RBC-positive front-line Revlimid EU recommendation - new $1 billion+ indication.We like CELG here for 2015+ based on potential settlement on Revlimid patents and 2020 guidance
Celgene Corp. (NASDAQ:CELG; USD 116.48)
Finally positive front-line Revlimid EU recommendation, increasing visible growth
FIRST GLANCE | COMMENT
December 19, 2014
RBC Capital Markets, LLC
Michael Yee (Analyst)
John Chung (Associate)
Long-overdue front-line myeloma indication gets positive recommendation - increasing visibility on long-term growth...
The EU CHMP board issued a positive recommendation for approval for Revlimid for front-line myeloma use (in transplant ineligible pts) based on the MM-020 study, etc. This is 1) a fundamental positive and consistent with our bullish CELG thesis because Revlimid now has a new $1B+ indication to go after and had zero front-line sales in EU but is doing $1B in US already...this helps the 2017+ growth trajectory and beyond; 2) recommendation seems a bit early and should get formal "approval" in a couple months which is earlier than spring 2015 which most had thought/guided to; 3) removes some near-term uncertainty that it was only downside risk and not much upside for the stock but now the recommendation is formal...
We note some investors may point to fact that recommendation was for transplant "ineligible" pts and not "full" front-line including transplant eligible. However the indication they got addresses 65-70% of the front-line market and was at least the base case and we are clear that very few investors would think they'd get the full label. The rest of the 30%+ of the market can be addressed through other Phase III studies we are waiting on longer-term follow-up on OS (CALGB study, and IFM study that are not mature yet...).
We like CELG here for 2015+ based on potential settlement on Revlimid patents and down the line...2020 guidance that gives even more visible growth to investors and
Piper predicts two large-cap biotechs could be acquired in 2015 - Biogen (BIIB), Celgene (CELG), BioMarin (BMRN), Pharmacyclics (PCYC), Vertex (VRTX), Alexion (ALXN), Regeneron (REGN) & Incyte (INCY) could be attractive targets for larger pharma names
Piper predicts two large-cap biotechs could be acquired in 2015
Joshua Schimmer of Piper Jaffray in his list of potential "surprise" biopharma events for 2015 predicted two large-cap names in the space could be acquired. Schimmer says the list of biotechs with above $10B in market cap continues to grow, and now includes Biogen (BIIB), Celgene (CELG), BioMarin (BMRN), Pharmacyclics (PCYC), Vertex (VRTX), Alexion (ALXN), Regeneron (REGN) and Incyte (INCY). Schimmer believes all of those companies could be attractive targets for larger pharma names. Other potential surprises on the list include bluebird bio (BLUE) curing sickle cell anemia in 2015, the Sanofi (SNY)/MannKind (MNKD) Afrezza launch going well, and failed trials wining FDA approval, starting with BioMarin's recently acquired drisapersen. :theflyonthewall
Yes this was it - they said next week but it was this wk. Results even better than I thought and because Abraxane is already on the market expect off-label sales in this indication even before specific approval in it.
CS - CELG a top pick for 2015 - raising target from $125 to $145..Domain Dominance-3 blockbusters, pipeline and patent settlement will provide additional upside...
Key picks from our 46 stock coverage universe: Large Cap – Biogen (TP400) – three high-reward catalysts; CELG (TP$145) – continued "domain domination" premium and patent settlement upside. Smid Cap – OVAS (TP $60) – potential paradigm shift in IVF, ATLN (TP SFr135) – Longer term Uptravi potential, CLDN (TP $20) – high risk/higher reward catalyst due in Q1, IRWD (TP $18) – Linzness ramp + pipeline appreciation, PCTC (TP $66) DMD leader + growing pipeline, ESPR (TP $41) – Catalyst rich 2015.
