Perhaps not a bargain, but Celgene, is a very attractive acquisition target at these levels ($38.70 at the time of this post). I have owned CELG for a few years now (bought in the low to mid teens). It has been a great performer. I would recommend a buy of Celgene for a number of reasons.
- Major consolidation in the drug / biotech / pharma sector. Many companies have blockbuster drugs that are losing their patent protection in the next couple of years. Celgene will give them a company whose cash flow can cover the cost of the acquisition and stock their pipeline.
- Sitting on more than $2.2 billion in cash (some claim that it stands at closer to $3 billion)
- Low to no debt ($26 million)
- Nearly recession proof market/business
- Solid pipeline of new drugs and/or new applications for existing drugs
- Expansion of existing portfolio into new markets / countries
Let’s not forget the major negative
- The Obama Administration
If health care reform takes hold it could mean big changes in the pharma sector and the prices that they are able to extract for their treatments/products. However, Obama and his administration have much more to worry about right now.
I will be looking to add to my position in CELG. However, I don’t know that I see this as a trading vehicle. It could turn into one with a juicy offer, but should that fail to come, I would be a buyer at these levels. Long term options (LEAPS) might be a good way to play this right now.
