PJ "Pom launch ahead of ests. MM020 delay positive. AAD Aprem data Sat could = upward revisions. $126 tgt. Our top pick"
PJ "Mgt dinner confirms CELG as our top pick for 2013. Pomalyst launch ahead of internal expectations. MM-020 slowdown could point to positive data & upside to ests. AAD Aprem detail could lead to upward revisions. OW. Target $126
Celgene Corporation (CELG)
Dinner with Management Confirms Our Bullish Outlook for 2013
C O N C L U S I O N
We are reiterating our Overweight rating and outlining CELG as our top large cap pick for 2013 following dinner we hosted with management. There were three key takeaways from the dinner that support our bullish outlook:
1) Pomalyst could get off to a fast start as use could rapidly expand to earlier lines of treatment, despite its recent approval in refractory multiple myeloma (MM) patients,
2) MM-020 data unlikely until late 2Q13 (vs. April previously) as PFS event rate has slowed down, which could signal improved outcomes with Revlimid + dexamethasone in newly diagnosed MM patients and
3) Apremilast Phase III psoriasis data at the AAD conference on Saturday/Sunday could confirm an efficacy and safety advantage relative to methotrexate and potentially biologics. These factors could drive upward revision of long term revenue and earnings guidance and upside to CELG shares.
• Pomalyst launch ahead of internal expectations. Celgene confirmed Pomalyst has shipped to the distribution channels and all specialty pharmacies and physicians are registered to prescribe the drug through the required Pomalyst REMS program. While scripts have been written for patients, within the typical 3-4 week timeframe after the Feb 8th approval, we will not have access to scrip number as Celgene has restricted the data from 3rd party sources, i.e. IMS and Source Healthcare Analytics. Management has conveyed that Pomalyst prescriptions to date are at or ahead of internal Key Performance Indicators (KPIs). We believe the real world experience could be better than the clinical trials in terms of safety as anecdotally, physicians have observed improved tolerability with Pomalyst compared to Revlimid. Trial data had suggested less hematological toxicity than Revlimid, but increased neurotoxicity.
However, tolerability issues have not been a main concern, in our view, and opens Pomalyst treatment in earlier lines of therapy. The confirmatory Phase III study, MM-007, is an SPA approved trial, which based on FDA discussions required Velcade +dex as the active comparator arm, and will likely enroll patients with fewer prior therapies (3-4 vs 5 in Phase II). We continue to believe that our $67mn estimate and Street’s $72mn for 2013 Pomalyst sales remain highly conservative given Kyprolis’ $62mn in less than 6 months of sales last year, Pomalyst’s survival benefit in the MM-003 Phase III study, and higher pricing (Pomalyst $10,500 vs. Kyprolis $9,950).
Slow down in event rate in the MM-020 could point to positive data. Celgene has revised its timing for Revlimid MM-020 Phase III results to late 2Q13 (mid-year) from April, after observing the trial’s event rate slowing dramatically over the past month. We continue to expect positive data, as MPT (comparator arm) has consistently showed a 24 month median PFS, whereas continuous Revlimid treatment reached 31 months (MM-015), with Rev + dex likely supporting better outcomes in MM-020. The MM-020 study is 80% powered to show 25% improvement in PFS for Revlimid+dex over MPT (30 vs 24 months). The trial is also designed to show a survival benefit, being 78% powered for a 25% improvement in OS (54 vs 46 months). Given the substantial clinical evidence of earlier trials, we believe the delay could be attributable to the superior Revlimid benefit. Overall, we expect a significant PFS benefit, a trend toward overall survival, and an SPM rate lower than MPT; supporting European approval and rapid cannibalization of MP based regimens (Thalomid and Velcade based); which could support upside to our assumptions for peak front line/maintenance sales in Europe of $2-3bn.