■ Target price and recommendation changes: We are making the following key changes to our coverage universe: We are downgrading UTHR to Underperform (from Neutral) while increasing our TP to $120 (from $100). We are also making several target price changes as follows: AMGN $180 (from $160), CELG $145 (from $125), ALXN $200 (from $184), VRTX $130 (from $94) BMRN $95 (from $75), ENTA $55 (from $44), IRWD $18 (from $16), XNPT $10 (from $7), ACHN $12 (from $10), SCMP $10 (from $8) and MVIR'B-SK SEK125 (from SEK115).
Celgene – Outperform, TP $145 (from $125 previously): We are increasing our TP for CELG to $145 (from $125 previously) and retaining our Outperform recommendation. Our positive outlook for CELG is driven by a combination of strong growth from CELG's current base business combined with its "Domain Domination" and concomitant pipeline. We expect Celgene to continue to post strong growth driven by the recent launch of three blockbuster drugs – Pomalyst, Abraxane and Otezla with a patent settlement for Revlimid providing further potential upside. We also view Celgene as a company that is furthest along the track to achieving domain domination especially in the areas of dominating the science and translating it into efficacious research, deep knowledge of the regulatory pathways and dominating marketing of products. On CELG’s pipeline, we believe that GED-301 in Crohn’s disease could be a potential blockbuster with the potential to change the entire disease paradigm. Our TP of $145 implies a multiple of ~22.5x on our '16 EPS estimate of $6.44, representing a 50% premium to the '16 PE multiple of the S&P500. We believe this premium is warranted due to the 20% top- and bottom-line growth that CELG appears set to deliver from 2014 to 2017.
Incredibleg really - Priced even HIGHER then Tues close right before announcment and even with market down almost 300 points , Celgene took $26.5 million which is VERY positive they are the best judge of early biotech talent - look at what happened to their partners AGIO, BLUE and XLRN this past week after ASH data t. AMAZING. $120 ++soon. Very, very soon - shorts in some trouble here - no matter how many pennies per post grunts they send to this board to try and scare people. Laughable. Stick with AGIO
Amazing really - HIGHER then yesterdays close right before announced, DESPITE absolute market bloodbath in market. With CELG taking $26.5 million to boot. AMAZING. This is heading to $120 soon. VERY soon
Links want post here but if you want link go to AGIO message board on Investor Village but this is right from the first page of AGIO filing....$120 is coming imo...CELG just validated $110+ is still a buy for AGIO and they are considered the best evaluator of talent (HUGE moves in their partners AGIO, XLRN and BLUE this week because of ASH data)
"CELG wants $26,250,000 of AGIO secondary" - front page of AGIO secondary filing- VERY positive
Celgene Corporation, or Celgene, an affiliate of two of our existing stockholders and our cancer metabolism strategic alliance partner, has indicated an interest in purchasing an aggregate of up to approximately $26,250,000 of shares of our common stock in this offering at the public offering price. However, because indications of interest are not binding agreements or commitments to purchase, Celgene may determine to purchase fewer shares than they have indicated an interest in purchasing or not to purchase any shares in this offering. In addition, the underwriters could determine to sell fewer shares to Celgene than Celgene indicated an interest in purchasing or not to sell any shares to Celgene. The underwriters will receive the same underwriting discount on any shares purchased by Celgene as they will on any other shares sold to the public in this offering. Any shares sold to Celgene will be subject to the lock-up agreements described under “Underwriting.”
