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Celgene Corporation Message Board

  • rob_cos rob_cos Nov 9, 2012 9:45 PM Flag

    Bernstein "CELG: Snowball Gathering Speed...ABRAXANE Hits OS Pancr Ca $1bn Upside - $96 target

    BERNSTEIN * Quick Take - CELG: Snowball Gathering Speed...ABRAXANE Hits OS Endpoint in Pancreatic Ca Potentially $1bn Upside


    This afternoon Celgene announced positive results from their phase III trial of Abraxane in pancreatic cancer. This positive result comes somewhat earlier than we had expected, and will come as a surprise to many investors and analysts; it has become almost axiomatic in the oncology world that "nothing works in pancreatic cancer" and this trial has certainly proven an exception to that rule. We had been cautiously optimistic about the outlook for this trial (see our note below), and it was a significant component of our Outperform rating for Celgene's stock. Despite the negative tape for biotech stocks, this should provide investors with some reversal in that trend for this name. When Abraxane is approved in this indication (which we regard as highly likely) the worldwide incremental revenue potential could be as much as $1bn (or 9% of total company revenue for 2017) given robust results in the full presentation of data in January.

    · The trial met its primary endpoint of achieving a statistically significant improvement in overall survival; although the exact results have not been disclosed, the company now intends to file the data with the FDA to expand the label for Abraxane. At a minimum this suggests that the phase III result must have looked somewhat similar to the phase I/II trial, in which 45-50% of patients responded. The company suggested to us that the result was highly statistically significant, and incontrovertibly superior to prior trials, drugs and the control arm of standard gemcitabine chemotherapy. Given the tremendous unmet need in this disease, and the many failed trials in the past, we now regard Abraxane as a near-certainty for approval in this indication. Investors will ask whether the improvement in survival is meaningful for widespread adoption; we believe the OS benefit is likely to be at least a month and a half, which would be viewed positively by clinicians and patients. The economic value of this opportunity for Celgene is also significant. With strong penetration assumptions and current pricing the revenue potential for pancreatic cancer alone could be as much as $1bn globally.

    · This announcement suggests that the trial has shown an improvement in overall survival of at least 20%; given a likely baseline overall survival of ~6 months, then the survival in the active arm is likely to have been at least 7.3-7.4 months (or higher). Such a difference is certainly meaningful, and substantially exceeds the improvement in overall survival seen with Roche's Tarceva in the same disease (which was approved by the FDA). When we asked Celgene about whether this was better than Tarceva, they emphatically confirmed the greater effect.

    · The worldwide revenue potential for the drug (which Celgene owns globally) in this indication, are likely to be substantial. There are some 44,000 patients diagnosed with pancreatic cancer each year in the US, and in other developed markets the incidence is likely to be at least another 80,000 patients. The treatment duration in this disease is likely to be relatively short since the medicine will not be life-saving, but could reach 3-4 months. Since pancreatic cancer has been a graveyard for other cancer medicines, the competitive barriers and challenges are likely to be relatively modest. Depending on the quality of the data, Abraxane/gemcitabine could easily become the new standard of care for pancreatic cancer, just as other taxane "doublets" form the standard of care for breast and lung cancer chemotherapy. Future trials in this indication are now likely to be "add-ons" of selected targeted and angiogenic therapies to this doublet.

    · To estimate realistic revenue potential, it is feasible that adoption could reach 50% in the US, and 25-30% in OUS markets (given lower pricing for Abraxane in OUS markets and limited adoption in other indications outside the US). At such levels, and with the product's pricing of ~$6,000 per patient per month in the US today (the dose for pancreatic cancer is 25% higher than the standard lung cancer dose), the reasonable 5 year revenue potential reaches $600mm in the US (44,000 x 50% x 4 months x $6000/month x 4% price increases/year x 5) and $300mm OUS (80,000 x 25% x 3 months x $5,000).

