Celgene's Long-Term Plan For Generating Blockbusters

Jan.14.13 | About: Celgene Corporation (CELG)

In January at the J.P. Morgan conference Celgene (NASDAQ:CELG) CEO Bob Hugin spelled out the company's long term plan for creating more blockbuster drugs and to double sales.

The company is advancing three new blockbuster programs that will help drive revenue to $12 billion a year by 2017: Pomalidomide, Apremilast and Abraxane to be approved for extended applications.


Multiple myeloma drug pomalidomide (to be sold as Pomalyst upon approval), is an oral drug for treating patients after other therapies, like Celgene's Revlimid and Takeda Pharmaceutical's Velcade failed.

Patients taking Celgene's pomalidomide plus a low dose of the steroid dexamethasone lived a median 3.6 months without their disease worsening, compared with 1.8 months taking a high dose of the steroid alone. Pomalidomide also helped with overall survival. This data was presented at the American Society of Hematology recent meeting in Atlanta.

The FDA's decision on pomalidomide is expected on Feb. 10, while European regulators will decide in the second half of 2013.

Pomalidomide may generate $1 billion in annual revenue by 2017, according to analysts polled by Bloomberg.

Competition in multiple myeloma

Multiple myeloma is a cancer of the white blood cells that is diagnosed in an estimated 21,700 Americans a year, according to the National Cancer Institute. An estimated 10,710 people will die from the disease.

In July 2012 Onyx Pharmaceuticals Inc. (NASDAQ:ONXX)'s Kyprolis was approved, a drug given by injection to multiple myeloma patients who had tried other therapies including Velcade.

Takeda's Velcade is the clear leader in the field with more than 60 percent share in first-line use and more than 50 percent share as a second-line therapy, according to a presentation of the Japan-based company's Millennium unit.

Millennium is running a phase 3 trial of a successor to Velcade, MLN9708. The sponsor said that of the 52 patients treated in Phase 2, 58% demonstrated a reduction of myeloma proteins in their blood of at least 90%. Nearly a quarter of the patients taking the drug experienced a remission. The new drug is a once- weekly pill as opposed to Velcade which is given through an injection under the skin or intravenously.

Celgene' Revlimid is also a leader in front-line use. Revlimid is Celgene's top-selling drug, generated $3.2 billion in revenue last year.


Apremilast is an experimental drug for treating psoriatic arthritis patients. In a phase 3 trial the drug showed a statistically significant response in ACR20 scores at week 16, a key goalpost in the field.

ACR20 is a measure of success in reducing symptoms. ACR stands for American College of Rheumatology. Clinical trials report the percentage of study participants who achieve ACR20, ACR50, and ACR70. For example, if a study reported that 55 percent of patients achieved ACR20, that means 55 percent of patients in the study achieved a 20 percent improvement in tender or swollen joint counts as well as 20 percent improvement in three of the other five criteria.

During the trial the statistically significant response was maintained through week 24. Patients will continue to receive treatment for a full year.

The data gives Celgene the numbers it needs to take to the FDA and the company plans to file for approval in early 2013.

The company also plans to submit a combined application in Europe for psoriatic arthritis as well as moderate-to-severe psoriasis in the middle of next year.

Some analysts believe the approved drug could earn Celgene about $500 million a year.


Celgene plans to file Abraxane for pancreatic cancer treatment later in 2013.

Much of Celgene's good news in 2012 centered around Abraxane. The FDA approved the drug for first-line treatment of advanced non-small-cell lung cancer in October. Abraxane was previously approved in 2005 as a second-line treatment of metastatic breast cancer.

But the drug is showing promise in other types of cancers, such as melanoma, ovarian and bladder cancer.

The most eagerly anticipated results are from a phase 3 trial in pancreatic cancer, which has one of the lowest survival rates among all cancer types. In November, Celgene announced that patients taking Abraxane in the study showed significant improvement in overall survival rates.