P/R not printing....see on yahoo news or investorvillage CELG board
The study found a statistically significant and clinically meaningful 9% absolute improvement from 29% to 38% (p=
Ph III Results from German Breast Group (GBG) Demonstrates Superior Activity in High Risk Early Breast Cancer for Nab-Paclitaxel (ABRAXANE®)/Demonstrate Significant Pathological Complete Response for Nab-Paclitaxel in Neoadjuvant Breast Cancer
2014-12-10 23:01:00.164 GMT
-- Phase III Results from German Breast Group (GBG) Demonstrates Superior Activity in High Risk Early Breast Cancer for Nab-Paclitaxel (ABRAXANE®) VS. Solvent-Based Paclitaxel—
Oral Presentation of GeparSepto Study Scheduled at the 2014 San Antonio Breast Cancer Symposium, General Session 2, 4:45 PM CT, Wednesday, December 10th--
-- Phase III Results Demonstrate Significant Pathological Complete Response for Nab-Paclitaxel in Neoadjuvant Breast Cancer
SAN ANTONIO & NEU-ISENBURG, Germany & FRANKFURT, Germany -- December 10, 2014
The German Breast Group (GBG) said nab-paclitaxel (ABRAXANE®) demonstrated significant benefit for patients with early high risk breast cancer when compared to conventional solvent-based paclitaxel. The findings are from the GeparSepto clinical trial sponsored by GBG and conducted together with the German AGO-B study group involving over 1200 patients, which is the largest randomized Phase III study ever completed with nab-paclitaxel and the first one completed in high risk early breast cancer. The results were presented by the coordinating investigator Michael Untch, M.D., Berlin in General Session 2 on December 10^th, at the 2014 San Antonio Breast Cancer Symposium.
The study found a statistically significant and clinically meaningful 9% absolute improvement from 29% to 38% (p=
Citi.. GeparSepto Abraxane Ph 3 Neoadjuvant Study Could Boost Value for Celgene –
Today at SABCS the German Breast Group (GBG) released positive results from the neoadjuvant GeparSepto Abraxane ph 3 trial in 1,200 women. The abstract is now out and full data will be presented at 5:45pm ET tonight. The data is positive as Abraxane showed superiority by achieving a 38% pCR rate (ypT0 ypN0) vs paclitaxel’s 29% (p=0.01; OR 1.5). This trial enrolled all early breast cancer patients, and subgroup analysis by genetic signature and secondary endpoint will be presented. We note that the FDA recently issued guidance confirming pathological complete response (pCR) as an acceptable surrogate endpoint in neoadjuvant trials. However, we await further guidance as to whether some preliminary EFS data will be required prior to approval in this case
Celgene is now speaking with GBG to acquire the data and see whether it is of registration quality. Celgene provided Abraxane for this study but it was run by GBG. Hence we are still waiting for input about the timelines to cleaning up the data and see whether it will be sufficient for filing. Initial feedback from GBG is that the study should be of registration quality.
This data looks very positive and albeit a 9% pCR benefit is marginal but encouraging enough given that both drugs have the same mechanism of action. The price for Abraxane will be $48k for a 12 wks therapy in the US. This data is a nice upside surprise and as it was not included in Celgene’s long-term guidance.
Potential Market Oppy
We currently do not include sales in this setting in our Abraxane breast cancer model. We estimate that ~75k women are treated with neoadjuvant therapy in the US alone which is ~35% of women. Assuming a 20% penetration this could represent a $720M/yr commercial opportunity for Celgene. The neoadjuvant market is 1.3x bigger ex-US albeit the price is 45% of the US price. Hence sales in Europe could reach ~$420m assuming 20% share.
CS - CATALYST ALERT - GED-031 out soon & ikely to be a paradigm shift treatment of Crohns’s disease given the “goldilocks” profile of significantly more efficiency than anti-TNF’s, with lower AE burden, and oral vs. injectable...what to look for..
Solutions, Insights, and Access
10 December 2014
Americas/United States Equity Research Biotechnology
Celgene Corp. (CELG)
What to focus on in GED301 data granularity
CELG stock is up ~20% since the headline data of Mongersen GED-0301 Phase II study was presented at UEG meeting in Vienna on 21st October.
After this data, we increased our CELG TP to $125 and reiterated our view that Mongersen is likely to be a paradigm shift treatment of Crohns’s disease given the “goldilocks” profile of significantly more efficiency than anti-TNF’s, with lower AE burden, and oral vs. injectable. Within our data preview and post view notes we provided “apples-to- watermelons” comparison of GED301 vs. anti-TNF PII/PIII clinical data as most recently summarized in our “GED301 Domain Dominates” note (LINK) and below in Exhibit 1.
