BMO "Aprem a $billion + blockbuster. Worth +$5 to CELG shr price. $90 target"
BMO "Another Potential Blockbuster in Apremilast for Psoriatic Arthritis.REsults better than expected. $1 billion+ opp worth $5 to share price"
Stock Rating: Outperform
Industry Rating: Outperform
Another Potential Blockbuster in Apremilast for Psoriatic Arthritis
Celgene hosted an investor meeting late yesterday to review phase 3 data for oral PDE4-inhibitor apremilast in patients with psoriatic arthritis (PsA) presented at the American College of Rheumatology (ACR) annual meeting. Detailed review of the PALACE-1 study supported a statistically significant benefit at week 16 in the primary endpoint of ACR20 symptom response at 41% for apremilast 30mg BID vs. 19% for placebo overall, 51% for apremilast 30mg BID vs. 11% as monotherapy and 35% for apremilast 30mg BID vs. 24% when added to disease modifying anti-rheumatic drugs (DMARDs) like methotrexate (MTX). Improvements were also seen in ACR50 response at 22% vs. 4% and ACR70 response at 12% vs. 1%, with a dose response seen between apremilast 20mg BID and 30mg BID. Improvement was also seen in disability and skin manifestations and prominent GI side effects in phase 2 were limited by slower dose titration with only ~5% of patients discontinuing owing to GI effects vs. 3% with placebo.
PALACE-1 results are better than expected, superior to that seen in phase 2 and suggest symptom benefits comparable to injectable anti-TNF agents. Improved efficacy with apremilast monotherapy vs. combination therapy with MTX should support switching vs. add-on use, a potential benefit given problems with MTX safety and efficacy to begin with. We are awaiting YE12 data on apremilast in psoriasis (PsO) and further detail on pricing to add apremilast revenues to our model but with ~600,000 eligible patients and premium pricing to $4-$6K/year DMARDS we believe that a $1B+ opportunity is emerging worth ~$5/share today.
Our 2012 non-GAAP EPS estimate is $4.89.
Our $90 price target is based on 16x our 2013 non-GAAP EPS estimate of $5.63.