Celgene Corp. (CELG) Presents at Morgan Stanley Global Healthcare Conference Call Transcript

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About: Celgene Corporation (CELG)
by: SA Transcripts

Celgene Corp. (NASDAQ:CELG) Morgan Stanley Global Healthcare Conference Call September 14, 2018 11:40 AM ET

Executives

Nadim Ahmed - President, Hematology & Oncology

David Elkins - CFO

Analysts

Matthew Harrison - Morgan Stanley

Matthew Harrison

So, we're going to get started with the next session. I'm Matthew Harrison, one of the Biotech Analyst here at Morgan Stanley. Just quickly before we get started, I need to read a disclosure statement. Please note, that all important disclosures including personal holdings disclosures and Morgan Stanley disclosures appear on the Morgan Stanley public website at morganstanley.com/researchdisclosure.

So very pleased to have the team from Celgene here today. And I don't know if either of you, Nadim or David, if want to make some opening comments, if you'd like, feel free to do that and then we can jump into Q&A.

Nadim Ahmed

Yes, happy to do that. Great to be here, hello everyone. So I think a couple of things that I do want to point out is highlight. So, as we think about the first half of this year and we're very pleased with the robust commercial execution we've seen in all the markets in which we operate, very positive momentum across our brands and across geographies and that was the reason why we raised guidance twice already, and we feel very good about 2018, so that's the commercial execution piece.

In terms of our pipeline, I think we had a very good summer with three highly positive Phase III studies, we've all squared REVLIMID in lymphoma but especially exciting was luspatercept, there is a new molecule, one of our key potential blockbuster molecules delivering in MDS and beta-thalassemia. And in that same theme of progression of the pipeline, as I think about the next 1 to 2 years in regulatory submissions and approvals, in the HemOnc franchise at least, I'm focusing on four, so we mentioned luspatercept; so seeing the data across two distinct diseases having impact on anemia opens up a lot of lifecycle management opportunities, so we're looking at what are the other anemia's potentially we could impact with luspatercept as we build that out.

2121 of course, very excited about continuing the acceleration expansion of that development plan as we move up aggressively into earlier lines of treatment. License out looking at what are the additional indications such as CLL where we've seen encouraging data early on in the process, and then of course fedratinib, and the opportunity of myelofibrosis, both as a monotherapy play and in combination. So, I think those four molecules in the HemOnc franchise represent greater near-term opportunity.

And then third, I'd just like to talk a little bit about our -- kind of enhancing our structure and leaderships, so David Elkins, our new Chief Financial Officer, sitting right next to me. So really thinking about how we could continue to strengthen the governance, have the executive committee really focus on execution in the company.

So really, kind of in summary I'd say, the commercial executions are very strong, we feel very good about 2018 and the four molecules plus as any more over the next 12 to 18 months I would say are the real catalyst, potential blockbusters that will drive the next wave of innovation for Celgene.

Question-and-Answer Session

Q - Matthew Harrison

Okay, perfect. I thought maybe you could place the start just because there has been a decent amount of turnover in management structure and I get a lot of questions on it. Maybe just talk about where you think you are in that process? If you think you've brought in all the people that you need to be bringing in? And how -- why you made some of those moves over the past six months or so I would say?

Nadim Ahmed

I think we feel very good about where we are, I'm pleased. Dave will add your thoughts in a minute. I think we feel very good about where we are, I think the key leadership positions where we wanted to bring new talent into, we've done that. Of course, it's always a journey, you always want to get better and continue to bring new talent into the organization, as well as promote key talent internally from within the organization. So I think overall, we feel very good about what we did. We also -- and Mark talks about this a little bit, also is making sure we have the right structure to deliver on our strategy. So continue to make sure that Celgene operates with an organization that's relatively flat, so the executive committee has the opportunity to really support our teams in terms of both, execution and strategy.

So I think we've done a lot of what we plan to do, feel very good that we have the structure in place to deliver both in terms of the pipeline but our strategy as we think about moving forward as well. So David, do you want to add any thoughts?

David Elkins

No, I think you covered it.

Matthew Harrison

And then, I guess to follow-up on it. David, since you've recently joined, maybe if you talk a little bit about the opportunity -- why you're interested in the opportunity and what you're looking forward to?

David Elkins

A couple of things, I think Nadim's opening comments really talk to the strength of the business, I mean the one thing is on the commercial execution side of things, the underlying business is doing phenomenally well. Two, as you think through the pipeline and the number of late stage products that we have come into market over the next 12 to 18 months is very exciting and then have that commercial vehicle as well to make the most of that. And then I think the third is the capability side of things and if -- Celgene is very much focused in the hematology and the oncology side of things, we have the technical expertise that continue to be impressed by those teams. We leverage that with the global alliances in business development, both focusing on the internal development but as well as being able to partner externally, we see a very bright future going forward beyond just the five products that we're going to be launching over the next 12 to 18 months.

