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Celgene Corporation (CELG - Analyst Report) recently entered into an accelerated share repurchase (ASR) agreement with an investment bank. The agreement will allow Celgene to repurchase around $600 million of its common stock. The move will boost Celgene’s bottom line.
As per the ASR agreement, Celgene will be paying $600 million to the investment bank for its common stock. The company expects to complete all repurchases under the ASR agreement by May 20 this year. Celgene is yet to decide on the total number of shares to be repurchased under the agreement. It will be done upon the final settlement and based on the discount to the volume-weighted average price of Celgene’s common stock during the ASR period.
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 the ASR is a part of the share repurchase program authorized by Celgen’s board. Celgene has repurchased around $385 million of its common stock so far this year. Under the existing program, Celgene can repurchase another $1.5 billion of its common stock.
During the fourth quarter of 2012, the company bought back 7.5 million shares of its common stock for approximately $580 million. Last year Celgene repurchased approximately 28.6 million shares for approximately $2.1 billion. The company has bought back $5.1 billion of its common stock over the last four years.
Celgene recently received encouraging news when the US Food and Drug Administration (FDA) announced that it will review the supplemental New Drug Application (sNDA) for cancer drug Revlimid (lenalidomide) on a priority basis.
Revlimid is been the key growth driver at Celgene. The drug is already approved in combination with dexamethasone for treating multiple myeloma (MM) patients who have received at least one prior therapy. Revlimid is also available for treating transfusion-dependent anemia due to low- or intermediate-1-risk myelodysplastic syndrome (MDS) associated with a deletion 5q cytogenetic abnormality (with or without additional cytogenetic irregularities).
Celgene, a biopharmaceutical company, currently carries a Zacks Rank #3 (Hold). Biopharma stocks, such as Array BioPharma Inc. (ARRY - Snapshot Report), Medivation, Inc. (MDVN - Analyst Report) and Alkermes plc (ALKS - Analyst Report) look better positioned with a Zacks Rank #2 (Buy).