CELG management has guided that further granularity of the PII trial is due to be published in a peer reviewed journal in the very near future. We note the NEJM online edition is available on Wednesdays at around 7pm EST.
The key data within this publication we are looking for to fill out our “Apples-to-watermelons comparison” table (Exhibit 1) are: (1) Clinical response (CDAI 70) at 4W and 12W (previously released PII was at CDAI 100 and anti-TNF’s have given numbers at CDAI 70) – ANY NUMBER for 160mg 80 at 4W and 50 at 12W = GOOD. (2) Clinical response (CDAI 100) at 12W (previously released PII was at 4W) – ANY NUMBER OVER 50 for 160mg at 12W = GOOD.
In addition to Phase II trial publication, another major interest is the design of PIII trial protocol. As previously guided, it is expected that PIII will begin by the end of Q4:14.
The key variables around the Phase III study design will be: (1) The requirement for endoscopy primary end point (either as single or co-primary) vs. CDAI alone.
O We note the comments made most recently by RCPT management on its view that endoscopy as a primary endpoint is likely required by the FDA for at least UC studies (2) Dosing protocol given the ‘acute treatment” nature of PI/PII studies so far conducted by CELG. We expect a “run-in” period of 1-3 months of daily dosing then a “phasic” (e.g. dosed for a week every 3 months) maintenance period of a minimum of 6 months; and (3) PIIb trials run in parallel to PIII trial to look into, for example CRP stratification and specific CD populations such as gastro-duodenal, fistulizing, etc
PREVIOUS SLIDES FROM CS
GED-0301: Topline 4W PII Data For Mongersen (GED301) Released – More Data (12W) Due Tuesday Morning. “Notably better efficacy than anti-TNFs but in an oral pill with lower AE’s” thesis supported. We are attending UEG, Published 10/20/14 at 12AM
Summary: The UEG meeting abstract for the PII data on Mongersen (aka GED-0301) in Crohn’s Disease was released yesterday afternoon. The abstract contained 4W data, 12-week data will be presented on Tuesday. The key data and comparisons from the abstract (with the notable “apples-to-watermelon” caveats) are Mongersen 40/60mg (2W+4W) remission of 55%/65% vs. Remicade and Humira (4W only) of 48% and 12% respectively; response rates (for Mongersen of 100 points or more) of 58%/72% vs. Remicade and Humira (70 point or more) of 81% and 41%. Headline safety data suggest a well-tolerated Mongersen. Thus data so far support a “notably better efficacy than anti-TNFs but in an oral pill with lower AE’s” thesis. Our aspirational up-and-over for 4W reemission was 80%. Details of our “apples-to-watermelon” analysis for Mongersen can be found in our 6th October note – “The Apples-To-Watermelons of GED-0301 vs. Humira/Remicade” – DOCUMENT LINK
GED-0301 4-week data hit our “up-and-over” numbers. The primary endpoint of clinical remission rates (CDAI score
Sentiment: Strong Buy
Bernstein note out this am - "Celgene's Revlimid plus Rituxan finally and decisively better than Rituxan alone in Front Line Follicular Lymphoma"
huge. two well studied reasonably well tolerated drugs, NHL market much bigger market than Multiple Myeloma
In my opinion it will be closer to $20 billion
Really Looking Forward to the 2015 J.P. Morgan Conference! (Gonna be a GREAT one given CELG comments on margins, 2014, 2015, near term positives)...
Jan 12th JP Morgan CELG presentation will be VERY positive- I'm so excited I am going to it - anyone with JP Morgan connections should try to get in - Dr Fouse (President of Hematology and Oncology - former superstar CFO) already told us Sunday that they are VERY comfortable with the rest of this yr vs estimates and that there are MANY upside items in 2015.... She also said she intends to INCREASE MARGINS in 2015 in Hematology and Oncology side of business (the huge majority) Here are just three of her comments:
"I intend to INCREASE margins in 2015 in the hematology and oncology side of the business"
Business overview - JF - "we have a lot coming in the VERY NEAR TERM, lots of growth in 2015, new data at ASH like ASPIRE not in our guidance, Conservative guidance with lots of potential upside....even more confident after seeing the ASPIRE detail...we have thought about it but have been VERY conservative in duration in our model and this will be positive upside to that duration
We are feeling GREAT about our business for the rest of this yr - VERY confident vs estimates...and definitely for 2015. Lots of upside items, approvals, commercial acceleration...Revlimid duration, new indications, MDS should triple next couple yrs.
