of $165. Currently, Celgene is a "middle-of-the-pack" biopharmaceutical drug manufacturer, in terms of market cap size and revenue, but we believe that within the next decade Celgene will be able to increase market share and become one of the largest players in the biotechnology space. Right now, Celgene dominates the entire hematology market with first line, second line, and third line treatments for patients with developed cancers and diseases including Multiple Myeloma, Acute Myeloid Leukemia, and various others. Although Revlimid, their multi-billion dollar blockbuster drug, makes up about sixty percent of their revenue, Celgene is positioned nicely for the next decade due to a relentless effort to diversify their drug portfolio. They have taken to initiative to enter the Inflammatory Bowel Disease market and more recently, Immuno-Oncology (I-O), the newest pillar of cancer therapy which includes the highly sought after CAR-T cell therapy market. Furthermore, Celgene has made many strategic partnerships with companies including AstraZeneca, BlueBird Bio, and Juno Therapeutics, helping them enter into markets that would have been otherwise unachievable. Celgene has a strong commercialized pipeline and a vast amount of ongoing clinical trials could eventually produce ten or more billion-dollar drugs within the next several years.

of 8US Dollar11/27/2017 Celgene Corp

Source: Morningstar Direct

Celgene CorpCELG

Financial Summary, Year End 2016 (in millions)

Market Capitaliza�on

Total Revenue

Gross Profit

Opera�ng Income

Net Income Cont Ops

Net Income

Current Assets

Cash

Total Assets

Current Liabili�es

Longterm Liabili�es

Total Liabili�es

Total Equity

Opera�ng Cash Flow

Inves�ng Cash Flow

Financing Cash Flow

Change In Cash

EBITDA

Enterprise Value

Capital Expenditure

P/E Ra�o Forward

PEG Ra�o

Dividend Yield % TTM

82,274.62

11,229.20

10,791.20

3,166.60

1,999.20

1,999.20

10,867.50

7,969.70

28,085.60

2,959.20

18,527.10

21,486.30

6,599.30

3,976.30

1,002.20

1,645.60

1,289.60

3,377.30

84,789.62

236.20

12.30

0.58

Financial Highlights

� Experienced constant revenue growth, with a 73% increase in the past 3 years and a 132% increase in the past 5 years.

� Consistently shown the ability to produce positive cash flows over the past 5 years

� A 2020 guidance of $20 Billion in Revenue

� Constant increase in their EPS over the past 5 years

� Forward P/E of 12x and a ROE of 35%

� PEG of 0.57

Investment Growth

Time Period: 11/1/2012 to 10/31/2017

4/2013 10/2013 4/2014 10/2014 4/2015 10/2015 4/2016 10/2016 4/2017 10/2017-50.0%

0.0%

50.0%

100.0%

150.0%

200.0%

250.0%

300.0%

Celgene Corp 175.3% S&P 500 TR USD 102.7% iShares Nasdaq Biotechnology ETF 139.8%



Celgene CorpCELG

"Celgene and bluebird bio...bb2121 breakthrough designation"

� bb2121 drug has been granted a breakthrough by the FDA

� “bb2121 further underscores the potential of this novel cellular immunotherapy approach to multiple myeloma treatment,” said Jay Backstrom, M.D” (Yahoo finance)

� bb2121 is a candidate for breakthrough Hematology developement

� Drug is currently being studied in phase 1

"Mongerson Fails"

� Celgene paid $710 million for the Mongersen drug in 2014

� Celgene dropped clinical trials for Crohn’s disease in Cctober of this year

� Mongersen was in phase 2 when purchased, and was still in phase 2 when dropped

"FDA Grants Approval of IDHIFA®"

�

�

�

August 1, 2017-the FDA granted approval of IDHIFA for the treatment of relapsed or refractory acute myeloid leukemia with an IDH2 mutation.First and only treatment of relapsed or refractory AML with the IDH2 mutation available (~8-19% of AML patients).AML is a blood/bone marrow cancer that happens to be the most common form of Acute Leukemia, with over 21,000 estimated new cases each year.

"Celgene Corporation Enters Into Partnership...Beigene"

� July 5, 2017-Celgene entered a strategic collaboration with BeiGene, Ltd.

� Celgene will acquire rights to develop and commercialize BGB-A317 for patients with solid tumor cancers in the United States, Europe, Japan, and the rest of the world not including Asia.

