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Celgene Acquired Receptos as M&As Continue to Drive the Market

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Celgene acquires Receptos

As we discussed earlier, mergers and acquisitions (or M&A) are driving the biotech sector’s recent surge. In the previous part of this series, we discussed how consumer groups are urging the Federal Trade Commission (or FTC) to prevent a takeover bid between Teva Pharmaceuticals Industries (TEVA) and Mylan (MYL).

Other M&A news in the sector included Celgene’s (CELG) acquisition of Receptos (RCPT) in an all-cash deal valued ~$7.2 billion. Within the iShares Nasdaq Biotechnology ETF (IBB), the combined weight of CELG and RCPT is 8%.

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For the week ending July 17, 2015, CELG rose 13.19% and RCPT stock price rose by 18.31%. The acquisition of RCPT will significantly enhance Celgene’s inflammation and immunology (or I&I) portfolio. CELG expects the revenue growth to begin in 2019. The company estimates that the Ozanimod peak annual sales will be in the range of $4 billion to $6 billion.

The above chart indicates the performance of CELG and RCPT on a month-over-month basis. The July data in the graph is from July 1 to July 17, 2015.

Valuation multiples of CELG and RCPT

Celgene’s (CELG) current trailing 12-month price-to-earnings (or TTM PE) ratio is 43.72. The company’s forward TTM PE is 26.10. The industry average is 46.87 and 37.95, respectively, indicating that the stock is trading below the industry average.

With respect to the price-to-book value ratio (or PVB), CELG stock is currently trading at 15.81x, while RCPT is trading at 11.79x. The PVB industry average within IBB is 12.31.

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