Like most blue-chip biotech stocks and Big Pharma companies, Celgene (NASDAQ:CELG) has had a rocky year, vacillating between being up and down multiple times. Yet despite the turbulence, and being down 1% year-to-date through Dec. 14, 2015, Celgene's turned in some pretty substantial growth.
For instance, multiple myeloma drug Revlimid just keeps tearing higher. The market share leader in multiple myeloma treatments is expected to generate $5.7 billion to $5.8 billion in full-year sales, up from just shy of $5 billion in 2014. By 2017, Celgene believes Revlimid sales could top $7 billion per year. Organic growth and label expansion opportunities alone have been allowing Celgene to raise its full-year forecast and to project strong growth through 2020.
Of course, not everything has gone right this year. Concerns regarding the possibility of prescription drug reform hit all drug developers in late September. Revlimid retails for around $100,000 a year, so any sort of price controls would be bad news for Celgene (as well as many other drugmakers). Celgene's cancer drug Abraxane has also been facing stiffer competition. Approved to treat metastatic breast cancer, metastatic pancreatic cancer, and first-line non-small cell lung cancer, it's possible the emergence of cancer immunotherapies has slowed Abraxane's U.S. growth.
Celgene's worst failure in 2015
But one major failure really stood out in 2015: Celgene and MorphoSys announcing the end to their collaborative agreement in March.
Signed in 2013, Celgene paid MorphoSys $92 million upfront and dangled $818 million in cumulative incentives to get its hands on MOR202, a cancer-fighting antibody that targets CD38. The reasoning behind the partnership was simple for Celgene: anti-CD38 is the perfect target for treating multiple myeloma, and Celgene figured that adding another multiple myeloma drug to its portfolio could help secure its market share after Revlimid comes off patent many, many years from now. As FierceBiotech noted in March when the deal termination was announced, Celgene had previously referred to MOR202 as "a very attractive asset" for a "validated highly promising target [CD38]."
MorphoSys was expected to unveil phase 1 data from its phase 1/2a study for MOR202 at some point in 2015, but Celgene was apparently not willing to stick around to see that data. In late March it pulled out of its collaborative deal, leaving behind its $92 million upfront payment.
It's possible Celgene didn't like what it saw in initial efficacy, but data revealed at the American Society of Hematology's annual meeting earlier this month suggests MOR202's safety profile was just fine. MorphoSys announced at ASH that MOR202 was well tolerated and could be given as a two-hour infusion with minimal infusion-related reactions.
Another possibility is that Celgene simply made a mistake and didn't realize how far along competing multiple myeloma products already were. Even if MorphoSys's MOR202 succeeds in phase 1 studies and demonstrates safety with hints of early efficacy, it's unlikely to see the light of day on pharmacy shelves for years.
Meanwhile, Johnson & Johnson (NYSE:JNJ) and Genmab announced the approval of Darzalex to treat third-line and higher indications of multiple myeloma in November, and Sanofi is working on its own anti-CD38 targeting drug. Johnson & Johnson and Genmab's Darzalex was particularly effective in terms of overall response rate in its clinical studies. A response rate of 29% may not sound like much, but for patients who've progressed on a median of five prior therapies, it's pretty darn incredible. It's possible that Johnson & Johnson's Darzalex could find itself in a second-line setting soon enough, and J&J may wind up with another blockbuster on its hands.
Not a huge concern
Even with this failure from Celgene, the company still looks like a force to be reckoned with in the biotech space.
Perhaps the biggest factor working in Celgene's favor is that it has 31 ongoing collaborations ranging from oncology to inflammation. Celgene's success with Revlimid, Abraxane, and anti-inflammatory pill Otezla had afforded it the ability to throw around its cash, so to speak, to find the next game-changing drug. Doing so will result in failure on occasion; however, it'll only take the success of a few of Celgene's partnerships for its collaborative efforts to pay big dividends.
On top of its collaborations, Celgene also has ample opportunities to expand the label indications of existing drugs. Revlimid and Otezla could be looking at around a half-dozen new indications, and Abraxane is being tested as a treatment for first-line triple-negative breast cancer. Wall Street and investors love organic growth, and Celgene is planning on bringing plenty of that to the table through the end of the decade.
Celgene even has the ability to grow by acquisition, although it doesn't do so often. Purchasing Abraxane, for example, has proven to be a smart move. Since 2010, sales of the drug have basically tripled. Celgene hopes its acquisition success will continue with its $7.2 billion purchase of Receptos. Receptos' key pipeline product is ozanimod, a potential next-generation relapsing multiple sclerosis drug. If approved, ozanimod could sport peak annual sales north of $4 billion.
All of this translates into one conclusion, in my opinion: Celgene still appears to be an attractive long-term buy, even with its rare failures.
Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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