Recently Celgene Corporation (CELG) announced that its board has cleared a program to buy back up to an additional $2 billion of its common stock, thus returning cash to shareholders.
The repurchase program, effective immediately, is open-ended. Management at Celgene stated that the expansion of the buyback program highlights the biotechnology company’s commitment to create value for shareholders.
The company stated that it has bought back approximately 32 million shares since 2009. The buyback process has seen the company returning $1.75 billion to stockholders. The company, headquartered in Summit, New Jersey, stated that currently it has approximately $2.25 billion remaining from previous authorizations in addition to the new authorization.
Celgene exited the second quarter of 2011 with approximately 460 million shares outstanding. 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.
Last month, Celgene came out with encouraging second quarter 2011 results. Celgene’s second quarter 2011 earnings (excluding special items but including stock-based compensation expense) of 78 cents per share beat the Zacks Consensus Estimate by a penny and the year-ago earnings by 17 cents.
Adjusted revenues climbed 38% to $1.18 billion in the second quarter of 2011. Revenues were boosted by the impressive performance of Celgene’s cancer products Revlimid and Vidaza. Revenues for the quarter surpassed the Zacks Consensus Estimate of $1.10 billion. Following the strong showing, Celgene upped its revenue and earnings guidance for 2011.
Celgene, which focuses on the discovery, development and commercialization of novel drugs for treating cancer and inflammatory diseases, carries a Zacks #2 Rank (Buy rating) in the short run. Currently, we have a ‘Neutral’ stance on the stock in the long run.
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