Celgene is an American biopharmaceutical company specializing in cancer, immunology and inflammatory drug therapies. It has a strong market position and promising pipeline. Key products include Revlimid, Vidaza, Abraxane and Thalomid. Celgene has grown revenue and earnings impressively through acquisitions and product growth. While it faces risks from debt and competition, analysts view its financial position and growth prospects positively.

1. Sector Manager: Aidan O’Neill
Presented by: Jack Curtin, PJ McGrane,
Robert Hatton, Dean McKenna
Healthcare sector presentation,
November 2013

2. Celgene
Company Overview
Celgene is an American biotechnology and
biopharmaceutical company, specialising in drug
therapies for cancer, immunology and inflammatory.
With a corporate headquarters situated in Summit, New
Jersey, they markets their products in three regions: the
US, Europe and All other areas.
Share Price Performance
Segment breakdownKey Financials
Price: $160
P/E: 45
Forward P/E: 16.6
Market Cap: $65.9 billion
Return on Equity (TTM): 25.8%
Debt-to-Equity: 0.7
57%
35%
8%
Regional Sales
USA
Europe
All Other

3. Investment Summary
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Inv Summary specific image

4. Investment Thesis
Investment Summary
1. Strong market positioning
Celgene has a strong and proven
reputation in the fields of oncology,
hematology and immunology; they have
leading products in each field. We expect
each of these fields to grow in the future,
with the bulk of growth being in
Celgene’s main sales region, the US and
Europe.
2. Promising pipeline
Celgene’s pipeline is cleverly targeting
underserved markets, with promising
signs. Furthmore, they relentlessly seek to
capitalize on the success of approved
treatments by testing them for treatment of
other conditions.

5. Company Overview
1 Founded in 1986.
2 Specialises in drug therapies for cancer, immunology
and inflammatory.
3 Targets Developed, Growing Markets.
4 Major Products: Revlimid, Vidaza, Thalomid, Abraxane
and Istodax
Investment Summary
Celgene

6. Company Overview
Celgene was founded in 1986 and has a proven record of
targeting growth markets. It operates in several key
markets.
Investment Summary

7. Company Overview
Investment Summary
Acquisitions
Year Company Cost Outcome
2012 Avila
Therapeutics
Inc.
350 2013 earnings?
2010 Abraxis
BioScience
2,900
2009 Gloucester
Pharmaceutica
ls
640
2008 Pharmion
Corporation
2,900
2003 Anthrogenesis 45

8. Company Overview
Investment Summary
Name Patent
expiration
2012
Revenue
($million)
Treatment
Revlimid 2027/2024 3766 Multiple myeloma after
previous treatment has been
used.
Vidaza 2011/2018 823 First drug approved by the FDA
for the treatment of all subtypes
of Myelodysplastic syndromes
Abraxane 2026/2022 427 Used to treat metastatic breast
cancer
Thalomild 2023/2019 302 Newly diagnosed multiple
myeloma
Pomalyst 2024 _ Multiple myeloma after two
previous treatments have been
used.
Current Products

9. Industry Overview
Oncology
Investment Summary

10. Industry Overview
Key Points:
• 1 in 3 will be diagnosed with cancer
• Survival rates have doubled in the past 40 years
• Treatments are becoming more lengthy, complex and effective
Investment Summary

11. Industry Overview
Investment Summary
Haematology & Immunology
Multiple Myeloma rates

12. Industry Overview
Key Points:
• Multiple Myeloma is more prevalent in the elderly, a demographic
expected to grow.
• Complementary drugs: Revlimid, Pomalyst
Investment Summary

13. Industry Overview
Investment Summary
Key Points:
• Psoriasis is the most prevalent autoimmune disease in the U.S.
• Psoriatic arthritis has no cure, but Celgene are close.
• Rheumatoid Arthritis affects between 1-2% of the worldwide
population

14. Financial Analysis
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15. Ratio Analysis
Financial Analysis
Celgene Gilead Merck Amgen Industry
Average
P/E 46.55 41.3 33.3 18.7 59.9
Forward P/E 16.36 12.0 12.8 13.3
P/B 11.6 10.5 3.1 4.1 7.5
P/S 9.46 11.8 3.4 5.0 8.1
EPS 5.96 1.64 3.03 5.52
Return On
Equity
26.1 32.30 11.47 22.82 13.7
Profit Margin 22.33 28.6 10.2 26.81 13.7
Div. Yield - - 3.47 1.59
Debt/EBITDA
D/E 0.8 0.5 0.5 1.3 0.7

16. Revenue
Financial Analysis
57%
35%
8%
Regional Sales
USA
Europe
All Other
67%
13%
10%
4%
5%
1%
Product Sales
Revlimid
Vidaza
Abraxane
Thalomid
POMALYST/IMNOVID
Other
0
2000
4000
6000
8000
2007 2008 2009 2010 2011 2012 2013 2014
Millions
Year
Revenue $

17. Earnings
Financial Analysis
-4.00
-3.00
-2.00
-1.00
0.00
1.00
2.00
3.00
4.00
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 TTM
Earnings per Share ($)
Key points:
• Earnings have grown impressively since 2008.
• EPS was $5.96 in 2013, guidance for 2014 is in the range $7.00-7.20.
• Bullish estimates based on expected revenue for Revlimid and the
rapidly growing Abraxane.
What are they doing with their earnings?
Year Net Profit ($ billion)
2013 1,449
2012 1,456
2011 1,318
2010 881
2009 777

