We had an opportunity to meet with CELG management recently and were encouraged by management confidence in its long-term financial objectives, with potential upside from Revlimid use in the first-line setting, geographic expansion and new indications and significant room for operating margin expansion. We remain positive on CELG’s long-term fundamentals and remain one of the Street high estimates for peak Revlimid sales.
Revlimid Metrics Suggest Significant Room For Growth. CELG management provided some incremental detail on current and future predicted Revlimid metrics. Market share for Revlimid in the first-line setting remains in the mid-50% range in the U.S. Current duration of therapy across all lines of therapy averages at 15 months in the U.S. and nine months in Europe. These numbers are consistent with our estimates in 2013. We remain confident that both significant penetration and duration gains can be realized in the U.S. and Europe. Although penetration rates are already robust in the U.S., we were encouraged that the company believes a full label with new data from long-term follow-up of previously reported Phase 3 studies and data from the new MM-020 study could drive at least an additional 10-15% market share over time in the U.S., in line with our estimate of peak 68-70% first-line market share. In Europe, the company was not specific about penetration targets, but we believe that first-line penetration rates in the major EU countries could eventually approach those in the U.S., as was the case for relapsed/refractory market share in both geographies. The company was not willing to quantify its target for duration of therapy in the U.S. or EU, but management highlighted the potential for duration to expand significantly with up to 45% of U.S. physicians still unwilling to endorse Revlimid dosing to progression. We see the company's estimate of $6b in 2017 Revlimid sales (vs. JEF $8.8b) as highly conservative. (continued in reply to this message )
Lastly, from the perspective of what investors may be missing of particular interest in the early and late stage pipeline, management highlighted the ankylosing spondylitis indication for apremilast and also CC-486, an oral version of Vidaza in three Phase 2 studies for solid tumors to explore whether it may have properties in enhancing chemotherapy efficacy.
Multiple Additional Growth Drivers Highlighted: Pomalyst, Apremilast, Revlimid In NHL, Oral Vidaza. CELG reiterated its confidence that its long-term revenue target through 2017 for a doubling from $6b to $12b is eminently achievable. There were several notable revenue growth drivers beyond Revlimid in myeloma highlighted. First, management noted that it has been very pleased with the recent launch of Pomalyst, its new myeloma drug for relapsed/refractory disease. We continue to believe that long-term extended duration of therapy with Pomalyst as it moves into the second-line setting could be a driver of upside. Second, the company remains excited about apremilast for psoriatic arthritis and psoriasis. Of its guidance for $1.5-2b in 2017 apremilast sales, the company estimates that slightly over half will come from the psoriasis indication. While we remain well below guidance at $400m, we are becoming slightly more positive on apremilast given the clean safety profile, oral delivery, and an aggressive pricing strategy in which management reiterated its intention for at least a 25-30% discount relative to approved biologics. The company reiterated its strategy to retain marketing rights in the U.S. to target rheumatologists but remains open to a potential partnership in dermatology. Third, although the company noted that its Revlimid sales estimates in 2017 for use in front-line follicular non-Hodgkin’s lymphoma are modest as the launch of this indication will still be in the early stages, management noted that off-label use in second-line NHL may be enabled now by the recent availability of a 20mg tablet of Revlimid, the dose that was used in the trial to support reimbursement approval through compendia listing in this indication. Previous to the recent approval in mantle cell lymphoma, a 20mg tablet had not been commercially available. (Continued in another reply)