Can This Celgene Drug Defy the Patent Cliff?

I still love Road Runner cartoons. My favorite part as a kid was watching Wile E. Coyote chase after the Road Runner and walk right off a cliff. He'd always walk for several feet before realizing there was no ground beneath him. Then, as always, poor Wile E. would plummet to the bottom.

Celgene's (NASDAQ: CELG  ) Vidaza is a Wile E. Coyote kind of drug. It went off the patent cliff and is still walking on air. In this new series on Celgene's products, we first focused on powerhouse Revlimid. This time around, we'll take a look at gravity-defying Vidaza.

Running hard
Vidaza first came to market back in 2004 when the U.S. Food and Drug Administration approved the drug for treatment of myelodysplastic syndromes, or MDS. It also is approved in Europe for the treatment of acute myeloid leukemia, or AML.

Revlimid dominates Celgene's sales, but Vidaza makes a significant contribution to the bottom line. The drug ranks as the company's No. 2 revenue-generator, well ahead of third-place Abraxane.

Source: Company 10Q. 

Despite being somewhat long-in-the-tooth for a drug, Vidaza is still running with a head of steam. Sales continue to increase year after year, growing 17% in 2012 compared to 2011.

Sources: Company 10K and press release.

This performance is especially impressive considering that Celgene lost U.S. patent protection for Vidaza in 2011. Sales actually continued to grow in the U.S. in 2012, although by only 3%. 

Gravity awaits
Vidaza has managed to pull off the Wile E. Coyote walking-on-air trick in a couple of ways. First, no generic competitor has yet emerged in the U.S. Don't count on that situation to last indefinitely, though. Celgene's future plans assume that a generic rival will emerge by January 2014.

The second way that Vidaza continues to succeed is outside of the U.S. Celgene reported that international sales for the drug were up 23% in the fourth quarter of 2012 compared to the prior year. Good news for Celgene is that it holds patent exclusivity for Vidaza in Europe through December 2018.

However, Dacogen could gain traction after receiving European approval for treating AML in September. The drug, which was developed by Astex Pharmaceuticals  (NASDAQ: ASTX  ) and licensed to Eisai and Johnson & Johnson  (NYSE: JNJ  ) , stands as the strongest challenger to Vidaza. Astex, though, projects royalties for Dacogen to drop off in 2013 despite gaining AML approval in Europe. The pessimistic forecast is due in part because orphan drug exclusivity for Dacogen in the U.S. expires in May. 

That's (not) all, folks
That's not necessarily all for Vidaza. Celgene expects to report results from a phase 3 study of the drug in treating AML later this year. Good results from that study could lead to approval in the U.S. for the additional indication.

With several more years on-patent in Europe and a little luck in avoiding generic competition in the U.S., Vidaza could prove to be Celgene's next to hit the $1 billion annual sales mark. It might have walked off the patent cliff nearly two years ago, but so far the drug is keeping on walking. Wile E. Coyote would be impressed.

With Celgene's broad portfolio of drugs and a strong pipeline to boot, many investors see it as a smarter way to play the biotech investing game. While Celgene might be a safer stock than its small biotech brethren, investors need to know about the key opportunities and risks facing the company. We run through them all in The Motley Fool's brand new premium report on Celgene. To claim your copy today, simply click here now.


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