JMP-Positive Data From MDS-005 Study Significantly Enlarges MDS Market for Revlimid- CELG TOP LARGE CAP PICK....$17 BLN+ revenues by 2020....
CELG said MDS sales will triple in the next 2 yrs. CELG estimates for 201 through 2017 are VERY VERY conservative.
December 9, 2014
Biotechnology - Company Update
Celgene Corporation (CELG)
Positive Data From MDS-005 Study Significantly Enlarges MDS Market for Revlimid
Positive Phase III data read-out at ASH 2014 for Revlimid in non-5q minus
MDS significantly expands the market opportunity for the drug in this setting;
we reiterate our Market Outperform rating and $117 price target (based on P/
E multiple and DCF methodologies) on Celgene Corporation. Data from the 239
patient (randomized 2:1) Phase III trial (MDS-005) was presented by Dr. Valeria Santini
from the University of Florence at yesterday's main session at ASH on myelodysplastic
syndromes. The results showed a large increase in the proportion of low/intermediate-1
risk patients who were free of transfusions for more than eight weeks (26.9 vs. 2.5%,
p 8 weeks was achieved by nearly 27% of patients, vs.
2.5% of patients on placebo. Responses were also rapid and durable; 90% of patients
achieved transfusion independence by cycle 4 (28 days per cycle), and median duration
of response was approximately 33 weeks. On the more stringent metric of transfusion
independence for 24 weeks, 17.5% of Revlimid-treated patients achieved the endpoint
vs. zero on the control arm. On the other critical endpoint of transformation to AML, the
event rate per 100 person-years was 1.91 in the Revlimid arm vs. 2.46 in the control
arm. From a safety perspective, it was comforting to us that the SPM (second primary
malignancy) rate was nearly identical in both arms.
MDS-005 data is key to the expansion and growth of CELG’s MDS/AML franchise, and dovetails
with Acceleron’s red blood cell stimulating “twins.” Celgene is barely scratching the surface in the
MDS with the current label that is limited to the (del)5q MDS patient population, which is approximately
15% of all newly diagnosed MDS. Within the newly diagnosed population, roughly two-thirds are
considered to be low/intermediate-1 risk. Assuming regulatory approval, the market opportunity
suddenly looks six-to-seven times larger for Revlimid, as the duration of therapy is roughly equivalent to
our assumption in the (del)5q MDS patient population (~8.0-8.5 months). We are also enthusiastic
regarding the possibility of the combination with Acceleron’s (XLRN, MO, $52 PT) red blood cell
stimulating “twins,” sotatercept and luspatercept. Given the multi-factorial nature of MDS, and the
somewhat myelosuppressive properties of Revlimid, we believe one can readily contemplate
concomitant or sequential therapy of Revlimid and sotatercept or luspatercept. Given the similarity of
the patient population in the Plaztbecker study of luspatercept in a low/intermediate-1 risk population,
and the impressive hemoglobin response and reduction in transfusion burden, we view these results as
highly complementary to the Revlimid findings by Santini.
We remain bullish on Celgene and forecast total revenues to rise to $17bn+ by 2020. We expect
Celgene’s four blockbuster drugs (Revlimid, Abraxane, Otezla, and Pomalyst) to drive revenues in
excess of $13.4bn by 2017, and $17bn by 2020, while investments in collaborators like Acceleron,
Epizyme (EPZM, MO, $40 PT), Oncomed (OMED, MO, $28 PT), Agios and others should ensure
growth from 2017 and beyond. We continue to view CELG as our top large-cap pick and reaffirm our
estimates and Market Outperform rating.
