When you bet $2.9 billion, you really hope that bet will pay off. Celgene (CELG) wagered that amount in 2010 when it bought Abraxis. What did it get for the money? Abraxis had one drug on the market -- Abraxane, which was approved by the Food and Drug Administration in 2005 for treatment of metastatic breast cancer. The smaller company had consistently lost money, yet Celgene CEO Bob Hugin saw the potential in Abraxane.

In previous articles, we looked at Celgene's top two drugs: Revlimid and Vidaza. Today, we're reviewing Abraxane to see if that big bet made a couple of years ago has begun to pay off.

From flat to fit
It's probably fair to say that Abraxane wasn't setting the world on fire when Celgene acquired Abraxis. Sure, the drug was pulling in solid revenue. However, sales were essentially flat.

Sources: Celgene 10K and 2012 earnings release, Abraxis 10Q.

Note that the sales number shown above for 2010 is only an estimate. Abraxis reported Abraxane sales only for the first six months of the year; Celgene reported sales for the drug only for the 2.5 months at the end of the year after it acquired Abraxis. The trend wasn't impressive back then, but the situation began improving in 2011. What happened?

Celgene's larger resources likely helped. Another factor impacting 2011 was a temporary shortage of generic paclitaxel, which also is used to treat breast cancer.The company also began to launch Abraxane in several international markets, which helped boost sales. 

While all of these activities were under way, Celgene kept moving forward with several clinical studies for Abraxane. None of these made a difference on the company's top line or bottom line, but good things were beginning to happen.

Payoff time
Bob Hugin and the team at Celgene knew that the real potential for Abraxane would be in expanding indications for which the drug was approved. That potential began to be realized in October 2012 when the FDA approved the drug for treatment of advanced non-small-cell lung cancer. The company also filed for approval for the indication in Japan, Australia, and New Zealand, with decisions expected this year. 

Additional confirmation of Abraxane's potential came with positive results from a phase 3 study of the drug in treating pancreatic cancer. The disease has been something of a minefield for pharmaceutical companies in recent history.

Amgen (AMGN -1.33%) decided to stop its phase 3 trial of ganitumab in August after the drug failed to prove more effective than gemcitabine. Threshold Pharmaceuticals (NASDAQ: THLD) also experienced difficulties in September when testing didn't show that its drug TH-302 improved overall survival rates. Celgene, though, now has solid results that enable the company to move ahead with regulatory submissions.

Then there's advanced melanoma. In October, Celgene announced significant improvement in progression-free survival rates for melanoma patients using Abraxane. The company plans to review final data in mid-2013 and will evaluate for possible regulatory filings.

The road ahead
Abraxane appears to have a good chance to be another blockbuster drug for Celgene in the next few years. Sales for the drug in treating breast cancer are growing. The drug can now be marketed in the treatment of lung cancer. Pancreatic cancer and melanoma could be added in the not-too-distant future.

Competing in the lung cancer market will probably prove to be the biggest challenge. Lilly's (LLY -1.00%) Alimta and Roche's (RHHBY -1.70%) Tarceva are currently two of the top drugs for treating lung cancer. Ironically, Abraxane's success for the indication could depend largely on how effectively the makers of these drugs hold off generic rivals. Roche already fended off a generic threat last year. Lilly hopes to accomplish the same result with a court decision this year that could enable the company to retain patent protection for Alimta through 2022 instead of 2016. 

Celgene will continue to enjoy patent protection for Abraxane through 2024 in the U.S. and through 2022 in Europe.It's still a little too soon to be 100% certain, but so far it looks like the company's multibillion-dollar bet will ultimately pay off.