If you add on top of that, I think as we talked about -- if you look at the strength of -- Mark strengthened the overall management team, brought in a new regulatory leader, we've got a new General Counsel, and I've been impressed by the entire executive committee coming into organization. Now if you look at it from a capital structure perspective, we had a lot of levers to pull, and if you look historically what the company has done in that $1 billion to $2 billion a year of acquisitions and about every third year a larger acquisition like we did this year with Juno. And we're realizing that Juno wasn't just a product that we're bringing in, it's a whole portfolio that we've brought in with that.

And then if you look at the wholesale therapy ecosystem, and the number of partnerships that they had; we're figuring that out along with the partnerships that we have. We just see that as a vehicle for growth going forward. So I'd be coming in new to organization, seeing the strength from a commercial perspective, seeing the strength in the technical expertise, but then with the capital that we have available to us I think that presents a lot of opportunities going forward.

Matthew Harrison

I guess to follow-up on that, you talked a little bit about acquisitions and acquisition strategy; how should investors think about where you are now -- you've obviously did two deals this year, fairly sizeable, you obviously have a track record of doing a lot of deals. And as you think about bolstering the pipeline, where do you think you are in terms of -- do you have everything you need or you're still looking aggressively for other things; how should we think about that?

David Elkins

One thing I'll start out by saying is we never have enough and so that's my sense of urgency around continuing to build this cancer business. I think the transaction with Juno allows us to have a very early seat in the cellular therapy environment, because one of the things I think is a principal of Celgene that we try to hold truth is really follow the signs wherever it may take us; and I think that was an example of recognizing that cellular therapy is a place that is going to continue as an evolution and a revolution in the cancer space. And recognizing that we had to get in early because I think overtime what you're going to see is with the technology continuing to evolve beyond 1.0 and 2.0 and 3.0 that -- probably the barriers to entry is going to become higher and higher; so I think that was one example where we saw the signs, we saw the opportunity and we went for it.

So specifically on cellular therapy, to making sure that our business development folks are looking at all the changes and technology changes in this space so that we stay on top of that and continue to bolster these add-on bids that will continue to make us competitive and lead the area of cellular immunotherapy. I think if you look at the hematology space, we want to make sure that we continue very strong leadership position in the myeloma space, and then as I think about specific areas within cancer, definitely with likes of cell now [ph] and REVLIMID delivering lymphoma-lymphoma still represents a significant opportunity where we want to continue to grow.

And then oncology and solid tumors; so even in the era of immuno-oncology or checkpoint inhibitors, there is still a tremendous amount of unmet need and opportunity just by the size of those patient populations because even today with checkpoint inhibitors, it's a relatively small fraction of patients that are responding and then a smaller fraction that again, those long-term draw responses. So I think oncology-lymphoma remain a high area of opportunity including business development opportunities, and then strengthening cellular therapy and maintaining leadership position at myeloma are the key areas that I'm really focused on.

Matthew Harrison

So I guess, lesser a big picture question and maybe -- I think it's probably a good idea since you've highlighted a bunch of the pipeline opportunities that we go there. But -- so we had secretary as are here on Wednesday and people are obviously asking a lot of questions on what the administration is thinking about pricing. And one of the questions was around how some companies have committed to not raising prices over medical inflation rate? And his response -- and I'm not going to get it exactly right, but was essentially -- that doesn't sound that attractive to me. We'd like to see something below [ph].

So I guess, how do you -- I guess the broad question is, how do you think about pricing? I know Marcus has written a blueprint sort of blog. So what's your thought on pricing? What's your thought on how pricing may or may not change and some of the actions that the administration has taken?

David Elkins

I think we're at an intersection where -- while we understand the focus on costs, I think it's important to also focus on value. And so if I take for example, multiple myeloma as an example, between all the companies over the years of development treatments for multiple myeloma, it wasn't that long ago where you died within two years of a diagnosis. So if you think about the complications of things like hospitalizations with relapses, all of that -- those treatments actually have saved the healthcare system a lot of money; and so I think do think that we as an industry do need to make sure we continue to advocate for the value proposition that we bring every time we bring a new medicine to the marketplace because if you focus just on cost, you forget the indirect benefits to society. I use hospitalization example but making people productive members of society, that -- people that can go back to work, I mean that's a whole different other element.