FIGURE 1. Upcoming Potential Milestones
Timing Drug Milestones
2H14E CC-486 Initial Phase I priming data in solid tumors in combination with
Abraxane or carboplatin (AZA-ST-001)
2H14E CC-292 Initiate Phase I/II CC-292 + Revlimid combo study in CLL
2H14E Revlimid Presentation of Phase III in non-del5 MDS (MDS-005)
2H14E MOR202 Phase I readout in RRMM (ASH)
2H14E Revlimid Initiation of Phase II trial in non-GCB DLBCL
2H14E Abraxane Initiation of Phase I/II combination trials with anti-PD1 antibody (PanC,
2H14E CC-486 Initiation Phase I trial in solid tumors
Oct 21E GED-0301 Phase II Crohn’s data at UEG Week, Vienna
4Q14E Otezla CHMP opinion for psoriatic arthritis and psoriasis
4Q14E Sotatercept Phase IIa update in renal anemia (ASN meeting, Nov 11-16)
4Q14E Sotatercept/ACE-536 Phase II updates in in β-thalassemia and MDS (ASH, Dec 6-9)
4Q14E GED-0301 Initiation of Phase III trial in Crohn’s disease
2014E Demcizumab Presentation of Phase Ib combination with Abraxane in PanC and
Feb 22E Revlimid PDUFA in NDMM
Source: JMP Securities LLC, Company reports
SABCS CELG Abraxane Late Breaker is THIS WEDS (in 2 days) A randomized phase III trial comparing neoadjuvant chemotherapy with weekly nanoparticle-based paclitaxel with solventbased paclitaxel followed by anthracyline/ cyclophosphamide for patients with early breast cancer
Since its a late breaker the actual abstract is embargoed until the day of the presentation - you could hear the excitement in Dr Fouse's voice when she specifically brought this non-hematology Abraxane Late Breaker up at ASH - should be a positive suprise imo. (Of Course GED-031 in NEJM or Lancet could come at anytime in weekly publications or online first as well this week) – Analysts/Investors not focused on this yet imo.
San Antonio Breast Cancer Symposium 2014
Program Schedule Daily Schedule - Wednesday, December 10, 2014
4:45 pm S2-07. A randomized phase III trial comparing neoadjuvant chemotherapy with weekly nanoparticle-based paclitaxel with solventbased paclitaxel followed by anthracyline/ cyclophosphamide for patients with early breast cancer (GeparSepto); GBG 69
Untch M, Jackisch C, Schneeweiß A, Conrad B, Aktas B, Denkert C, Eidtmann H, Wiebringhaus H, Kümmel S, Hilfrich J, Warm M, Paepke S, Just M, Hanusch C, Hackmann J, Blohmer #$%$, Clemens M, Costa SD, Gerber B, Nekljudova V, Loibl S, von Minckwitz G. Helios Klinikum Berlin-Buch; Sana Klinikum Offenbach; University Hospital Heidelberg; Elisabeth Krankenhaus Kassel; Universitätsklinkum Essen; Institute of Pathology, Charité-University of Berlin; Universitätsklinikum Schleswig-Holstein Kiel; St. Barbara Kliniken Heesen; Kliniken Essen Mitte; Eilenriede Klinik Hannover; Kliniken der Stadt Köln; Universitäts-Frauenklinik rechts der Isar, München; Praxis Bielefeld; Rotkreuzklinikum München; Marienhospital Witten; St. Johannes Hospital Dortmund; Mutterhaus Trier; Universitäts-Frauenklinik, Magdeburg; Universitäts-Frauenklinik, Rostock; German Breast Group, Neu-Isenburg; Universitäts-Frauenklinik, Frankfurt am Main
Sentiment: Strong Buy
Cantor Fitz - Strong ASH - Raising PT to $131 from $120, & 2016 & 2017 EPS on Margins...Strong Tailwind...Partners Coming into View..ABRAXANE Upside?...We Continue to Like the Shares
December 8, 2014
Target Price: $131.00
Strong ASH - Raising PT to $131 from $120, and 2016 & 2017 EPS on Margins
o Strong Tailwind. Celgene, in our view, appears to have a strong tailwind
heading into 2015 and beyond, based on the volume of data that support the
core hematology franchise, Revlimid and Pomalyst, as well as the potential from
partnered assets. At ASH thus far, compelling evidence for continued duration
of treatment as well as combinations (novel, triplets, etc.) for multiple myeloma,
with Revlimid serving as a backbone, is in evidence. This is not a new dynamic,
but the totality of it speaks to continued growth for the already sizable multibillion
franchise, in particular due to opportunities in disease other than multiple
o Partners Coming into View. We have previously pointed to the upside
opportunity from the company's large Phase II pipeline and stable of partnered
relationships, which have yet to be fully incorporated in the valuation, in
our view. With some key data presented thus far from partners and the
opportunity for advancing candidates into pivotal studies, we believe that
additional valuation expansion could occur.
