Revlimid ranked as the second best-selling drug in the world last year, with sales of nearly $8.2 billion. Market research company EvaluatePharma predicts that the drug will slip one spot by 2024 but will rake in around $11.9 billion. Revlimid contributes 64% of total revenue for Celgene (CELG). And yet the big biotech's CEO just said that he "wants to make Revlimid obsolete." Say what?
Mark Alles took the helm as CEO of Celgene in 2016 after 12 years with the company. He fielded questions in a fireside chat on Thursday at Citigroup's 13th annual biotech conference in Boston. Revlimid was, understandably, one of the primary topics of discussion at the conference. But if you think Alles' comment about making the drug obsolete raised eyebrows, think again: It actually should be music to investors' ears.
Context is key
Did Mark Alles mean it when he said he wants to make Revlimid obsolete? Yep. However, he didn't state that he wants it to happen anytime soon.
His comment came during a response to a question about how Celgene will be able to offset a coming "cliff" for Revlimid. The drug loses patent exclusivity in Europe in 2022, and in the U.S. in 2027. Celgene reached a settlement a couple of years ago with Natco Pharma that allows a generic version of Revlimid to be marketed in the U.S. beginning in March 2022 in limited volumes.
Alles took issue with describing the impact of the loss of exclusivity for Revlimid as a "cliff." He preferred to use the word "hill," because sales of the drug should gradually decline rather than experience a big drop in a short period.
But Celgene's CEO does indeed want to make Revlimid obsolete over time. If all goes according to plan, that's exactly what will happen. Alles referred to Revlimid as an "outlier" in that it's a single megablockbuster drug that is approved for treating multiple blood disorders. He stated that the "chapter is over" for launching a Swiss-army-knife kind of drug -- what Revlimid has been in the hematology space.
The bottom line is that Celgene plans to replace Revlimid, but not with just one drug. Instead, Alles pointed to four hematology drugs in Celgene's pipeline that he thinks will take the baton from Revlimid and become blockbuster franchises.
The first drug mentioned was luspatercept. Celgene and partner Acceleron Pharma (XLRN) reported great news in June from a pivotal study of the drug in treating myelodysplastic syndromes (MDS), one of the top approved indications for Revlimid. The companies followed up in July with more positive late-stage study results for luspatercept in treating beta-thalassemia.
Celgene acquired Impact Biosciences earlier this year, picking up fedratinib in the process. The biotech expects to file for Food and Drug Administration approval for the drug in treating myelofibrosis by the end of this year. Like beta-thalassemia, myelofibrosis is a blood disorder for which Revlimid isn't approved.
While Celgene already included liso-cel (also known as JCAR017) in its pipeline before 2018, its acquisition of Juno Therapeutics gave Celgene full rights to the cell therapy. Celgene is evaluating liso-cel as a potential treatment for lymphoma and chronic lymphocytic leukemia (CLL).
Alles seemed to be most excited about the prospects for bb2121, a cell therapy that Celgene licensed from bluebird bio (BLUE -5.00%). He described the drug as "first in class" and "best in class" for treating multiple myeloma, another of Revlimid's key approved indications. Alles said that he thinks bb2121 will "transform" the treatment of multiple myeloma.
The biggest worry
Investors' biggest worry about Celgene is that it might not have as much time as hoped to replace the revenue that Revlimid generates: Dr. Reddy's Laboratories (RDY -2.08%) is challenging Celgene's patents for Revlimid.
Alles acknowledged that many of the company's shareholders would like to see a settlement reached soon. However, he was adamant about making sure any deal reached was a good one for Celgene. Alles stated that the company absolutely would not settle "out of expedience."
At this point, Celgene and Dr. Reddy's are scheduled to go to trial in early 2019. Alles said that Celgene will defend its patents against all potential generic rivals "until conditions are acceptable to settle." He insisted that the biotech won't give up even one month of continued revenue from Revlimid if it doesn't have to do so.
My hunch is that in large part Alles is signaling Dr. Reddy's that the best deal it's going to get is one similar to the settlement reached with Natco. I suspect that Celgene fully expects an acceptable agreement will be reached, but is more than willing to go to the mat in court if necessary.
Replacing Revlimid, part 2
Celgene's multipronged strategy of reducing its dependence on Revlimid by launching new hematology drugs is a smart one. However, the company also has other ways of replacing revenue that will be lost after generic rivals begin taking away market share from Revlimid. Probably the most important drug for offsetting the Revlimid patent "hill" is ozanimod.
After a major blunder earlier this year resulting in the FDA issuing a "refuse to file" letter for ozanimod in treating multiple sclerosis (MS), Celgene is poised to try again in early 2019. Alles stated that the biotech continues to see ozanimod as a franchise that could generate annual sales between $4 billion and $6 billion, assuming it wins approval in MS and as a treatment for ulcerative colitis and Crohn's disease.
Over the next few years, new drugs like ozanimod, bb2121, fedratinib, liso-cel, and luspatercept could make concerns about Revlimid fall by the wayside. If Celgene can make Revlimed obsolete, as Mark Alles plans to do, that will be great news for investors.