So I think it's a point now to make sure, one, we want to be part of the solution but two, that we don't give up the value that we bring through our medicines; and then three, we're in very active engagement and discussions with the administration. Along with the administration we do want to be part of that solution also, so it's kind of how do you get all of those intersecting together, but our approach is to say focus on value but also make sure that we're key players in arriving at a solution.

Matthew Harrison

Pipeline; I think PCMA is the topic that everybody is very interested in and obviously important to your business as a growth strategy in myeloma. So I guess two questions to start us off there; obviously, you're enrolling a pivotal study to get approval for bb2121. Any comments on how we're almost going -- how that's going? And also, how you think about regulatory strategy with that first study?

Nadim Ahmed

So without getting the nitty-gritty of it, enrollment is going well on plan, on-track with everything that we've discussed leading upto an approval in 2020. So we're still kind of holding that position. And from a regulatory strategy perspective, I think the advantage we have in the BCMA space is that we're still going first-in-class, and so that allows you a lot more regulatory opportunities versus if you came behind. So I think our view is that still a significant unmet need in that heavily pretreated patient population, those patients have failed everything, they are the patients we're putting into the comma [ph] study, and I think showing a strong risk benefit profile will allow us to get a regulatory approval based on that single arm approach within KarMMa.

And then I think the broader BCMA question, there has been data recently, preliminary data that we have seen with antibodies, etcetera. So the view we take on it is that the more data that comes out in BCMA, the further it strengthens the position of the fact that this is a very well validated antigen. Obviously, great news for patients but this is exactly and specifically why we have taken a multi-modality approach to BCMA. So not just quality or antibodies but have the quality approach, we the buy specific approach; we had the ABC approach and then of course, on the other side of the house we also have the cell mode approach. So we feel in a very strong privileged position and we're just going to make sure that we maintain our leadership, continue to accelerate our development plans in both of those campaigns.

Matthew Harrison

So obviously you're referring to the engine by data where I guess we call it snipping of data that we saw. Maybe you could just help us think about -- obviously you hit on it, you have one of every mechanism, potential mechanism of BCMA. You've got a lot of data on cars; I mean I don't really have much data on the other mechanism. So what's the timeline for that? How should investors be think about when we might have an understanding if you're also successful with some of these other modalities?

Nadim Ahmed

Sure. So we spoke about the BCMA approach, so that's in the clinic, our bispecific BCMA antibody is currently in Phase I, so we continue enrollment there. Our ADC will be in Phase I next year, and then of course we have our two sell mods in Phase II and Phase I respectively, so we're doing everything we can to kind of further accelerate our development plans and make sure we bring as many of these treatment concerned forward to produce [indiscernible] come from myeloma patients. And other thing is, if you follow the myeloma landscape, it wasn't that long ago when patients were being treated with doublets, now it's triplets. Now people want quadruplets, so there is an intersection that is the combination of all those modalities and we feel good in the fact that in the future, probably there will be a role for BCMA and cell mods combined together to further drive outcomes.

Matthew Harrison

You've outlined the strategy of how to move BCMA in cellular lines therapy; I think some of those studies recently posted on clinical trials; how should we think about that strategy versus as you start to get initial data with some of these other approaches and how you figure out how you're going to sequence these or which ones you may move into earlier lines? It could be very complicated, so I don't know how are you thinking about that.

Nadim Ahmed

We're looking at kind of both, the frontend and the backend. So the backend I'll start off with is; as more and more data is generated by these various different BCMA approaches, I think we're going to get to a stage where we're going to have this bolus of patients building that BCMA refractory. So I think that's a private pool of patients that's going to continue to board overtime, that will need something; so that's one thing. I think on the frontend -- and let me start to say, let me use newly diagnosed myeloma as an example. In newly diagnosed myeloma, today -- and if I use transplant as a very loose analogy, not every frontline patient is going to be eligible for transplant, and if our most patients are not eligible for transplant, something like 60%:40% in the U.S.; so you could -- as you think about that you could certainly see even in that newly diagnosed setting, there will be certain patients that are appropriate to receive a CAR-T therapy but remember this is a disease of the olderly, so there may be some patients that have co-morbidities or for whatever reason they can't receive a transplant or CAR-T, could certainly receive a BCMA antibody directed approach in combination with -- for example, a cell mod [ph]. So I do think with the way we are thinking about our portfolio, there is opportunity to enter multiple segments but for these modalities to co-exist together also.