o Glimpse of Things to Come. In addition to data presentations from Celgene sponsored,partner-sponsored and other clinical programs, an investor reception
was also held on December 7th. With the company reconfirming that operating
leverage should continue to persist, we think there is continued opportunity for
rising EPS forecasts. As a result, we are raising our 2016 (nonGAAP, ex-
SOE) EPS forecast to $6.29 from $6.15, based on this dynamic, and 2017
as well. With this, our PT is now $131, or 21x our new 2016 EPS forecast
o ABRAXANE Upside? In addition to the ASH-related data, Celgene also
highlighted ABRAXANE neoadjuvant data to be presented at the San Antonio
Breast Cancer Symposium later this week. With neoadjuvant treatment growing,
and the franchise having experienced weakness in 3Q:14, we think it possible
that new data could boost to sales trends.
o We Continue to Like the Shares. We continue to like Celgene shares for
the revenue and EPS growth opportunities, dynamic pipeline (e.g., GED-0301,
multiple partnerships, post-ASH digestion, and additional indications from
currently marketed products), share repurchase, and the overall directionality of
EPS growth. We maintain our BUY rating.
Celgene’s portfolio diversification story is in full swing, with the approvals and launches of Pomalyst and ABRAXANE in pancreatic cancer earlier this year and OTEZLA, which posted nearly a three-fold increase in revenues between its initial launch and first full quarter on the market. A second and larger indication of psoriasis was added to OTEZLA’s label, and we believe it will be a significant market opportunity. The company’s flagship product, REVLIMID, should maintain growth from new indications and increasing duration of treatment, but we believe it is the combination of EPS upside from new products and indications and a strong milestone calendar that should drive P/E multiple expansion. Revlimid is the most significant component of the company’s top and bottom lines and the focus of great scrutiny, but revenue and earnings acceleration should also come from new products and indications, and this is spread over multiple products, hence diminishing risk from any one single product.
We have held the view that new sources of revenue, in their totality, could be meaningful to the company, and this has included the launch of POMALYST, new indications for ABRAXANE, and the approval/launch for OTEZLA. With ABRAXANE moving to become a foundation of treatment for pancreatic cancer and POMALYST hitting the market globally, we are forecasting strong sales and EPS growth. The company has a robust Phase II pipeline, which is under-appreciated, in our view, and there is a high degree of operating leverage in the P&L, suggesting multiple levers to earnings growth.
