9:42 PM
Jan 26, 2018
 |  BioCentury  |  Strategy

Jump-starting growth

Analyzing Celgene’s growth prospects after Juno, Impact deals

Celgene Corp.’s two deals this month -- including its largest ever acquisition, of Juno Therapeutics Inc. -- will help fill in the holes left by late-stage failures and commercial disappointments of candidates that were intended to replace lost revenues after Revlimid lenalidomide loses patent protection.

If Celgene can navigate the clinical and commercial risks associated with Juno’s pipeline and execute on its own late-stage candidates, the company could see revenue growth accelerate through the mid-2020s.

But Celgene’s current expectations for launches between now and 2022 don’t look like enough to avoid a revenue decline followed by slower growth after Revlimid succumbs to genericization.

Celgene has highlighted 10 late-stage programs, including the lead candidates from Juno and Impact Biomedicines Inc., as potential blockbusters that are expected to contribute a combined $16 billion in incremental peak sales between 2020 and 2030. All are expected to launch during 2018-22.

The closest to market, autoimmune candidate ozanimod, has the potential to be best in class. In December, Celgene submitted an NDA for the oral selective modulator of sphingosine 1-phosphate receptor 1 (S1PR1; S1P1; EDG1) to treat multiple sclerosis, with a launch expected in 4Q18.

Ozanimod is also in Phase III testing for Crohn’s disease and ulcerative colitis (UC). Celgene expects peak sales of $4-$6 billion.

The more likely scenario is that Celgene revenues plateau over 2022-25, with a trough year in 2026 that is followed by a return to growth, albeit at a slower rate.

Celgene expects $1 billion in peak sales for fedratinib, which Celgene obtained through the acquisition of Impact announced Jan. 7. Celgene paid $1.1 billion up front and may pay up to $5.9 billion in milestones related to the oral Janus kinase-2 (JAK-2) inhibitor. The molecule is slated for regulatory submissions mid-year to treat myelofibrosis.

Celgene also expects $3 billion in peak sales from Juno’s lisocabtagene maraleucel (JCAR017), a chimeric antigen receptor (CAR) T cell therapy targeting CD19. On Jan. 22, Celgene announced it would acquire Juno for $87 per share, or about $9 billion, net of Juno’s cash and the 9.7% stake Celgene already owns.

It appears likely that Revlimid sales will taper between the launch of an authorized generic in 2022 and the expiration of the last patent in 2027. If so, and if the 10 launches management highlighted reach their peak sales targets within 5-8 years of launch, some would be starting to decline when Revlimid finally goes over the cliff.

Juno’s seven other clinical programs could fill some of the shortfall.

Management said success in solid tumors -- an area where CAR Ts haven’t shown much efficacy -- is upside beyond Juno’s $9 billion valuation. Celgene pointed out several candidates in its emerging immuno-oncology pipeline that could be combined with Juno’s cell therapies to increase efficacy in solid tumors.

Management also has signaled that more deals may be on the horizon. During a conference call to discuss the Juno acquisition, EVP and CFO Peter Kellogg said the deal “does not preclude us from moving forward with further transactions if they make sense and if they represent real value-creating opportunities.”

CEO Mark Alles returned to the theme on Celgene’s 4Q17 conference call on Jan. 25, noting that the biotech will continue “to deploy capital to acquire or license the most promising science, technology and products.”

The Revlimid problem

Revlimid’s growth is the primary reason Celgene’s valuation has grown from $6.9 billion in early 2006 to $82.2 billion today.

The drug was first approved to treat myelodysplastic syndrome (MDS) in December 2005, with a label expansion the following year in multiple myeloma (MM). It has accounted for more than 55% of Celgene’s total revenue every year since 2007, and more than 60% of total revenue annually since 2009. That reliance peaked in 2012, when Revlimid’s share of consolidated revenues reached 69%.

Launches over the past five years have reduced that reliance some, but Revlimid...

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