125 REASONS TO OWN CELGENE
Rob_Cos/JBWIN416
1) Already solidly profitable for 13 consecutive quarters and a CAGR that is the envy of the industry,
2) Over $770 million in cash and marketable securities,
3) Extremely conservative estimates (excluding many upside income items) suggest CELG will generate over $3 billion of free cash flow from 2006-2010, even AFTER the enormous $1.5 Billion R&D expenditure estimate in those years to move this great pipeline forward.
4) This cash flow and the recent stock price appreciation (that should continue) gives the company great flexibility to use cash and/or equity to acquire strategic companies or products to further bolster their pipeline and global position and knowing Bob Hugin, with potential ACCRETION to earnings.
5) Consistent unwavering long-term vision of becoming a global, highly profitable pharmaceutical company specializing in small molecule and cell-based therapies targeting cancer immune/inflammatory diseases articulated by senior management for several years with execution as evidence to confirm progress. This management team has for years bypassed short-term hype and glory for the future and that future has now arrived.
6) Consistent history of meeting or beating EPS estimates and regularly raising guidance for the future.
7) Net Operating Loss Carryforward will help offset taxes on profitability. As of December 31, 2005 Celgene has combined state and Federal NOL carryforwards of $416.7 million as well as $19.7 million of research and experimentation credit carryforwards that expire in the years 2006 through 2025.
8) CELG beat earnings estimates handily in the first quarter DESPITE spending millions in RLI launch costs. Thalomid Q1 revenues of $107.2 million exceeded most estimates despite Revlimid’s availability. Revlimid Q1 revenues of $32.4 million beat consensus estimates of $23 million by OVER 40% and EPS (ex option exp) of .09 cents beat the .06 consensus estimates by 50%!
9) Revlimid Q1 sales beating estimates by 40% is truly spectacular given that it was just approved and the large Insurance and Medicare Part D coverage/administrative hurdles it encountered, especially in the first half of the quarter. It now appears that the most difficult administrative hurdles are under control, which bodes well for the full Q2 RLI sales given the momentum of the last half of Q1.
10) The Q1 off-label RLI sales percentage of 30% stunned Wall Street and was 6 times the expected 5% off-label use. What made this even more eye-opening was how quickly patients have gotten “broad off-label Revlimid insurance and Medicare coverage” per CELG management.
11) While the 20% MM off-label RLI Q1 sales was staggering, perhaps what was even more stunning was that 10% of all Revlimid scripts were in indications other than MM and MDS. This is truly amazing. This appears to indicate CLL doctors are prescribing RLI for their patients that have failed other therapies much quicker than anyone thought.
30% off-label and 10% non-MDS/MM off-label are two of the most important Q1 numbers Wall Street has yet to truly factor into their revenue forecasts.
12) Company has achieved accelerating profitability and a huge cash hoard, DESPITE reinvesting 45% of sales dollars back into R&D for years and developing diverse pipeline.
13) Since these significant R&D expenses hit operating expenses in years before approval, these investments set up huge earnings acceleration upon approval and launch of blockbuster drugs like Revlimid. Given the manufacturing cost of the actual pill is minimal and the real cost of drug development charged to prior years, the 95%+ margins (and double analysts’ expected price) will cause earnings acceleration seldom seen in other industries. There are few industries, where accounting rules allow so much of your products’ real cost to be charged to operating expenses in earlier years. This is the reason biotech stocks earnings and stock price appreciation really accelerates after blockbuster approvals. AMGN and DNA’s real stock appreciation began after they introduced their first blockbuster – CELG is now at that launching point of pending significant stock appreciation. (Read and re-read this important reason).
14) Scalability - Revlimid is cheap and easy to produce, price and margin (95%+ vs. 84%) is SIGNIFICANTLY higher than Thalomid. CELG can use the current established commercial sales/marketing infrastructure to easily and quickly ramp up. Wall Street has still not come out of the ether as to just how powerful this combination is to EPS CAGR after a blockbuster approval. “THE POWER OF 95”
15) Revlimid carries a modest 1% royalty on sales for licensing of IP to Children’s Hospital of Boston as opposed to the 10% average obligation on Thalomid sales, 9% Cost of Sales savings right to the bottom line.
16) Revlimid in MDS 5q- is priced in the range of $4,500 to $4,700 per month for 5 and 10 mg dosing. The typical dose for Revlimid in MM is 25 mg. While no pricing guidelines for r/r MM have been released prior to approval, a conservative estimate is $6,000 to $7,000 per month. At 95%+ gross margin and 9% less royalty than Thal, this will drive an earnings acceleration that will be spectacular over the next year and beyond.
