Recently, Celgene Corporation (CELG) announced that its board has cleared a program to buy back up to an additional $2.5 billion of its common stock, thus returning cash to shareholders. The move will boost Celgene’s bottom line.
The repurchase program, effective immediately, is open-ended. We believe that the expansion of the buyback program highlights the biopharmaceutical company’s commitment to create value for shareholders. We remind investors that in August 2011, the board of directors at Celgene had cleared a program to buy back up to an additional $2 billion of its common stock.
We note that during 2011, Celgene bought back approximately 38.3 million shares for $2.22 billion and approximately 2.35 million shares for $169 million in the first quarter of 2012. Celgene exited the first quarter of 2012 with approximately 449 million shares outstanding. A share repurchase at the company would lead to a lower number of outstanding shares, escalating its earnings per share ratio, even if profits remain the same.
We note that Celgene has been constantly making acquisitions/signing deals to boost its product portfolio as well as pipeline. In April 2012, Celgene inked a collaboration and licensing deal with Epizyme, Inc., for the discovery, development and commercialization of personalized medicines for treating patients suffering from genetically defined cancers. Moreover, in March 2012, Celgene acquired Avila Therapeutics to boost its oncology pipeline. We note that Celgene had made two important acquisitions (Abraxis BioScience and Gloucester Pharmaceuticals) in 2010 to bolster its oncology portfolio. We believe that Celgene’s financial flexibility and strong balance sheet should allow it to continue making such prudent acquisitions.
Celgene, which focuses on the discovery, development and commercialization of novel drugs for treating cancer and inflammatory diseases, carries a Zacks #3 Rank (Hold rating) in the short run. Currently, we have a Neutral stance on the stock in the long run.
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