    · With the recent successful phase III trial for Abraxane in melanoma, and now this result, we believe investors are grossly underestimating the product's revenue potential for Celgene. Given long patent life for the core formulation patents behind the product (US 2026/EU 2022), we expect the company to consider a portfolio of additional trials in this and other indications. It is hard to over-estimate how significant it is for the company, and this product, to have achieved statistical significance in pivotal phase III trials against gold standard (if only marginally effective) existing treatments for some of the most difficult-to-treat cancers. Such success will invite a host of further trials in other settings and indications in these and other diseases; with all these indications, and further trials, the ultimate revenue potential for Abraxane could be several times current expectations.

    · Our current forecast for Abraxane is for revenue of $437mm this year, growing to $830mm in 2015 and $1.1bn in 2017. Consensus forecasts revenue for Abraxane growing to ~$770mm by 2015, and $1.05bn by 2017. These longer term revenue forecasts could be achieved from pancreatic cancer alone, should the company's results achieve the degree of significance at the upper end of our expectations (2 months or greater OS benefit). Our forecast already included some contribution from additional indications, and geography, but by no means accounts for the full potential of lung cancer and melanoma and pancreatic cancer, all of which are now likely to be added to the existing breast cancer indication. We expect street expectations for the potential of Abraxane to increase materially after the phase III results in melanoma and pancreatic cancer are presented in coming months.

    · For more information about our views of this trial, and our expectations for the results, please see our note of July 13, 2012 ("CELG: Could Abraxane Ph 3 in Pancreatic Ca Offer Upside? Latest Pre Clinical & Clinical Data Surprisingly Encouraging"). We continue to rate Celgene Outperform, with a target price of $96. It is our preferred stock of the large cap names in our coverage, and we are generally more positive about the larger cap names than mid caps in the group, although trends in valuation are already making mid caps much more attractive.

    Investment Conclusion

    We rate Celgene Outperform with a target price of $96. Celgene has taken an old and discarded drug (thalidomide) and invented a whole new class of compounds and a novel approach to cancer treatment based on research into thalidomide’s original activity. Although it has taken many years for that strategy to come to fruition, it now appears that Celgene will capture significant incremental use of its first novel compound in this family, Revlimid, in its two existing indications, myeloma and myelodysplastic syndrome, as well as in other diseases such as NHL and CLL and potentially even in solid tumors.

    Over the next three years, we expect Celgene to deliver ~22% EPS CAGR. The acquisition of Abraxis boosts the company's long term growth outlook, consolidates its position in oncology and leverages the company's established global development and commercialization infrastructure. The returns on this acquisition will depend on successful development in lung cancer at least, and potentially pancreatic and other indications too, as well as international expansion.

    Sentiment: Strong Buy

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    • Rob, in laymans terms will you please give me the stock price the way you see it for three years ,five years and ten years,and please include splits.Ive been long and accumilating for 12 years,My friend Denny said you know your stuff.Thanks H.D.

      Sentiment: Strong Buy

    • Snowball - I love the analogy

    • This is huge from Bernstein...."The company suggested to us that the result was highly statistically significant, and incontrovertibly superior to prior trials, drugs and the control arm of standard gemcitabine chemotherapy" ...."When we asked Celgene about whether this was better than Tarceva, they emphatically confirmed the greater effect."

      • 1 Reply to rob_cos
      • Agree 100 percent re bernstein quote. That statement is priceless. Similar to confident mgmt statements about apremilast. The data presentation this week on PsA is so close to this large positive it will be interesting to see how market digests

        And the additive effect of it diversifying away from rev

        And analysts themselves saying Pc data is where they could be wrong. Apremilast prentation could make those same analysts redo their models 2x in 2 days. Lots of doubters on the 8 billion 2015 revenue. This week changes that


        Sentiment: Buy

    • What a potentially amazing several days upcoming... Celgene, the perenial 1 hit wonder, should see 2x the effect from apremilast and abraxane study data. Huge derisking of pipeline combined with huge steps away from being seen as a 1 drug company.

      snowball is right... Apremilast Phase 3 data in psoriasis + pom FDA approval is RIGHT around the corner.

      None of this is Revlimid driven. Add to all this geo expansion of Rev + MM-020 data in 1H2013.

      Thank you RobCos!

      Congratulations to Summit.

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