) 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
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
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
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
Celgene, a biopharmaceutical company, currently carries a
Zacks Rank #3 (Hold). Biopharma stocks, such as
Array BioPharma Inc.
) look better positioned with a Zacks Rank #2 (Buy).
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