2 Huge Immunology Opportunities For Celgene

| About: Celgene Corporation (CELG)


All oral Otezla ready to take on psoriasis by end of year.

Oral Otezla won’t entirely displace injected biologics, but safety and convenience should easily push it over the $1 billion mark.

Early clinical data suggests oral antisense drug GED-0301 could be a Crohn’s disease winner.

At about 50 times earnings, it's hard to look at Celgene (NASDAQ:CELG) as a value opportunity, but few biotechs out there have as many growth drivers. Sales of Revlimid continue to grow at double-digit pace, and recently released data suggest it could see a nice bump in the near term.

While the company's dominance in the multiple myeloma space is well worth attention, nervous investors like myself would like to see diversification of its revenue base. Luckily Celgene has two immunology assets with blockbuster potential. Let's take a closer look and see if they have what it takes to make Celgene a major player in the anti-inflammatory market.

Straight to the top
You wouldn't know it looking at the meager $4.6 million worth of Otezla sales Celgene recorded in the second quarter, but the oral anti-inflamatory is already a hit. Launched in April, it ended the quarter "sharing the market share lead for new patient starts" with AbbVie's (NYSE:ABBV) Humira in its somewhat limited psoriatic arthritis indication. With just a few months on the market it has also become the number one product switched to when patients discontinue their current therapy. Patient access has been encouraging with an estimated 80% of patients able to start Otezla without having failed a biologic, like Humira.

The successful psoriatic arthritis launch is encouraging, but a label expansion to the broader psoriasis indication is where the real opportunity lies. A new drug application for treatment of psoriasis is currently under review at the FDA and the company expects an announcement by September 23. With the foundation already laid among dermatologists through the April launch, Otezla could see a major sales bump before the end of the year.

If approved, Celgene estimates peak sales reaching $2 billion by 2017. Priced at $22,500 per patient per year, reaching that estimate requires roughly 90,000 on therapy, or about 6% of the 1.5 million Americans living with moderate to severe psoriasis. Following FDA approval in March, consensus estimates were far lower than management's, hovering around the $1.2 billion mark. Given the rapid uptake among psoriatic arthritis patients, I expect some revisions in the months ahead.

Inhibiting an inhibitor
So far Otezla is the company's first big push into the anti-inflammatory space. It's still early, but Celgene could have another in an mid-stage Crohn's disease candidate that has the industry buzzing. In-licensed from Nogra Pharma, GED-0301 is an oral antisense drug that targets the mRNA Smad7, which has been shown to block the immuno-suppressive activity of TGF-b1. Normally TGF-b1 inhibits local immune responses. Patients with Crohn's disease typically express abnormally high levels of Smad7, rendering TGF-b1 ineffective.

Reducing Smad7 expression to normal levels should allow a more natural inhibition of an immune response than anti-tumor necrotic factor biologics like Humira. Available phase one data suggests it's working, and Celgene's astronomical upfront payment of $710 million suggests the unreleased phase 2 data is even better.

In the 15 patient phase 1 trial all but two experienced clinical remission, despite three different dosage cohorts. More importantly at this stage, the drug was relatively well tolerated with no dropouts or serious adverse events. The company intends to present data from a 166-patient phase 2 study on October 21 during the United European Gastroenterology Week in Vienna. Celgene signed the record breaking deal shortly after completion of this trial, making this one of the most hotly anticipated presentations of the year.

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