Business Corpus: Could Biotech Giant Celgene Join Tesla In The Private Markets?Biotech giant Celgene could go private at 120 per share, an analyst suggested Wednesday after similarly sized electric-car maker Tesla confirmed it's discussing the possibility. The post Could Biotech Giant Celgene Join Tesla In The Private Markets? appeared first on Investor's Business Daily.

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Biotech giant Celgene (CELG) could go private at 120 per share, an analyst suggested Wednesday after similarly sized electric-car maker Tesla (TSLA) confirmed it's discussing the possibility.

The primary obstacle for Celgene is the massive size of such a deal. Celgene has a market cap around $64 billion, almost identical to Tesla's $63.5 billion value. Most leveraged buyouts are under $10 billion with the largest at $50 billion, RBC Capital Markets analyst Brian Abrahams said.

Celgene and Tesla are in different industries. But both face intense public scrutiny. Celgene's biggest cancer drug, Revlimid, is set to lose patent protection in the mid-2020s. Tesla has yet to reach profitability and investors worry about its slow Model 3 ramp up.

Tesla Chief Executive Elon Musk said Tuesday the firm is considering going private. Musk's suggestion demonstrates that such a transaction "may not be completely unrealistic," Abrahams said in a report. A key difference, though, is that Musk says he has the funding to do it.

"We believe this does potentially illustrate that performing such a transaction even on such a large company, to help better capture trapped value and/or insulate it from public-markets volatility as it seeks to overcome challenges, may not be completely unrealistic," he said.

Celgene Stock Challenged

Celgene stock is still far off its October 2017 highs when shares eclipsed 147, hitting a record. In quick succession, Celgene stock plummeted that month as it scrapped several studies of a drug to treat Crohn's disease and lagged quarterly views. That put shares near 100.

In February, the Food and Drug Administration refused to review an application to approve multiple sclerosis drug ozanimod. That sent shares down 9% in a day. In May, Celgene stock hit a four-year low on a report that a key executive had quietly exited a month before.

Shares have been trapped well below 100 since February. But Abrahams says Celgene could take itself private at 120 per share. He noted that the stock has gained momentum since hitting lows in the 70s. Investor sentiment appears to be "substantially improving."

"The underlying business has stabilized and it has made progress with its pipeline," he said. Celgene is "on track to resolve ozanimod (refusal to file) issues" and it has reported positive data for anemia treatment luspatercept with partner Acceleron Pharma (XLRN).

No Urgency?

So the urgency to go private may no longer be there, he said.

"Still, such an idea — or perhaps more likely, an acquisition by a larger pharma — could still potentially help capture more value for its commercial plus pipeline products, which we continue to view as underappreciated at the current stock price," said Abrahams.

Abrahams kept his outperform rating and 110 price target on Celgene stock. In afternoon trading on the stock market today, Celgene stock rose 1.3%, near 91.50.

Celgene representatives didn't immediately return a request from Investor's Business Daily for comment.

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The post Could Biotech Giant Celgene Join Tesla In The Private Markets? appeared first on Investor's Business Daily.