Revlimid Blow Highlights Big Cap Exposure

| About: Celgene Corporation (CELG)

Celgene (NASDAQ:CELG) had hoped to extend the life of its blockbuster Revlimid by expanding into new indications, but has hit a brick wall after the Remarc study in a new lymphoma setting returned mixed results.

The setback knocked 2% off Celgene shares this morning and highlights just how much the company depends on its top product – but Celgene is far from the worst culprit. CSL and Abbvie (NYSE:ABBV) are particularly vulnerable: in both cases the combined net present value of just two products accounts for the company's entire market cap (see table below).

The analysis only includes drug makers with a market cap of at least $30bn; EvaluatePharma's product NPVs are based on consensus forecasts and are shown here as a proportion of the company's total value.

That Humira’s NPV is responsible for 81% of Abbvie’s value is not a surprise, and explains the company's aggressive stance against biosimilars. But its newer cancer drug Imbruvica accounts for another 18% of its market cap, leaving the company in a precarious position.

Humira’s key composition-of-matter patent will expire in the US in 2016, but Abbvie's chief executive, Rick Gonzalez, has said that IP could hold back the biosimilar onslaught until 2022 – in spite of the looming threat from Amgen’s (NASDAQ:AMGN) ABP 501 (Humira biosimilar speeds to approval, but what of launch?, July 13, 2016).

Imbruvica’s patent, meanwhile, should last until 2027. Even so, Abbvie needs to bring in some new blood, explaining why it has been the biggest spender of the large-cap pharmas in the past few years (Who splashed the cash at the top of the market?, July 12, 2016).

Opdivo trumps Keytruda

Also at a high risk, should anything happen to their lead products, are Regeneron (NASDAQ:REGN) with its eye drug Eylea, and Bristol Myers-Squibb (NYSE:BMY), whose checkpoint inhibitor Opdivo has quickly become its most important asset.

Interestingly, Opdivo’s NPV is more than double that of Merck & Co’s fellow PD-1 inhibitor Keytruda, which made it to the US market first. However, since then Bristol has overtaken Merck (NYSE:MRK) in terms of the number of approved indications for Opdivo – and canny marketing must have also helped the company capture around 85% of the checkpoint inhibitor market.

Eggs in one basket: the most exposed of the industry's biggest drug makers

Product

Company

Today’s product NPV ($bn)

NPV as % of market cap

Privigen

CSL

33.9

84%

Humira

Abbvie

87.5

81%

Eylea

Regeneron Pharmaceuticals

28.0

69%

Opdivo

Bristol-Myers Squibb

76.7

61%

Revlimid

Celgene

49.0

59%

Botox

Allergan

34.9

36%

Hepatitis C franchise

Gilead

43.0

36%

Tecfidera

Biogen

20.3

32%

Immunoglobulin franchise

Shire

17.9

31%

Xarelto

Bayer

23.5

27%

Ninlaro

Takeda

8.3

25%

Human albumin

CSL

9.9

25%

Harvoni

Gilead Sciences

26.6

23%

Keytruda

Merck & Co

33.7

21%

Gammaguard Liquid

Shire

11.3

20%

Imbruvica

Abbvie

19.4

18%

Repatha

Amgen

21.9

18%

Click to enlarge
Click to enlarge

Gilead (NASDAQ:GILD) is surprisingly low down the list, with Harvoni’s NPV only accounting for 23% of its market cap. However, including its wider hepatitis C franchise – Harvoni, Sovaldi and the newly approved doublet Epclusa – in the analysis bumps it up to seventh place in the table.

Looking for Relevance

So things could be worse for Celgene. But the company had still hoped to add $1-1.5bn to Revlimid sales by expanding its indications. Although it has now scrapped its plans in diffuse large B-cell lymphoma patients responding to chemotherapy, it still has various trials ongoing in new uses.

However, the Remarc population represented the biggest opportunity and could have brought in $1-1.2bn alone, said Evercore ISI analyst Mark Schoenebaum, which is why Celgene’s stock fell this morning.

The focus will now shift to follicular lymphoma, the largest remaining indication that is being studied, with initial data from the Relevance trial due in the first half of 2017. If it does hit this will not take the pressure off Celgene.

In the longer term, the company might need a new blockbuster. Luckily, Celgene has already started looking, evidenced by its many partnering deals. It will hope that one of these comes up trumps.

Study

Details

Trial ID

Remarc

DLBCL responding to induction therapy

NCT01122472

Continuum

B-cell chronic lymphocytic leukaemia following second-line therapy

NCT00774345

Robust

ABC-type DLBCL

NCT02285062

Augment

Relapsed/refractory indolent non-Hodgkin lymphoma

NCT01938001

Relevance

Untreated follicular lymphoma

NCT01476787

Click to enlarge
Click to enlarge