Celgene Corp. (CELG) shares nose-dived in October following a trial failure and third-quarter financials that failed to impress. However, there are good reasons investors ought to consider adding Celgene to portfolios, including upcoming data for cancer trials, a promising potential new drug launch in 2018, and a bulletproof balance sheet.
All eyes on ASH
In December, industry leaders will get together to discuss the latest in blood cancer research at the annual American Society of Hematology (ASH) conference.
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At this year's conference, bluebird bio (BLUE -4.91%) and Juno Therapeutics (JUNO) will present updated data on their Celgene-partnered drugs.
This week, we got a look at the abstracts these companies will present, and the initial reaction is positive. A beta-thalessemia drug, LentiGlobin, that isn't partnered with Celgene was largely responsible for bluebird bio's shares rocketing higher Wednesday and Thursday, but bluebird bio also said it will roll out updated data at the conference on bb2121, a CAR-T for use in advanced multiple myeloma patients.
Celgene's got the ex-U.S. rights to bb2121, and earlier this year, bluebird bio stole the show at ASCO, another industry conference, with data showing a 100% response rate. That rate will drop as more patients are dosed, but the title of bluebird bio's abstract for the ASH conference is encouraging: "Durable clinical responses in heavily pretreated patients with relapsed/refractory multiple myeloma: Updated results from a multicenter study of bb2121 anti-BCMA CAR T cell therapy (Oral Abstract #740), and the presentation, will be on Monday, December 11 at 3:00 p.m. EST.
The abstract for Juno Therapeutics' and Celgene's JCAR017, a second-generation CAR-T for use in advanced diffuse large B-cell lymphoma patients (DLBCL) suggests it could outflank Gilead Sciences and Novartis' CAR-Ts and become a blockbuster drug someday.
In a core group of patients representing the population being studied in its ongoing pivotal trial, 73% of patients saw a complete response at three months, and 64% of patients didn't have severe grades of cytokine release syndrome or neurotoxicity -- two safety concerns that exist with Gilead Sciences and Novartis' drugs. If the pivotal data is as good as this, then Juno Therapeutics and Celgene could be handsomely rewarded.
If these drugs are eventually approved, Celgene will pay royalties or share profits with bluebird bio on bb2121, depending on if they exercise their co-commercialization option. On JCAR017, Celgene and Juno Therapeutics will share profits.
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Eyeballing a new indication
Celgene has long wanted to expand beyond its current dominant position in multiple myeloma, and it may make a big leap toward that goal if its ozanimod gets a green light from the FDA next year.
Ozanimod is an S1P1 inhibitor that works similarly but is more selective than Novartis (NVS 1.10%) Gilenya, a top-selling multiple sclerosis drug with more than $3 billion in annual sales. In trials, ozanimod delivered solid efficacy, but it also put up safety results that could position it as the best-in-class oral drug in this indication.
Oral MS drugs represent an $8 billion annual market opportunity, so ozanimod could be a needle-mover. Celgene plans to complete its FDA filing for approval this quarter, clearing the way for an FDA decision sometime in 2018.
Plenty of financial firepower
Celgene's shares have fallen sharply because GED-0301 failed to hit its mark in a phase 3 Crohn's disease trial and because of slowing growth for its psoriasis drug, Otezla.
Yet, the company has a lot of financial flexibility that it can use to continue advancing other drugs in its pipeline, execute acquisitions, or ink new co-development deals with biotech upstarts.
Last quarter, operating cash flow was $1.1 billion (not too shabby for a disappointing quarter!), and that helped cash, cash equivalents, and investments grow on the balance sheet to $11.8 billion.
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What's the takeaway
Biotech stocks are notoriously risky investments because stocks can pop or drop depending on the latest trial results. As this past month's performance reminds us, Celgene isn't immune to this risk.
Nevertheless, the company's got a flurry of clinical drug research ongoing both internally and at its collaboration partners, a potential blockbuster drug in ozanimod approaching the finish line, and the cash necessary to maintain its status among the top-tier biotechs on the planet. Overall, I believe that makes it compelling to pick up shares after their drop.
