What: Shares of biotech blue-chip giant Celgene (NASDAQ:CELG) are surging in Wednesday's trading session, up as much as 11% at one point, after the company announced that it had settled long-standing patent litigation concerning its multiple myeloma blockbuster Revlimid.
So what: The issue concerned the potential entrance of generic competitors to Revlimid, and was headed by Natco Pharma, Arrow International, and Watson Laboratories.
According to Celgene's press release, which actually came out after the market close yesterday, Celgene will allow generic competitors of Revlimid to fully enter the market by late January 2026, a little over a year before the expiration of Revlimid's last patent in April 2017. Natco will receive a limited-volume license to sell a generic version of Revlimid beginning in March 2022, and its capacity to sell generic Revlimid will be increased each 12-month period through March 2025. The press release suggests Natco is not expected to produce more than a third of Revlimid capsules that are dispensed annually in this period.
Now what: "Why on Earth would Celgene make this move?" you may wonder. It has everything to do with securing the long-tail growth opportunity for Revlimid. Despite its last patent expiring in 2027, it was long suspected on Wall Street that Revlimid could face a flood of generic competition between 2022 and 2025. However, by striking this deal with Natco, Arrow, and Watson, Celgene has secured the potential for substantial Revlimid growth through the mid-2020s.
Additionally, it's also prevented Revlimid sales from falling off a cliff. By forging a deal with generic competitors Revlimid sales will eventually be affected, but the sales decline will be more gradual than steep, giving Celgene ample opportunity to prevent a year-over-year revenue decline with the introduction of new therapies.
As a whole, Celgene appears to be one of the best run biotech companies. It has the ability to grow through label expansion (including more than half a dozen ongoing studies for Revlimid and a half-dozen for anti-inflammatory pill Otezla), via its 31 ongoing collaborations, and through acquisitions, such as its purchase of Receptos for $7.2 billion, giving it access to experimental next-generation relapsing multiple sclerosis treatment ozanimod. If you're looking for growth stocks to add to your portfolio, Celgene would certainly be worth a look.
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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