Our price target is $131, which reflects our view that the shares can maintain the current 20x multiple on our 2016 EPS forecast, now $6.28 up from $6.15. We continue to think that an industry-leading P/E multiple is warranted given accelerating double-digit EPS growth through 2017, strong cash flow, upside from the portfolio (REVLIMID, POMALYST, ABRAXANE, OTEZLA), and strategic value as a leading hematology company. We also believe a high multiple of sales is justified given accelerating top-line growth, reflective of our $131 price target
Celgene CEO Hugin on CNBC Fast Money Halftime starting at Noon
Scott Wapner ScottWapnerCNBC 48s48 seconds ago
ALERT: Laszlo Birinyi, Rick Rieder and an exclusive with the CEO of CELG. Today at Noon
RBC - CELG hosted an ASH analyst event which supported our bullish view that CELG - duration & recent data reads "all add on top" of RLI guidance/duration - incr Target to $135 from $115"
CELG, PCYC mgmt meetings from ASH
Increasing CELG PT to $135 from $115
December 8, 2014
RBC Capital Markets, LLC
Michael J. Yee (Analyst)
CELG hosted an ASH analyst event which supported our bullish view that CELG: (1) thematically is in the midst of an early innings pipeline thesis on display at ASH, (2) investor enthusiasm on partnered pipeline (AGIO, XLRN, Sutro, Venti-RX, Acetylon HDAC, etc) should pick up over the next couple of years, driving an increasingly positive view of CELG's future growth drivers beyond Revlimid, and importantly, (3) mgmt has been conservative on Revlimid long-term guidance and duration of therapy and recent read-outs from AMGN ASPIRE (and probably pending ABBV ELO study) all "add on top" of Revlimid and make duration of therapy longer, eg., towards 22-25mos duration and 20% better than 15-18mos used in the last few years.
Positive takeaways: (1) CELG acknowledges Revlimid duration of therapy will keep going up based on "combinations" and they've been waiting to see ongoing datasets (eg., ASPIRE) before incorporating into their models and long-term guidance, (2) CELG reiterated a commitment to margin expansion which might be a positive sign towards 2015 guidance in January, (3) positive commentary on Phase III R-squared (Revlimid/Rituxan) in front-line iNHL (our consultant feedback is also positive on that study), (4) commitment to MOR-202 anti-CD38 differentiation on combinations though they're still dose escalating to find optimal dose.
We are raising our Celgene price target to $135 from $115 based on our increasing confidence in CELG's emerging pipeline, longer duration of therapy given all these combinations with Revlimid. We use a higher target multiple of 23x 2016E EPS (up from 19x) in our valuation, which is a premium to peer group of 18-22x based on strong pipeline and above average margins as well as visible growth coming out of ASH. Our bear case is: settlement with ACT is apparently "expected", no catalysts after ASH and stock at highs, partnerships don't impact revenues until 2017+, MOR-202 too far behind JNJ/SNY.
PCYC: Post our meeting with management, we maintain our Sector Perform (Speculative risk) rating on PCYC based primarily on valuation and our view that consensus peak of $6B already accounts for CLL label expansion and the additional indications coming are in analyst models already. We view 2015 US Imbruvica consensus $805-850M as achievable but scripts need to be watched as NRx have plateaued for the last 2 months. Consensus $130M+ OUS seems achievable for FY15. Note we confirmed in discussions that Veterans Affairs (VA) business can be slow and requires much back-and-forth to confirm formulary and will probably be less than 5-7% of revenues consistent with Revlimid and Hep C drugs. However, PCYC management does think NRx will eventually pick up as they're trying to get community docs, where some are using only in handfuls of pts and just trying Ibrutinib, to use it much more broadly across their eligible pts. Also, for TRx, perhaps a natural bolus of sickest, relapsed CLL pts got on therapy in 2014 and some might be coming off, offsetting NRx, and causing TRx to moderate right now.
That said, in the bigger picture we do see a number of positive catalysts later in H2:15 that could lead investors to get excited about label expansions and push PCYC stock higher: (1) Phase III RESONATE-2 study will likely be positive on PFS (80-90% confidence) at final analysis (there's no interim analysis) and open Imbruvica to "tx-naive" front-line CLL pts 65yo (our consultant estimates 10-20% more pts treated after data); (2) Phase II DAWN study in follicular lymphoma should be positive and open up $500M-$1B long-term opportunity; Phase I showed 30% ORR, which is lower than GILD Zydelig of ~50% and PFS ~12mos and has got accelerated approval. We'd want to see 50% ORR levels or better PFS than GILD