17) Celgene has differentiated itself by controlling the entire process from drug discovery to development to commercialization for strategically important areas.
18) Potential of two drug approvals in the next 5 weeks or sooner with (1) RLI in refractory/relapsed MM and (2) Thal in newly diagnosed MM after two approvals last year (Focalin XR in pediatric, adolescent, adult ADHD and RLI in MDS 5q-).
19) Thalomid has become the recommended standard of care in FIRST-LINE Multiple Myeloma therapy by the National Comprehensive Cancer Network, a network of prestigious; thought-leading US based oncology centers.
20) FDA approval for Thalomid in MM appears likely May 25 after CELG has complied with all requests and worked in detail with the FDA since the approvable letter requirements were defined.
21) Further staggering efficacy evidence supporting Thalomid approval was provided in Jan2006, when an external Independent Data Monitoring Committee (IDMC) analysis of the multi-centered, phase III study of combination THALOMID plus dexamethasone versus dexamethasone alone as induction therapy for previously untreated multiple myeloma met the pre-specified interim endpoint for stopping the trial. The IDMC found time to disease progression of 75.7 weeks for the arm that included Thalomid versus 27.9 weeks for dexamethasone alone. Treatment assignments have been unblinded and all patients currently on the trials will have the opportunity to add THALOMID to their regimen. STAGGERING EFFICACY!
22) John Jackson estimated Thalomid sales/scripts could increase 10% to 15% after approval in Multiple Myeloma (as sales force will be able to directly market for the first time) without factoring in any price increase.
23) In addition, expect a substantial Thalomid price increase on approval. Celgene Mgt recently confirmed publicly that Thalomid's current price is 55%-60% of monthly Velcade price. It was clearly stated that Thalomid pricing has always been behind the curve, as it was originally priced cheaply because original thought was it would be used in AIDS wasting (cachexia). CELG has been constrained pricing Thal as a MM drug therapy, since it wasn't approved for MM. Despite Thal’s position as gold standard of care in that indication, it would be like rubbing off-label indication in the face of the FDA, if you priced it like Velcade and then had to defend the higher price publicly due to its predominant use in MM. This all changes, with Thal approval coming soon. Expect a significant Thalomid price increase to close the gap between Velcade and Thalomid. (Hugin at MS on 3May2006 even talked about closing the RLI/Thal gap - although it won't be closed completely, they would want to do this before the 25 mg RLI pill for MM is available on or quite possibly before 30Jun2006). The cost/benefit will remain in Thal’s favor vs. Velcade even without considering the clinic/doctor’s office visit and the hassle and physical and emotional toll of IV drugs on patients. Thalomid's current price is 55%-60% of monthly Velcade price. This all changes upon approval.
24) Significant Thalomid price increase is not in most analysts’ estimates – they will have to increase earnings estimates with Thalomid price increase and after the MM pricing is announced with RLI 25 mg pill.
25) The use of Thalomid after chemotherapy in small cell lung cancer (SCLC) improves the average survival rate by four months. In a trial performed in conjunction with the community oncology sites of the Ireland Cancer Center, an average survival of 13 months was observed as compared to a standard survival of 9 months for this disease. Revlimid/IMiDs may show even better efficacy.
26) Of the doctors JMP surveyed (53 or approximately 13% of total, but a larger percentage of high-prescribers, capture rate greater than 60%), an overwhelming majority were aware of Revlimid prior to its approval. The data also indicated that almost all of the doctors have a very high (46%) or high (46%) level of enthusiasm for Revlimid in MDS. The hematologists noted that the drug’s favorable safety and efficacy profile, especially in transfusion-dependent patients, was medically meaningful, appealing and would be influential in their treatment decisions.
27) Additionally, and most compelling in JMP’s view, is that over half of the doctors (54%) surveyed would use Revlimid for MDS patients who did not harbor a 5q minus chromosome deletion. Most of these hematologists indicated that they would use Revlimid in all of their MDS patients, especially patients who require blood transfusions, thus signaling the potential for off-label use in a greater MDS population than indicated in all the analysts’ models.
28) In the JMP survey, Revlimid outranked Vidaza in all MDS subtypes. Based on the survey data, it is clear that Revlimid has the potential to take a significant portion of Vidaza’s market share in all IPSS subtypes.
