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Pomalyst

In February the FDA approved Pomalyst (pomalidomide) developed by Celgene (NASDAQ:CELG) for the treatment of patients with multiple myeloma whose disease progressed after being treated with other cancer drugs, like Celgene's Revlimid or Johnson & Johnson/Takeda's Velcade.

Pomalyst is a pill that helps the body's immune system to destroy cancerous cells and inhibit their growth.

The approval comes on the back of strong Phase 3 data, which showed that 29 per cent of relapsed or resistant multiple myeloma patients treated with Pomalyst plus low-dose dexamethasone, a corticosteroid, saw their cancer completely or partly disappear, with the response lasting for more than seven months.

The FDA is warning doctors against using the drug for pregnant mothers with a "Boxed Warning" because the treatment could cause birth defects.

Pomalyst may generate $1 billion in annual revenue by 2017, according to a poll of analysts conducted by Bloomberg.

Market

Pomalyst is the third drug approved by the FDA in a class of immunomodulatory agents including Revlimid and thalidomide, and is the second drug approved in the past year to treat multiple myeloma. Onyx Pharmaceuticals (NASDAQ:ONXX)'s Kyprolis, approved in July 2012, is a drug given by injection to patients who had tried other therapies including Velcade.

The new drugs on the market enable physicians to tailor treatments to the needs of individual patients.

Multiple myeloma is a cancer of plasma cells, which are a special type of white blood cell that are part of the body's immune system. Patients with multiple myeloma have increased numbers of abnormal plasma cells that may produce increased quantities of dysfunctional antibodies.

Multiple myeloma is diagnosed in an estimated 21,700 Americans a year, mostly older adults, according to the National Cancer Institute. An estimated 10,710 people will die from the disease.

Decision Resources, a healthcare advisory firm, predicts that the multiple myeloma market will grow from just $5.02 billion in 2012 to $7.2 billion in 2021 mainly due to new and better treatments.

Competition

Johnson & Johnson (NYSE:JNJ) and Takeda's Velcade is a 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 given by Takeda's Millennium unit.

Velcade was the fast growing blockbuster for Johnson & Johnson in 2012, which made up 62% of total oncology sales.

Takeda is running a phase 3 trial of a successor to Velcade, MLN9708, a once-weekly pill as opposed to Velcade, which is given through an injection under the skin or intravenously.

In a Phase 2 trial of 52 patients, midway through the study, the overall response rate was 90%, including complete response rate of 23% and a "very good partial response" rate of 58%. The study is ongoing and response rates continue to increase along with the number of treatment cycles.

Velcade's only major competition is Celgene's Revlimid.

Revlimid is Celgene's top-selling drug, which brought in $3.767 billion in revenue in 2012.

Revlimid is a major earner for the company with sales clearing the $1 billion threshold for the first time in the fourth quarter.

The Decision Resources firm forecasts that the entire myeloma market growth will be driven by increasing penetration of Celgene's Revlimid into the first-line setting and its use in combination with emerging therapies across all lines of treatment.

Revlimid is tested in combination with Onyx/Ono Pharmaceutical's Kyprolis, JNJ/Takeda's MLN9708 and Bristol-Myers Squibb/Abbott's elotuzumab.

Velcade is tested in combination with AEterna Zentaris(NASDAQ:AEZS)/Yakult Honsha's perifosine and Novartis's (NYSE:NVS) panobinostat.

Khurram Nawaz, an analyst with Decision Resources, forecasts that Revlimid will garner impressive major-market sales of $1.6 billion by 2021 from its use in combination with Kyprolis, MLN9708 and elotuzumab. By comparison, Velcade will garner less than $70 million from its use in combination with panobinostat and perifosine.

A reason behind the pessimistic Velcade forecast is that Velcade will lose its patent protection in early 2014. Other analysts however insist that the drug will successfully counter the generic onslaught and hold its own on the market.

Investor's summary

In January at the JPMorgan conference Celgene CEO Bob Hugin spelled out the company's long-term plan for creating more blockbuster drugs and double sales. The company is advancing three new blockbuster programs that will help drive revenue to $12 billion a year by 2017, one of them is Pomalyst, the other two are Apremilast and Abraxane to be approved for extended applications.

Celgene is the world's fourth- largest biotechnology company behind Amgen (NASDAQ:AMGN), Gilead Sciences (NASDAQ:GILD) and Biogen Idec (NASDAQ:BIIB).

For 2012 total revenue was $5.5 billion, a 14 percent increase year-over-year. Adjusted diluted earnings per share is $4.91, up 30 percent from the previous year.

Full-year Revlimid sales increased 17 percent.

Operations generated cash flow of $2.031 billion for the year, an increase of 12 percent compared with 2011.

In 2012 Celgene repurchased approximately 28.6 million shares at a cost of approximately $2.1 billion. That leaves approximately $1.8 billion under the authorized stock repurchase program.

The company ended the year with $3.9 billion in cash and marketable securities.

New and updated data are expected in 2013 on over 10 Phase 3 trials.

Guidance for 2013: Total sales expected to increase 11 % year-over-year to approximately $6 billion.

Revlimid sales projected to increase approximately 10 % year-over-year to a range of $4.1 to $4.2 billion.

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

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

The share price in the past 52 weeks ranged from $58.53 to $102.29.

Celgene does not pay a dividend but if the company comes close to its sales projections, the sky is the limit for the share price.

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.

Source: Celgene And The Race To Cure Multiple Myeloma