Celgene Corp. (NASDAQ:CELG) markets four billion-dollar blockbuster medicines, but only two were behind its stellar sales and profit performance in the second quarter. Sales of Revlimid grew 21% to $2.4 billion, and Pomalyst sales increased 30% to $507 million. Can these multiple myeloma drugs continue to deliver growth for Celgene's investors?

Delivering on plans

Celgene came into 2018 expecting sales to increase to at least $14.4 billion, and so far, it appears the company is on track to over-deliver on that guidance.

Pills spill out of prescription bottles onto a table.


In the second quarter, revenue increased 17% to $3.8 billion, and that strength was enough to prompt the company to up its full-year sales outlook to $15 billion.

Although three of its four major drugs posted year-over-year revenue growth in the quarter, it was Revlimid and Pomalyst that really stole the show. Combined, they generated nearly $3 billion in revenue in Q2, up from about $2.4 billion in Q2 2017. For comparison, sales of the psoriasis drug Otezla inched up only 5% to $375 million, and sales of pancreatic cancer drug Abraxane fell 4% to $243 million.

What's multiple myeloma?

A bone marrow cancer, multiple myeloma occurs when plasma cells responsible for creating antibodies that battle infection mutate, multiply, and crowd out the production of healthy plasma cells.

According to the National Cancer Institute, 30,770 people will be newly diagnosed, and 12,770 people will die from multiple myeloma this year alone.

Improving outcomes

In 1975, there were 4.9 new cases of myeloma per 100,000 Americans, and the five-year survival rate of myeloma patients was only 26.3%.

Myeloma's incidence has climbed to seven cases per 100,000 Americans since then. However, new drugs have improved the five-year survival rate to 53%.

Arguably, a lot of the improvement of survival rates in this indication are due to Revlimid, an analogue of thalidomide, a drug that was once sold as a sedative but was pulled from the market following the discovery that it could cause birth defects.

Initially, Revlimid won approval in 2005 for myelodysplastic syndromes, a group of blood cancers characterized by an inability of red blood cells in the bone marrow to mature. It won the FDA OK as a second-line therapy in 2006, a first-line multiple myeloma therapy in 2015, and a maintenance therapy following stem cell transplant in 2017.

Revlimid's expanding addressable market and efficacy have made it a wildly successful commercial-stage drug, and in the process, its success helped fuel the development of Pomalyst, a next-generation thalomide analogue.

In 2013, the FDA approved Pomalyst for third-line multiple myeloma, and in trials, Pomalyst's use significantly improved the likelihood of patients' responding to treatment and living longer.

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Can these drugs keep going?

Revlimid and Pomalyst's potential became even more important to investors following the phase 3 failure of GED-0301 in Crohn's disease last year and the delay in securing a FDA review of ozanimod earlier this year.

In the past, sales of these drugs have benefited from increasing use and price increases. For example, the cost of a one-month supply of Revlimid has doubled from 2010 to 2018.

In the future, similar tailwinds from pricing are likely to be much weaker. On its Q2 conference call, management said it intends to limit price increases to once per year, and the amount of future price increases will be in line with the Centers for Medicare and Medicaid Services' annual healthcare inflation estimate. This year, the CMS estimate was 5.3%, and last month, Celgene upped Revlimid and Pomalyst prices by 5%.

The 5% increase will provide a little support to sales in the back half of the year, but based on management's comments, investors shouldn't model for much in the way of price appreciation in 2019 and beyond.

Instead, Revlimid and Pomalyst's growth will be determined more by prescription volume trends and label expansions than ever before. And there's reason to think growth from those sources will continue.

Management says 15% of its 17% revenue increase in Q2 was the result of volume growth, not pricing, and trials that could increase the use of these drugs are already under way.

Recently, the use of Revlimid alongside Rituxan was shown to benefit patients with relapsing or recurring indolent lymphoma, and a filing for approval of that combination is expected in Q1 2019. Data from triplet combination trials of Revlimid in newly diagnosed multiple myeloma is anticipated soon, as are results from a first-line trial of Revlimid in diffuse large B-cell lymphoma.

Similarly, Celgene recently unveiled data showing that a triplet combination that includes Pomalyst met its endpoint as early as the second-line setting. Specifically, including Pomalyst in the combination reduced the risk of death or disease progression by 39% when compared with the use of the other two drugs in the combination alone. In the second-line setting, adding Pomalyst reduced the risk of death or disease progression by 46%.

What about longer term?

Celgene has cut deals with generic-drug makers that will allow limited production of generic Revlimid beginning in 2022, so it still has a few years of runway left before it has to cut prices to maintain market share. Pomalyst's patents protect it a bit longer. It has exclusivity through 2025.

Since these drugs aren't going to have to compete with generics for a while, Celgene should have time to advance new multiple myeloma drugs to market. The closest of its next-generation multiple myeloma treatments to launching is bb2121, a gene therapy its developing in concert with bluebird bio. A 90%-plus response rate in fourth-line or higher multiple myeloma patients has been observed so far, and trials that could support an FDA application are under way and expected to wrap up next year.