Abraxane contains the chemotherapy drug paclitaxel, which is a 'taxane'. A taxane is a type of drug used in cancer treatment to block cell growth by stopping cell division.

Significantly, unlike older taxane treatments for breast cancer, Abraxane is solvent free and uses the human protein, albumin, as a binding agent, thereby eliminating solvent-related side effects and reducing allergic reactions. A higher dose of the tumor fighting drug paclitaxel (49 percent higher) can be administered.

This so-called nab technology (nanoparticle albumin-bound) has been shown to significantly prolong patient survival in breast cancer patients with stage 4 breast cancer.

Nanoparticle technology enables drugs to be made into very tiny particles so they can be readily delivered directly to the site of action. This way a higher dose can be delivered without compromising safety and tolerability.

Deal with Sutro

Celgene is also expanding into the ADC (antibody-drug conjugate) business by striking a deal with South San Francisco-based Sutro Biopharma.

Sutro will make new antibody-drug conjugates plus bispecific antibodies for Celgene's drugs. Bispecific antibodies are able to hit more than one molecular target.

Sutro is getting a "substantial" upfront cash payment from Celgene, an equity investment, and milestone payments. If the companies reach all their goals, the deal could be worth $500 million for Sutro.

The technology originally comes from Stanford University, and the big idea at Sutro is to develop a new process for making biologic drugs that doesn't rely on incubating specific strands of DNA inside living cells. Instead, Sutro is crafting a method in which genetically engineered drugs can be synthesized in a way that's faster, cheaper, and more consistent-similar to the way classic "small-molecule" pharmaceuticals are made by big companies like Pfizer and GlaxoSmithKline.

Immunogenics and Seattle Genetics are front runners in the ADC field, but Sutros's method is pioneering the "site-specific" approach.

Sutro can bind toxins to the exact same spot on a Y-shaped antibody every time in its manufacturing process. Previous technologies have lacked that precision, CEO Bill Newell says, and this ability could affect the consistency of the final product.

Investor's summary

Celgene is the world's fourth-largest biotechnology company behind Amgen Inc. (NASDAQ:AMGN), Gilead Sciences Inc. (NASDAQ:GILD) and Biogen Idec Inc. (NASDAQ:BIIB), the top three biotechnology companies in the world, in revenue and market value.

For the year 2012 total revenue is expected to increase approximately 14 percent year-over-year to a range of $5.45 to $5.55 billion. The previous range was $5.4 to $5.6 billion.

Revlimid's sales are expected to increase 18 percent year-over-year to a range of $3.75 to $3.8 billion. .

For the first nine months of 2012 operating cash flow was $1.528 billion, an increase of 14 percent from 2011.

The company repurchased approximately 10.8 million shares during the third quarter of 2012 at a total cost of approximately $744 million. As of September 30, 2012, it had $2,417 million remaining under the existing stock repurchase program.

During the third quarter of 2012, Celgene issued a total of $1.5 billion in five- and ten-year bonds. At the end of the third quarter the company had $3.833 billion in cash and marketable securities.

For 2013 sales are projected to reach $6.0 billion, an increase of 11.4% year-over-year.

Revlimid sales anticipated to be in the range of $4.1 billion to $4.2 billion.

Adjusted diluted EPS expected to be in the range of $5.50 to $5.60, an increase of approximately 12 to 14 percent year-over-year.

Further out in the future, Celgene sees targets of $8.0-9.0 billion in sales for 2015 and $12.0 billion for 2017.

Abraxane sales will bring in about $1.0-1.25 billion in 2015 and $1.5-2.0 billion in 2017.

Sales growth for each year between 2013 and 2017 is expected to be 13% for the existing business, 15% including Abraxane pancreatic cancer and 19% including apremilast.

The share price's 52 week range was between $58.53 and $82.78.

Celgene does not pay dividends but if it makes good on its projections, the share price most certainly will go sky high.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.