MALCOLM LOWENTHAL
FIRST VICE PRESIDENT
KERN, SUSLOW SECURITIES

COMPANY: Celgene
TICKER: CELG (Nasdaq)
PRICE: $37.65 (as of 4 p.m. yesterday)
52-WEEK RANGE: $17.84-$44.74
MARKET CAPITALIZATION: $12.99 billion

Malcolm Lowenthal is the first vice president of Kern, Suslow Securities, and has more than 40 years of investment experience. Celgene develops and manufactures various drugs, primarily for the treatment of cancer. Mr. Lowenthal spoke to David Dalley of The New York Sun about the company.

What does Celgene do?

They’re a biotech company. Their lead product is called Thalomid, and they’re doing a ton of business. They did a half billion dollars in 2005, and they’ll do a hell of a lot more this year.

Why do you like the company?

They have a drug out right now called Revlimid, which was approved around the end of last year. It’s used in treating a rather rare form of blood cancer, but its real potential comes from its other applications. It has been shown to be effective in treating other kinds of blood cancers as well as chronic pain, which is something that really excites me. Now, they haven’t got approval for these other applications yet, but I believe very strongly that they will.

What will drive the stock price?

In the short term, they’ll be reporting earnings next week, and I think they’re set to blow away the numbers. I expect their results to be dramatically higher than what is anticipated.For the full year, the estimates are all over the place. The consensus for earnings is around 42 cents for the year. I think the high estimate is around 60 cents, and I wouldn’t be surprised if they beat that. Even so, the stock is expensive in terms of multiples. It’s trading at around 37.

Why is the multiple so high?

Well, this new drug is extremely exciting.The stock price is on the back of expected revenues.The approval for its use has been very limited so far, but there’s a strong belief that it will be approved more broadly in the near future. The high price signifies that the market believes the drug approval process will be successful. You can make a good case for them doubling their earnings every year for the next few years if it is.

You seem very optimistic about this drug’s potential. What are you basing that on?

Apart from the company’s information, I’ve talked independently to a lot of doctors and people within the industry. I’ve spoken to people who are knowledgeable in relation to this company and this drug, and I’ve based my opinion on that.

The stock price is pretty high now. Is it still a good buy at current levels?

Yes, but one has to be prepared for extraordinary volatility. It’s timely now, even though it’s expensive, because my guess is that they’re going to beat the numbers when they’re released, and that could be fairly dramatic.

What do you think the stock is worth?

If the approvals come through within the next few months as I expect, I’d be happy to see 10 points on a trading basis. During the course of the year, if the market holds together, can the stock double? Why not, but it depends on the market. I think it is a superior investment. There are two aspects – the trading, short-term aspect and the investment aspect. I like it on either basis.