Celgene rebounds after patent challenge threat

NEW YORK

Shares of Celgene Corp. rose Friday, bouncing back from a sharp 4 percent decline Thursday after the company said it could face a patent challenge to its cancer drug Revlimid.

THE SPARK: The stock regained ground after hitting an intraday low of $49.50 on Thursday, following the company's announcement that a drug developer has asked the Food and Drug Administration for approval on a generic version of Revlimid. Celgene had said it intends to defend patents on the drug. Meanwhile, the Summit, N.J., company named Jacqualyn A. Fouse, 49, its new chief financial officer.

THE BIG PICTURE: Revlimid accounts for the majority of Celgene's sales, bringing in $587 million during the second quarter. Wall Street on Friday mainly brushed off concerns about the patent challenge, with one analyst citing strong intellectual property.

THE ANALYSIS: Barclays Capital analyst Dr. Jim Birchenough reaffirmed a "Overweight" rating, saying the selling pressure is an opportunity to buy the stock.

"With concerns raised regarding the Revlimid ANDA (challenge) filing and CFO transition, we believe that selling pressure is not broad-based or sustainable and that a fundamental opportunity exists on strong intellectual property protection and a strategic move to enhance upper-management international experience," he said in a note to investors.

He said Celgene has multiple drivers of sustainable earnings growth and said strong patents on Revlimid would make it difficult for a challenger to prevail. Also, he said the hiring of Fouse is a positive move given her experience, which includes a stint at global eye care products maker Alcon Laboratories.

SHARE ACTION: Up $1.44, or 2.8 percent, to $52.06 in afternoon trading. The stock has traded between $48.02 and $65.79 over the last 52 weeks.