� In turn, BeiGene will acquire Celgene’s commercial operations in China. They will gain an exclusive license to commercialize ABRAXANE, REVLIMID and VIDAZA solely in China.



Celgene CorpCELG

Investment Growth

Time Period: 11/1/2012 to 10/31/2017

4/2013 10/2013 4/2014 10/2014 4/2015 10/2015 4/2016 10/2016 4/2017 10/2017-50.0%

0.0%

50.0%

100.0%

150.0%

200.0%

250.0%

300.0%

Celgene Corp 175.3% Merck & Co Inc 42.1% Pfizer Inc 68.2%Bristol-Myers Squibb Company 112.6% Amgen Inc 125.8% Gilead Sciences Inc 136.1%

Competitor Comparison

Revenue(mil)

Revenue %Chg

GrossProfit(mil)

GrossMargin %

NetIncome

(mil)

NetIncome %

Chg

NetMargin %

MarketCap

(mil)(Daily)

CurrentRatio

ReceivableTurnover

Celgene CorpMerck & Co IncPfizer IncBristol-Myers Squibb CompanyAmgen IncGilead Sciences Inc

52,824.00 8.13 40,495.00 76.66 7,215.00 3.66 13.66 211,545.50 1.25 6.4439,807.00 0.78 25,916.00 65.10 3,920.00 -11.75 9.85 148,073.14 1.78 5.90

30,390.00 -6.89 26,129.00 85.98 13,501.00 -25.44 44.43 94,652.25 2.22 5.8622,991.00 6.14 18,829.00 81.90 7,722.00 11.28 33.59 123,491.91 4.11 7.4619,427.00 17.31 14,481.00 74.54 4,457.00 184.79 22.94 100,542.46 1.55 5.78

11,229.20 21.32 10,791.20 96.10 1,999.20 24.79 17.80 82,274.62 3.67 7.38

Competitor Comparison (Cont.)

EBTMargin %

FY 1ROA %

TotalDebt

to TotalEquity

ROE % Beta 5 YrP/E

RatioCurrent

P/BRatio

CurrentPEG Ratio

DividendYield %

TTM

RevGrowth %

10 Yr(FY1)

Celgene CorpMerck & Co IncPfizer IncBristol-Myers Squibb CompanyAmgen IncGilead Sciences Inc

0.12 3.98 0.62 9.25 0.78 52.26 3.87 3.47 3.46 5.810.21 7.26 2.17 31.94 1.79 24.53 8.35 0.58 28.73

0.40 10.36 1.16 26.65 1.38 15.37 3.83 4.77 2.70 4.890.30 13.62 0.41 29.28 1.19 24.09 6.80 1.75 2.54 1.19

0.56 24.84 1.39 72.16 1.14 8.24 3.81 2.80 25.95

0.16 4.26 0.71 11.62 1.01 21.91 3.48 2.25 3.61 0.88

Industry Environment:

The Biotechnology industry uses advances in genetics research to develop products for human diseases and conditions. Biotech companies largely mirror those in the pharmaceutical industry but a key difference is that biotech firms spend considerably more capital on research and development due to the nature of their products. Additionally, the possibility of drug price regulation is something that would not affect Celgene as much other companies since Celgene drugs mainly treat very rare or developed diseases. The companies that would be most heavily affected by the possibility of drug price regulation would be ones whose drugs treat common conditions such as high cholesterol and diabetes. The Biotechnology industry performed well since last year with a 35.64% year to date gain (S&P Biotechnology Select Industry). One factor that heavily affects biotech stocks would be the FDA approval process. Biotechnology and Healthcare stocks in general are very volatile due to their dependence of FDA approval to make their profits. Trump has stated before that he favors a faster approval process for the FDA, regulation cuts, and ending freeloading on foreign price controls. In the future it is unknown what the state of Obamacare will be and can be a major factor in the industry.



Celgene CorpCELG

Strengths:

� Revlimid and Hematology Market Dominance -Celgene's blockbuster drug, Revlimid, is a first line treatment for Multiple Myeloma and different forms of Leukemia. It will gross over eight billion dollars in sales this year.

� Strong Distribution Network – Over the years Celgene has built a reliable distribution network that can reach majority of its potential market.

� Acquisitions and Management - Celgene has been able to diversify its drug portfolio through strategic acquistions and management decisions.

