Celgene Wins One Bull, Loses Another On Revlimid Potential

Celgene Corporation CELG is down about 35 percent year-over-year, and as management resists challenges to critical Revlimid patents, analysts are at odds about where the stock could head from here.

The Ratings

Bernstein analyst Aaron Gal upgraded Celgene from Market-Perform to Outperform and cut the price target from $121 to $102.

Argus analyst David Toung downgraded the stock from Buy to Hold.

The Bull Thesis

By Bernstein’s assessment, Celgene’s current discounted cash flow reflects the worst possible outcome for the Revlimid trial — a result that could push the launch to April 2020. Gal expects a victory in the second half of 2019 or a settlement even earlier.

His bullishness is bolstered by Celgene’s potential to secure four significant, valuation-driving approvals in the next two years or, in the case that valuation remains depressed, to pursue governance or ownership changes.

“This is fundamentally a valuation call on a 'cliff' company,” Gal said in a Wednesday note. 

The Bear Thesis

Toung is less optimistic about Revlimid’s legal issues, which could increase share volatility with an adverse ruling.

“We remain concerned about the company’s overreliance on Revlimid (65 percent of revenue) and about setbacks in its product pipeline,” Toung said. “While Celgene has settled one legal challenge to its Revlimid patents, it continues to fight challenges from other potential generic competitors.”

His downgrade also accounts for a perceived drop in financial strength after Celgene took on more debt to fund acquisitions.

Price Action

Celgene shares were up 0.64 percent at $77.10 after the open Wednesday. 

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