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3 Reasons the Best Is Yet to Come for Celgene

Celgene Corp.'s (NASDAQ: CELG) second-quarter revenue and sales came in nearly 50% higher than they were two short years ago, yet the company doesn't appear to be anywhere near peaking. A flurry of R&D activity should provide it with a steady stream of label expansion and new drug opportunities, and if so, management should have no trouble delivering on its goal of growing sales to $21 billion in 2020 from an estimated $13 billion this year.

Expanding addressable markets

Celgene's widely used first-line multiple myeloma drug Revlimid has been a big reason the company's delivering significant top- and bottom-line growth. Originally approved for use in the second-line setting, the FDA approved it as a first-line drug in February 2015, and in February 2017, it also approved its use as maintenance therapy in multiple myeloma patients following stem-cell transplants to help prevent the cancer from progressing.

IMAGE SOURCE: GETTY IMAGES.

The company's success in expanding Revlimid's addressable market has caused Revlimid's sales to spike. In Q2, Revlimid revenue was $2.03 billion, up 19.6% year over year, and that has Celgene estimating $8 billion in revenue from the drug this year.

The strategy of expanding the use of its drugs to more patients, however, isn't limited to Revlimid. Management hopes to boost sales of its other drugs this way, too. For instance, studies are evaluating its third-line multiple myeloma drug, Pomalyst, as a second-line treatment. They're also exploring the use of its psoriasis drug Otezla in ulcerative colitis patients. And the company's pancreatic cancer drug, Abraxane, could someday be used to help treat patients with non-small-cell lung cancer and triple-negative breast cancer.

Given the company's track record with Revlimid, I think there's a good shot these trials pan out, and if so, then revenue and profit will march steadily higher.

Collaborating in cancer

Management may dominate multiple myeloma treatment, but it's not sitting on its laurels. Thanks to a slate of collaborations with emerging biotech companies, it has plenty of irons in the fire that could result in new drugs targeting a variety of cancer indications.

This week, the company's collaboration strategy took a big step forward when the FDA approved Idhifa, the first drug specifically OK'd to treat relapsed or refractory acute myeloid leukemia (AML) patients possessing a specific genetic mutation. Celgene co-developed Idhifa with Agios (NASDAQ: AGIO), and it won FDA approval only four short years after entering clinical trials.

Idhifa isn't likely to become a huge source of profits for Celgene because Celgene will share its success with Agios, but it could still rack up $100 million to $200 million in annual sales, or more, if it's eventually approved for first-line use. The two companies estimate that Idhifa's current addressable market is between 1,200 to 1,500 patients, and they've priced the drug at nearly $25,000 per month.

The company's also making headway on its other collaborations. Celgene and partner Acceleron Pharma have completed of enrollment in phase 3 trials evaluating luspatercept in patients with lower-risk myelodysplastic syndromes and transfusion dependent beta-thalassemia. Results from those studies are anticipated in the middle of 2018.

Further back in the pipeline are intriguing chimeric antigen receptor T-cell drugs, too. Celgene's working with Juno Therapeutics on JCAR017, a non-Hodgkin lymphoma drug in early stage studies, and bluebird bio on bb2121, a multiple myeloma drug that's in phase 1 trials.

IMAGE SOURCE: GETTY IMAGES.

Entering new markets

When Celgene launched psoriasis drug Otezla, it marked its first foray into treating autoimmune disorders. Now, Celgene's close to the finish line on yet another autoimmune-disease drug. It's targeting relapsing multiple sclerosis this time around, though.

Celgene spent over $7 billion buying Receptos to get its hands on the clinical-stage MS drug ozanimod, and based on ozanimod's success in phase 3 studies, that looks to have been money well spent. 

The global MS market is worth over $22 billion, and about 40% of the market value belongs to oral MS drugs, including Gilenya, which generates sales of over $3 billion annually. Like Gilenya, ozanimod controls MS by inhibiting S1P to limit immune system responses. However, unlike Gilenya, ozanimod is more selective, and its selectivity may make it safer. During trials, ozanimod outperformed the MS drug Avonex without showing signs of the cardiovascular safety risks associated with Gilenya. If all goes well at the FDA, ozanimod could put a big dent in Gilenya's market share. It could also chip away at Tecfidera, another oral MS drug with nearly $4 billion in annual sales, depending on its label.

Celgene's also conducting a phase 3 trial of ozanimod in ulcerative colitis, and it expects enrollment in that trial to be complete this year. It's also got a phase 3 study of another drug, GED-0301, for use in Crohn's disease. Management expects enrollment in that trial to wrap up soon, too. Since these are blockbuster indications, a positive outcome in one or both of them could eventually be needle-moving.

Looking forward

In 2020, Celgene's wants to deliver $21 billion in sales and over $13 per share in earnings. Those figures represent a huge jump from the $13 billion and $7.25 in EPS that's forecast for 2017. Yet there's reason to think Celgene can meet or exceed those targets. Management based its long-term forecast on the drugs it currently has on the market, so if collaborations and R&D efforts yield new commercial-stage medicines, then Celgene should be able to deliver on its goal. In this respect, the company's best days may truly be yet to come.

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Todd Campbell owns shares of Celgene. His clients may have positions in the companies mentioned. The Motley Fool owns shares of and recommends Bluebird Bio and Celgene. The Motley Fool recommends Juno Therapeutics. The Motley Fool has a disclosure policy.