Biotechnology company Celgene Corporation (NASDAQ:CELG) dominated headlines yesterday as the company settled its Revlimid patent litigation with Natco Pharma in India. Revlimid is an FDA-approved drug for multiple myeloma. Its patent expires in 2027, but Celgene agreed to grant Natco a license to sell a limited amount of lenalidomide, the generic version of the drug, in the US beginning in 2022, followed by an unlimited amount beginning in 2026.
In light of this settlement, analyst Eric Schmidt of Cowen & Co. reiterated an Outperform rating on Celgene with a $150 price target. He believes the deal is favorable to Celgene, commenting, “We view the deal terms as favorable and reflective of the strength of Revlimid’s IP portfolio. We believe Street expectations were that Celgene might be able to settle for a 2024 generic entry date. The company appears to have done modestly better than that… We believe shares could be up ~10% on such favorable settlement terms.”
Furthermore, Schmidt notes that the entrance of lenalidomide to the market will prevent other potential generics from entering the market due to the long litigation period and financial burden posed by challenging the patent.
Eric Schmidt has a 53% success rate recommending stocks with a +27.3% average return per rating.
Separately, Joshua Schimmer of Piper Jaffray reiterated an overweight rating on Celgene with a $163 price target yesterday following the litigation news. Schimmer explains, “We view the agreement as creative and a positive, lifting the overhang in a reasonable compromise that allows the company to continue managing towards a 25% EPS CAGR through the middle of the next decade, which is why we like this deal. CELG remains one of our top biotech picks with a reasonable valuation and high EPS growth visibility heading into 2016.”
Joshua Schimmer has a 40% success rate recommending stocks with an average loss of 2.7% per rating.
Among others, Cory Kasimov of J.P. Morgan reiterated an Overweight rating on Celgene yesterday. Kasmiov believes that the result is a near best case outcome for Celgene. He explains that the end of the litigation provides clarity “on a product runway that extends out another 10 years; this for a mega-blockbuster drug that’s already coming in on an annual run rate of nearly $6B and healthy growth likely ahead of it (as a backbone of future combination therapy).”
Cory Kasimov has a 42% success rate recommending stocks with an average loss of 0.7% per rating.
According to TipRanks, all 7 analysts covering Celgene are bullish on the company with an average 12-month price target of $153.57, marking a 38% potential upside from current levels.