Matthew Harrison

So maybe we could talk about a couple of other pipeline products you have in hematology. You mentioned luspatercept and obviously we'll get details on the data as Ash [ph] probably but maybe just characterize for everybody what's your excitement about that product? I mean, how you're thinking about the data that you have in relation to some of the peak sales estimates that you've provided previously?

Nadim Ahmed

With luspatercept obviously we can simultaneously pursuit two indications; taking two shots on goal and you don't always deliver when you take two shots on goal. So I think the thing that really excited us was to have positive Phase III data in both MDS and beta-thalassemia was the fact now that we've shown in two distinct diseases we've been able to impact anemia. So from a lifecycle management perspective, we're very excited about what are the opportunities than anemia that could pursue with luspatercept. I think coming back to Matt, your question about revenue projection. So our kind of $2 billion plus that we have given is based on MDS, beta-thalassemia, it doesn't include things like myelofibrosis or any other opportunities.

Matthew Harrison

In light of the data that you've generated so far, how you're thinking about the global expansion studies that you've already enrolled and I think we myelofibrosis data next year I guess. Specifically, how much thinking about that opportunity?

Nadim Ahmed

Yes, so I think with miler fibrosis, this is an opportunity where we see a potential nice synergy between fedratinib and luspatercept; so if I use that as an example, so with fedratinib we have the potential to impact the [indiscernible] associated with the disease with the status, we can tackle the anemic components so we feel that combination could be very promising and mind I approach this for example. And of course we have a whole host of pipeline assets targeting miller fibrosis. So I think that's one example, with the KarMMa study that we're planning this year, that will be looking at the spot [ph] is now in the front line. Setting of MDS going head-to-head versus PSAs.

So I think as we think about those lifecycle opportunities of both myelofibrosis and beyond with other anemia indications. I think we have the opportunity to stretch beyond the $2 billion guidance we've given for this brand already. So we're very very excited about luspatercept.

Matthew Harrison

As you mentioned fedratinib, so I might as well tackle that now. So I guess first question is just really around regulatory approach and why we're excited in that asset because the asset obviously have the pretty check of history. So maybe talk to us about what the value you'd see in that asset, and then the clarity that you had from regulators because I believe you had a pre-NDA meeting already.

Nadim Ahmed

Yes, let me put the checkered history to one side and we'll start with the kind of the clinical value proposition for the brand. I think this is one of those rare examples where you get to introduce a molecule in a disease setting where there is only approved therapy and that's been the case for years. So as we think about the tremendous advancement that ruxolitinib [indiscernible] insight brought to myelofibrosis. Over a period of years, there have been patients who ultimately went on to progress beyond ruxolitinib, so that prevalent pool of patients has been building up overtime, so that's a significant unmet need. So we're excited about that opportunity in that post ruxolitinib setting as number one, there is an immediate unmet need to go to.

And then I think as we even think about that frontline setting, there are patient segments where whether it's through anemia baseline where they can't qualify for existing treatments today, there is an opportunities for fedratinib. And so that's just a monotherapy play but as I think about the combination approach also, luspatercept and other assets. I think we do have the opportunity to really drive treatment outcomes but also value with fedratinib. So that's the clinical/commercial value proposition. And I think we have had -- we've had very good dialogue with the agency today in terms of putting our submission together and I think we feel very positive about the opportunity for fedratinib and getting over the goal line from a regulatory perspective.

Matthew Harrison

And maybe can you be specific, how big of a patient pool do you think that checkify [ph] population is or the checkify [ph] intolerant population is? And I guess follow-up to that is, what's happened to those patients now? What are they doing now? Are they easily accessible? What sort of work do you have to do to be able to access them?

Nadim Ahmed

So the incidence in the U.S. for myelofibrosis is around 20,000 patients or so, we're still getting a hand along the prevalent pool of patients but even if you just took that at any given point in time in the U.S. probably about 60% of patients are on ruxolitinib. There is another 20% that potentially would be intolerant to ruxolitinib, and there is another 20% that are kind of relapsing or progressing in ruxolitinib. So we feel there is a significant market opportunity there with fedratinib coming in behind ruxolitinib from a commercial potential perspective as well.

Matthew Harrison

Maybe before we talk about clinical data, we have some idea of the market; you've got two CAR-Ts that have launched. What's your view on the initial market opportunity given what you've seen out of the revenues that those products have generated?

Nadim Ahmed

I think this -- in some way this almost reminds me of when monoclonal antibodies first arrived on the scene. I think early on it was all sorts of logistic issues that physicians and the marketplace and payers had to deal with, this is kind of like that on steroids in the sense that there is access issues, logistic issues, all of those things. So generally being a competitive on a person, I'd like to be first to market and [indiscernible] in this sense is actually we may benefit from some of the pains that we've seen in the market but you know, CMS is catching up. So for example, they put out draft guidance and/or how do we handle reimbursement in the in-patient setting moving forward.

