Doing one thing well is hard enough, especially in biotech where the field is littered with the bodies of companies that couldn't get a single drug successfully through trials, let alone enough to become a "franchise". And yet Celgene (NASDAQ:CELG), which has already built an impressive franchise in hematological oncology, is looking to build what could be a multibillion-dollar, multi-blockbuster platform of immunology and inflammation (also called "I&I") drugs.
From mixed beginnings...
Celgene's story in autoimmune/inflammation starts with Otezla, and it has been a strange story so far. Approved in psoriasis and psoriatic arthritis, Otezla doesn't really work as well as injected biologics like AbbVie's Humira or Johnson & Johnson's Stelara, but it's an easy-to-take pill with no lab testing/monitoring requirements (and a relatively clean overall safety profile) and it offers an option with a different mechanism of action than biologics or methotrexate.
What makes the Otezla story particularly interesting is how Celgene has done more with this drug than analysts had expected. Given the so-so efficacy in psoriasis and psoriatic arthritis, as well as the phase 3 trial failure in ankylosing spondylitis back in 2014, expectations a few years ago were that this would be a drug with around $1 billion to $1.5 billion in peak sales potential. Well, as of the last quarter, Otezla is annualizing at close to $1 billion already and still growing very strongly (almost 25% quarter-over-quarter). That's all the more surprising when you consider how exceeding ebullient biotech analysts tend to be.
Otezla still may have more to give. Celgene hasn't abandoned ankyolising spondylitis given that longer-term data from the Phase 3 study have shown a meaningful reduction in progression. With around half a million patients in the U.S., this could conceivably add around half a billion dollars to the peak sales pool. What's more, there are other market-expanding applications like Behcet Syndrome, atopic dermatitis, and ulcerative colitis still to consider. Given that Celgene has shown that they can do quite a lot with this drug from a marketing perspective, the future is still looking bright.
... to growing opportunities
Celgene looks serious about building a franchise offering different treatment approaches to ulcerative colitis and Crohn's disease (two serious and relatively prevalent autoimmune disorders). Celgene paid over $700 million upfront to Nogra for GED-0301 (or mongersen), an oral antisense treatment for Crohn's disease and then paid over $7 billion in 2015 to acquire Receptos and its two drugs ozanimod and RPC-4046 (with an overwhelming amount of the deal value tied to ozanimod).
Mongersen is a weird little drug in that oral antisense drugs almost never work. But because this drug acts locally in the gut (blocking Smad7), this one works. This has been an exciting opportunity ever since early studies suggest that even a short course of treatment (only a couple of weeks) could produce clinical remission in a large portion of patients.
Since then, the outlook for mongersen has gotten murkier. Celgene recently presented more detailed Phase 1b data on mongersen at the United Euro Gastro Week. These data show that 67% of patients treated for 12 weeks did show a response (a CDAI decrease from baseline of 100 or more), with 44% of patients treated for 8 weeks showing response and 53% in the 4-week group. Clinical remission rates (CDAI < 150) were 48% in the 12-week arm, 35% in the 8-week arm, and 32% in the 4-week arm.
But with the endoscopic studies, only two patients achieved remission at week 12 (AbbVie has seen closer to 20% remission with risankizumab) and only 15% of mongersen patients had a SES-CD reduction of 50% or more. Making matters worse, there was no placebo arm in this study, and a recent trial of fligotinib (under development between Galapagos and Gilead showed 25% of patients with a SES-CD reduction of 50% or better at 10 weeks and a placebo response of 13.6%. Comparing across trials is always risky, but a bearish interpretation of this would be that mongersen was barely more effective than a placebo in improving endoscopic outcomes for these patients.
Mongersen has been a controversial drug for years now, with many "key opinion leaders" questioning the mechanism of action and whether encouraging early studies really reflect the "real" Crohn's patient population. Time will tell, and Celgene is moving on with two Phase 3 placebo-controlled studies. It may well be that adding the placebo arms makes a major (negative) difference, or it may be that this drug works well in a certain sub-set of patients. With that, it's worth noting that the safety and non-systemic activity of the drug (it works and stays in the gut) could make it a potential combo therapy. While peak sales projections of $4 billion-plus for mongersen may be too high given the questionable Phase 1b data, Otezla shows that Celgene can market safe oral drugs even if they're not as effective as injected alternatives.
Celgene bought Receptos (and its lead drug ozanimod) after mongersen, and it likely wasn't just for the potential in multiple sclerosis. This oral second-gen S1P1 modulator has shown solid efficacy relative to other MS drugs like Novartis' Gilenya while also demonstrating a better safety profile (lower hepatoxicity, less lymphocyte reduction and so on). While the MS field is getting more and more crowded, including the potential Roche blockbuster Ocrevus, this could still be a successful drug ($1.5 billion-plus in revenue) for Celgene just in MS.
But Crohn's and ulcerative colitis are where things get more interesting. Receptos wasn't necessarily looking to make ozanimod into a drug for UC and Crohn's, but early trial results (MS drugs are often also trialed in UC in part to generate more safety data) were surprisingly strong with early remission rates in UC on par with injected biologicals like Humira. A Phase 3 study of ozanimod in UC should read out in 2018 and development in Crohn's is also under way. Approval in either could be a $2 billion+ opportunity given its oral administration and relatively clean safety profile (again, speaking to the success seen to date with Otezla).
And many more earlier-stage opportunities
Many biotechs (or pharmaceutical companies) would be happy to call it a day with three multibillion-dollar shots on goal in immunology/autoimmune. But Celgene has several more drugs in its I&I pipeline behind this "Big Three".
Among the Phase 2 candidates, the other Receptos drug, RPC-4046, is being tested in eosinophillic esophagitis, a rare condition with no approved treatments that could potentially be worth billions. Sotatercept, partnered from Acceleron (NASDAQ: XLRN), is being studied in renal anemia, while CC-220 is in studies for lupus and CC-292 is being studied in B-cell-mediated autoimmune diseases. While most autoimmune diseases are viewed as antibody-mediated and/or T-cell-mediated, B cells appear to play a role in many autoimmune conditions including lupus, rheumatoid arthritis, and Type 1 diabetes.
A worthy second act
It's always good to have a back-up plan, and while Celgene's I&I efforts likely won't surpass the company's impressive oncology franchise, successfully getting multiple drugs to market with multibillion-dollar peak sales potential will certainly give it a run for its money. Celgene still has much to prove with this platform, and the recent disappointment regarding mongersen highlights the risk to sentiment and share price in the near term, but a deep pipeline, the potential of ozanimod, and the proven ability of this company to effectively market oral alternatives even with lesser efficacy should encourage shareholders.