Celgene Aims to Boost Drug Stable
After two decades of staking its future on the infamous drug thalidomide, Celgene Corp. is branching out.
Celgene, spun off by chemical maker Celanese Corp., is expanding its portfolio. Over the next 12 months, it is expected to win approval from the Food and Drug Administration for two new drugs. One of them -- for attention deficit hyperactivity disorder, a thriving market segment -- could be approved before the end of the month.
Sales from those drugs could quickly double or triple the company’s annual revenue of about $400 million and reduce its dependence on Thalomid, the successor to thalidomide.
“Today, we’re in a wonderful position,” said John W. Jackson, Celgene’s chairman and chief executive. “Going forward, we have an incredibly promising future.”
Celgene was started in 1986 by scientists developing technology to use enzymes to “eat” pollution in water. When they found it wasn’t economically feasible, they moved on to study thalidomide, a morning-sickness drug that caused grievous birth defects before being banned in 1962.
Research showed thalidomide could stimulate or suppress the immune system well, giving it the potential to treat many disorders, and it can prevent the growth of blood vessels that feed tumors, said Sol J. Barer, Celgene’s president.
Redeveloped as Thalomid, a popular treatment for a type of bone cancer, the drug’s steady revenue has helped Celgene grow into one of the 10 largest biotech companies in the world and has bankrolled the company’s research on treatments for cancer and other disorders.
Celgene reported last month that its first-quarter profit more than quadrupled to $48.2 million on record sales and a large, one-time income tax benefit. Profit rose 110% to $19 million without the benefit. Revenue for the quarter jumped 35% to $112 million, and Celgene said it expected total 2005 revenue of about $525 million.
The company’s stock price has climbed steadily for the last three years, although on Monday its shares dropped 26 cents to $39.16, not far from its historical high of $40.90.
Those numbers could improve if the FDA gives its approval to two Celgene drugs in the pipeline.
Celgene is awaiting a decision on Focalin XR, an extended-release drug for ADHD, a $3-billion-a-year market. Such long-acting drugs are widely preferred because they limit between-dose behavior problems and children don’t have to go to the school nurse for an afternoon pill. Celgene manufactures the original, twice-a-day version of Focalin for Swiss pharmaceutical giant Novartis, which created the first ADHD drug, Ritalin, decades ago.
Focalin XR appears to have the same efficacy as Ritalin and fewer side effects, said Sherie Novotny, a child and adolescent psychiatrist and associate professor of psychiatry at Robert Wood Johnson Medical School in New Brunswick, N.J. She said her patients on regular Focalin would be thrilled to have a drug they would take only once a day.
Under a licensing deal, Celgene collects royalties on 30% of all Novartis revenue from Focalin and Ritalin -- an arrangement that discourages Novartis from promoting Ritalin over Focalin. Celgene estimates that royalties and payments on all those ADHD drugs would bring it $60 million this year.
Yaron Werber, a biotech analyst at Smith Barney, called Focalin XR a modest improvement over existing ADHD drugs. But he noted that competing drugs such as Concerta would face generic competition soon and probably would be advertised less, so a marketing campaign could build a good niche for Focalin XR.
Another Celgene drug, Revlimid, is up for two FDA approvals: to treat the bone cancer multiple myeloma and a rare form of the bone marrow disease myelodysplastic syndromes, or MDS.
“They’ve really developed the world’s best multiple myeloma franchise and what looks to be one of the leading hematology franchises,” Werber said.
Most analysts don’t expect use for MDS to be approved because Revlimid has been tested only on a small number of patients, said biotech analyst Matthew Osborne of investment banker C.E. Unterberg, Towbin.
Osborne said he believed that Celgene had a good shot at that approval. He forecasts that Revlimid eventually could bring the company total annual sales of $500 million to $1 billion.
“If it’s not approved, then the stock may pull back,” said Osborne.
Werber is forecasting annual Revlimid sales of about $1.2 billion by 2009 but cautions that Celgene needs to develop a marketing team outside this country to generate sales that high.
Celgene is also expecting FDA approval to use Thalomid to treat multiple myeloma. The drug provides 90% of the company’s revenue, mainly through doctors’ off-label use to treat bone cancer. FDA approval would allow the company to market Thalomid for that use.