� Drug Pipeline - Celgene is well positioned for the next decade due to a vast amount of developmental drugs currently in trial.

Weaknesses:

� With any new medication it takes a long time to get approved by the FDA and other organizations because they have to check the side effects and the effectiveness on patients. As long as the company stays patient and waits for the approval to be processed they are able to raise the profits lost in that period by promotion and income of the new medication.

� Celgene also has high research and development expenses because they have to pay for royalties, patents, and drug approval applications for their medications. As new products undergoing development they take time and can be costly. However, once the medication is in the market it is able to accumulate growth allowing Celgene to pay for the high research and development charges.

� Even though Celgene is a global corporation they have limited exclusivity, or litigations. The promotion of any new drug can cause problems, but Celgene was able to reach a settlement without expensive protracted litigations allowing them to continue production of their breakthrough medicines.

Opportunities:

�

�

�

Combo Therapies with Revlimid Because of

Revlimid's dominance, many other companies

have been lining up to use their medicines in

combina�on with Revlimid. This will con�nue to

boost Revlimid sales.

CART/PDL1 Market Share Celgene has

con�nuously been diversifying their por�olio

away from Hematology to capture a greater

market share. With strategic partnerships and

alliances, CELG has entered into new and highly

lucra�ve markets including the brand new CART

industry and checkpoint inhibitor space.

Pipeline Celgene currently has a strong por�olio

behind the scenes with more than a dozen drugs

in cri�cal or Phase III trials. Among them are

several candidates that could generate over a

billion dollars annually.

Threats:

�

�

�

Federal Regula�on The FDA and EMA have always

been a threat to the drug industry. These

organiza�ons are almost solely relied on in order to

bring a drug to commercializa�on.

Compe��on Compe��on will forever be fierce

within the biotech space. Although Celgene

dominates Hematology, that will not last forever.

Furthermore, Celgene has hit obstacles within the

I&I space (Otezla) facing compe��on from Valeant

and Johnson & Johnson.

Vola�lity & Clinical Trial Uncertainty

Biotechnology is one of the most vola�le industries

that exist. One trial failure has the power to

plummet certain stocks (as seen with GED0301).

Although this is true, we believe that Celgene has a

strong enough por�olio that a single trial will not

substan�ally impact the fundamental company.



Celgene CorpCELG

Valuation: Discount Cash Flow Model (DCF)

Using a 5 year time frame and estimates from Capital IQ, we calculated a $164.77 price target on Celgene using a Discounted Cash Flow Model and measuring their future unlevered FCF.

Some numbers used:

�

�

�

WACC 11%CAPM 12.4% (1.79 beta)Diluted Share Count (815 million)

Risk: VaR and CVaR

Using a 95% Confidence Level and 5 Year Historical Return, Celgene's Value at Risk is -2.95%. Essentially this means that Celgene's maximum single loss in a single day will be 2.95%, 95% of time. Additionally, their Conditional Value at risk (average losses that exceed the VaR) is -4.3%. This calculation measures the tail end of the VaR in a normal distribution and indicates the average loss amount that will exceed the 95%.

Valuation: Multiple Valuation

Using estimated future TTM P/E ratios and GAAP/Non GAAP EPS, we calculated the following prices. Additionally, we used a WACC of 11% over a 5 year time frame.

$150 - GAAP - 1 Year price target - 48% Upside$204 - Non GAAP/GAAP Average - 5 Year target - 100% Upside



Celgene CorpCELG



Celgene CorpCELG

Bloomsburg Investment Group Disclaimer

This report was developed by student members of the Bloomsburg Investment Group (BIG). The

purpose of the report is to provide research analysis of securi�es to poten�al and exis�ng donors of

The BIG Fund. The report is designed to exemplify the abili�es of our members through investment

research and analysis. Analysts of the Bloomsburg Investment Group and The BIG Fund are not

registered brokers, investment advisors, or licensed financial professionals. The generated opinion of

our analysts is not an offer or solicita�on to buy or sell any security, and due diligence is recommended

before making any financial transac�on. Informa�on included in this report was compiled from

different public sources. Not all relevant data was included into the report, and accuracy is not

guaranteed. Students, faculty, and staff of Bloomsburg University may have a financial interest in any

company listed in this report.

Sources Cited

Yahoo Finance

Capital IQ

Morningstar

Bloomberg

Wall Street Journal

MarketWatch



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