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Better Buy: Intrexon Corporation vs. Celgene

Keith Speights, The Motley Fool

Two very different companies are hoping to make their mark in cell therapy. Intrexon Corporation (NYSE: XON) formed its Precigen subsidiary last year to develop gene and cell therapies. Celgene (NASDAQ: CELG) recently announced its acquisition of Juno Therapeutics (NASDAQ: JUNO), a move that puts the big biotech front and center in the cell therapy arena.

Neither stock performed well in 2017, though. Celgene's share price tumbled nearly 10%. Intrexon stock collapsed, sinking more than 50%. But which of these two biotech stocks is the better buy now? Here's how Intrexon and Celgene compare.  

Hand holding test tube with genetic data in background

Image source: Getty Images.

The case for Intrexon

There's really only one argument in favor of buying Intrexon stock: the potential of the company's technologies. And what a variety there is in the technologies that Intrexon is developing.

Intrexon's Trans Ova subsidiary focuses on use of genetics in breeding cattle. Another subsidiary, Oxitec, works on biological solutions to control insect populations. Intrexon's Viagen group targets genetic preservation and cloning technologies. Yet another subsidiary, Exemplar Genetics, develops custom miniature swine models for use in medical and genetic research. Perhaps the most unusual business for Intrexon is BioPop, which uses synthetic biology in creating artwork, children's toys, and novelty goods. 

The company is also involved in a couple of joint ventures that use Intrexon's natural gas bioconversion platform. These joint ventures are working on producing biofuels, lubricants, and industrial chemicals. 

But in Intrexon CEO Randal Kirk's presentation earlier this month at the J.P. Morgan Healthcare Conference, the primary subject discussed was the company's efforts in developing gene-based therapies. Intrexon's Precigen subsidiary has partnered with Ziopharm Oncology to research CAR-T therapies delivered at point of care.

It's this CAR-T program that could hold the greatest potential for Intrexon. CAR-T is very promising in treating several types of cancer, but there are some drawbacks currently, including high costs and delays in treatment resulting from the need for centralized manufacturing. Intrexon hopes to address these issues using non-viral-based gene transfer.

If the company succeeds, its stock should skyrocket. However, there's still a long way to go. 

The case for Celgene

Investors can pretty much take their pick of reasons to buy Celgene. Let's start with its current products. Revlimid was the No. 2 best-selling drug in the world last year. Sales for the blood cancer drug continue to enjoy strong momentum. Celgene also claims a couple of other fast-growing blockbuster drugs in Pomalyst and Otezla. In addition, the biotech has a near-blockbuster with cancer drug Abraxane. 

These big winners have generated a nice cash flow for Celgene that enabled the company to build up an impressive pipeline with significant potential. Celgene anticipates FDA approval for ozanimod in treating relapsed multiple sclerosis in the second half of 2018. Market research firm EvaluatePharma predicts that ozanimod will rank among the five biggest new drugs launched this year.

Ozanimod is just the tip of the iceberg, though. Celgene believes that it will launch nine other potential blockbusters by 2022. These include luspatercept, which targets treatment of beta-thalassemia and myelodysplastic syndromes, and multiple myeloma candidate bb2121. Luspatercept is being developed in partnership with Acceleron Pharma, while Celgene partnered with bluebird bio on bb2121.

Then there's the acquisitions. Celgene reeled off two significant buyouts within a period of 15 days in January. First, the company announced that it was buying Impact Biomedicines, picking up fedratinib, a drug that is being evaluated in clinical studies for treating myelofibrosis and polycythemia vera. Second was the previously mentioned acquisition of Juno, which gives Celgene a potentially best-in-class CAR-T therapy with JCAR017. 

Aside from Celgene's tremendous growth from its current products and its solid pipeline, there is one other reason to buy the stock -- valuation. Celgene shares trade at only 12 times expected earnings. With the biotech likely to grow earnings per share by close to 20% annually over the next few years, Celgene looks like a bargain right now.

Better buy

I had to think long and hard about the decision between these two stocks -- for maybe a nanosecond. Celgene is definitely the better pick, in my opinion.

Celgene made over $6 billion in profits last year. That's more than three times Intrexon's market cap. Celgene took its licks in 2017 due to a late-stage clinical setback and lowering its outlook. However, the big biotech appears to be poised for a rebound this year. 

There's a chance that Intrexon will be successful with its technologies. But with Celgene, I think there's a strong likelihood of success. That difference makes Celgene the better buy.

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Keith Speights owns shares of Celgene and JPMorgan Chase. The Motley Fool owns shares of and recommends Bluebird Bio and Celgene. The Motley Fool recommends Juno Therapeutics. The Motley Fool has a disclosure policy.