So I think as long as we continue to work on it, and we, our policy teams are working on how do we shake the environment, how do we continue to have those discussions that will open up access when we launch, we feel very good about the position that we are in. And then secondly, I think it's very important for the whole CAR-T category to rise, so for me I see a less of that competition with individual CAR-T assets as opposed to the promise of CAR-T over things like chemotherapy and combination chemotherapy regiments that aren't as effective. So our goal is to make sure that CAR-T becomes the first choice to go to in these discrete indications and then our role is to make sure that within CAR-T the value proposition of license [ph] though is the strongest of our customers.

Matthew Harrison

Obviously, initial indications here at CLBCL -- when you said antibodies, I thought about CD47 which is another target that you guys have and you've seen some data from 47 which has pretty interesting response rates relative to CAR-T. So maybe you could just remind everybody where your asset is for -- against CD47 and when we might see some data from that?

Nadim Ahmed

So with CD47 we're in Phase I. We're actually also excited after seeing -- we were excited anyway but seeing the ASCO data was even more encouraging from a target validation perspective. So I think one of the things I mentioned earlier Matt was that lymphoma and presence in building -- our presence in lymphoma is very important to us. So I think between lysosome [ph], the CD47 play, what we have seen already we have REVLIMID and the new cell modes [ph], I think we're building up a critical mass to really impact lymphoma in a big way. But we're in Phase I at the moment and we'll continue to update the data as we progress through the clinic.

Matthew Harrison

But no timeline when we might see something out of that?

Nadim Ahmed

Maybe Phase I.

Matthew Harrison

I think one of the things -- Juno, when they were an independent company is to talk about what's the ability to not have to be dosed in the in-patient setting. So how you've been thinking about that since you've taken over the product? And how do you think about that vis-à-vis your sort of initial launch?

Nadim Ahmed

I think there are several aspects for that. Our view and our colleagues view at Juno is also the same. When we think about outpatient, we're not talking about doing CAR-T and the row-row single person practice, wherever it is, it's in the U.S. Within that context, it's two things; one, even shifting from inpatient to outpatient in those academic centers today unlock significant opportunity. So I think for us that's really important. And then beyond that we are thinking about those kind of -- either community hospitals or community clinic that have the infrastructure, multi-disciplinary access to beds or doing Phase I studies as an obvious next kind of go to for us where nobody is in at the moment.

So I just want to clarify how we're thinking about outpatient but that in it's obviously self will really further unlock the prescribe the breadth that we can go to with lysozol [ph].

Matthew Harrison

We've seen when larger companies such as yourself take over products like this and can put a lot more capital to bear on this so you can accelerate some of the way with expansion strategy. So I guess we've obviously -- what [indiscernible] pushing forward, some of those strategies; so maybe just remind us where the studies are outside of the refractory study and sort of how quickly you think you can maybe expand the opportunity beyond our refractory patients?

Nadim Ahmed

Yes, so couple of areas of opportunity that we're looking at further driving and accelerating within diffused like B-cell lymphoma looking at that kind of second line transplant eligible and ineligible patient population. So that's one way I got studies either or in progress. The other area -- again, very early but we have an ongoing study at CLL too, and so we will likely have some data at ASH [ph] for life was stored in CLL so we're excited about that opportunity. And then the team is also looking what are the other indications if you think about other histologies in lymphoma such as molecular lymphoma, and when other places you could go to. So the team is really working those up at the moment.

Matthew Harrison

So maybe just to finish off in the last minute here; one of the things people always worry about just from a base business standpoint is; as you enter every year this is sort of the time when you have to renegotiate formulary and things like that. So anything that we should be thinking about in terms of formulary is their products where rebates are going to dramatically up or anything like that.

Nadim Ahmed

Yes. I think I'm the privilege position of -- with my cancelled portfolio we have very very low exposure to rebates and discounts. So I think from a [indiscernible] franchise in general, that really isn't an issue for us. OTEZLA, if you want to speak about it?

Unidentified Company Representative

Yes, it for OTEZLA we feel we're really really in a good position. You remember, we did entering some contract staffs here, those are multi-year contracts and Terry, I've sharing that to really soak up the strategy for a Tesla is being very successful with -- we right now have about 80% of covered miles with [indiscernible]. And our GTC is pulling through quite well, so she feels very good about the position that OTEZLA's in.

Matthew Harrison

Great, perfect. Thank you very much for being here. We appreciate the time.