18. Assets
Financial Analysis
Key points:
• Upward trend in cash, one we expect to accelerate.
• Rising goodwill from acquisitions.
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
2008 2009 2010 2011 2012
Total Cash
Goodwill

19. Liabilities & Equity
Financial Analysis
0
500
1000
1500
2000
2500
3000
3500
4000
4500
2009 2010 2011 2012
Long-term Debt
Cash & Equiv
Cum. Acq.
Key points:
• Large amounts of long-term debt have been incurred – financing
acquisitions and share buy-back schemes.
• At the same time cash and equivalents have grown.
• Equity is quite stable: retained earnings show robust growth, treasury
stock is high

20. Cash Flow
Financial Analysis
Year 2012 2011 2010
Net Cash Flow form
Operations
2,019 1,776 1,182
Net Cash Flow from
Investing Activities
(1,554) 378 (2,107)
Net Cash Flow from
Financing Activities
(249) (1,622) 1,177
Net change in Cash 231 508 249
Key points:
• High earnings growth drive Operations cash flows.
• Acquisitions and share buy-backs create erratic Investing cash flows.
• Issuance of long-term debt create erratic Financing cash flows.
• Net change in cash is reliable positive.
Year
2013 9
Months 2012 2011 2010
Net Cash Flow from
Operations 1675 2019 1776 1182
Net Cash Flow from
Investment Activities -1443 -1554 378 -2107
Net Cash Flow from
Financing Activates 104 -249 -1622 1177
Net Change In Cash 332 231 508 249

21. Free Cash Flow
Financial Analysis
0
200
400
600
800
09-3
09-6
09-9
09-12
10-3
10-6
10-9
10-12
11-3
11-6
11-9
11-12
12-3
12-6
12-9
12-12
13-3
13-6
13-9
Free Cash Flow ($ millions)
Key points:
• Overall, the trend is growth.
• Dips tend to match acquisitions, while peaks match returns from these
investments.
• Despite a recent dip, FCF’s are remarkable - $1983 million.

22. Valuation
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23. Stock Price Analysis
Valuation
The stock currently trades around $160 and has a 52 week range
of $96.30-174.66.

24. Historical P/E
Valuation
• Over the past 10 years, Celgenes P/E has converged closely
with that of the S&P500.
• With a current P/E of around 46, Celgene is trading at around
half of its 10 year average of 95.4, though this may be
misleading.
0
50
100
150
200
250
300
350
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Historic P/E
CELG S&P 500

25. DCF
Valuation
FCF Growth Rate 12.5%
Discount Rate 9.00%
Year FCF 12.5% Growth Present Value
1 1983.00 1819.27
2 2230.88 1877.68
3 2509.73 1937.98
4 2823.45 2000.20
5 3176.38 2064.43
9699.56
Terminal Value (using Gordon Growth Model)
Expected FCF 2000
Long-Term Growth of FCF 5%
Rate of Return 19%
Terminal Value 14285.71429
Intrinsic Value 23985.27334
Per
Share 203.27

26. DCF & Football Field Analysis
Valuation
Celgene Reverse DCF %
Growth (Y1 to 5) 15.00
Free Cash Flow 1983 Growth (Year 6 to 10) 10.00
SharesOut 281 Discount Rate 9.00
Long Term Debt 2,771.00 Long Term Growth Rate 0.50
Long Term Discount Rate 9.00
DCF-IV 193.28
Method Price Weight
Historic P/E $336 5%
Reverse DCF $193.28 40%
FCF Growth Rate $203.27 40%
Competitor Multiple $155.83 15%
Weighted Target Price $198.79
We recommend
a target price of
$195.

27. Risk analysis
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28. Financial Risk
Risk Analysis
• Increase in long term debt to 2771, 0 in 2009
• Subsequent increase in debt/equity to .79,
above industry average of .66
• Debt/assets healthier at .34, industry average
.30
• No dividend payments
• But, outlook is good due to strong cashflow
and growth potential
• Cashflow ops/total debt .43, ind average .08

29. Operational Risk
Risk Analysis
• Risk of further consolidation of American
wholesalers
• Difficulties surrounding integration of
acquisitions
• Liability due to use of hazardous materials in
research
• Currency risk, although it is hedged
• IT breakdown
• Legal risks
• Improper conduct by employees, agents etc.

30. Strategic Risk
Risk Analysis
• No impending patent cliff risk, with both
Revlimid and Thalomid patents not expiring
until mid 2020s
• Vidaza is very open to generic competition
with its patent already expired. Vidaza
accounts for 15% of total revenue

31. Strategic Risk
Risk Analysis
• Velcade by Millenium is the main competitor
to Revlimid, as market leader in 1st and 2nd
line treatment
• Velcade successor, MLN9708, could pose a
very serious threat in the future
• Elotuzamab by BMS and AbbVie also very
promising, but still in phase III
• However, Revlimid may be prescribed in
conjuction with these new drugs