29) While 70% of RLI blowout Q1 sales were in MDS, it appears that more than originally expected is in non 5q- indications of MDS. On May 22, Rodman & Renshaw sent a note to clients stating that Revlimid continues to accelerate in all lines of treatment for MDS in Q206. They noted acceleration in all MDS lines, taking significant share away from the market leader, Pharmion's Vidaza, in second line and above. Most analysts have conservative penetration estimates in these lines, which will have to be updated if R&R’s claims are confirmed.
30) Expect RLI to be approved for Multiple Myeloma probably before ASCO and the June 30th PDUFUA date. Most analysts including JP Morgan state there is “a good likelihood of an FDA decision on Revlimid’s label expansion in MM ahead of the drug’s PDUFA date”. The compelling SPA P III trial data, Celgene’s cooperation with the EAP program requested by the FDA, the lack of a 25mg pill and staggering 20% off-label MM RLI prescriptions with doctors using varied doses makes early approval likely.
31) Early approval for RLI in MM is indeed supported by the SPA and two Phase III trials confirming results so staggering, that they had to be halted because it was no longer ethical to withhold Revlimid from even one patient due to efficacy. RLI+Dex has totally eclipsed all previously agreed to endpoints required for approval in two separate large randomized double-blinded Phase III trials on two different continents. It has now been OVER ONE YEAR since an external Independent Data Monitoring Committee review determined that both Phase III Special Protocol Assessment pivotal trials overwhelmingly exceeded the pre-established efficacy stopping rule of p <0.0015 for the primary endpoint, time to disease progression And in addition to the initial positive efficacy profile, the safety profile was favorable. With Revlimid already approved by the FDA based upon a single arm Phase II non-blinded trial with limited patients and dosing questions, it is now up for approval based upon two double-blinded PHASE III trials on two different continents that were stopped for STAGGERING EFFICACY. To make the approval even clearer, these 2 separate large number of patient Phase III trials both confirm each others results rather remarkably.
32) The SPA trials that CELG has run are the type the FDA wants to be the example for the future – what other drug companies should emulate. Data from the International and North American Phase III SPA Trials will be updated at ASCO. These trials were designed to investigate the effectiveness and safety of cyclic dosing of REVLIMID at 25mg combined with high-dose dexamethasone (HDD) compared with placebo and HDD in previously treated patients with multiple myeloma. These trials enrolled 705 patients and are being conducted in 97 sites internationally.
33) Expect the update at ASCO in early June on the MM-009 and MM-010 trials to be impressive. Data presented at a meeting of the American Society of Clinical Oncology last year showed that patients with advanced multiple myeloma who were given Revlimid in combination with chemotherapy took an average of 15 months to relapse, compared with five months for patients taking chemotherapy plus a placebo. Revlimid is more potent than Thalomid and has fewer side effects. The Phase III trial showed that 61.2 percent of multiple myeloma patients taking Revlimid responded to the drug, compared to only 22.8 percent taking chemotherapy plus placebo. Of those, 26.5 percent saw their cancer go into complete remission, compared to 4.1 percent of those taking the placebo. AMAZING COMPLETE RESPONSE IN REFRACTORY / RELAPSED PATIENTS IN ADVANCED STAGES OF THE DISEASE WHO FAILED OTHER THERAPIES!!
34) Celgene CEO Sol Barer discussed these results of the RLI MM P III SPA trials at 2005 CELG Annual Meeting and called them “stunning” and stated that the CR in MM-009 has “not been seen in cancer trials, especially this patient population.” There were “huge” differences between the curves (arms) of both MM-0009 and MM-010 and unheard of p values with “overwhelming statistical significance”. Sol stated publicly that the Complete Response is “NOTHING SHORT OF REVOLUTIONARY.”
35) Updated trial results on these trials that were released at ASH in Dec2005 confirmed Revlimid improves overall survival and delays time to disease progression. The updated clinical data from the pivotal International Phase III trial (MM-010), demonstrated that the combination of REVLIMID plus dexamethasone led to a statistically significant improvement in median time to disease progression (p=0.001). The updated clinical data from the pivotal North American Phase III trial (MM-009), reported that the combination of REVLIMID plus dexamethasone led to a statistically significant improvement in overall survival in addition to a statistically significant improvement in median time to disease progression. As of June 2005, median overall survival in patients treated with REVLIMID plus dexamethasone has not been reached as compared to 104 weeks with dexamethasone plus placebo (p=0.013). Data from the International study reported that the median time-to-disease progression with REVLIMID plus dexamethasone was 49 weeks, compared with 20 weeks for placebo plus dexamethasone (p<0.001). Best response rate with REVLIMID plus dexamethasone was 59 percent, (p<0.001) compared with 24 percent for placebo plus dexamethasone. Complete response (CR) and near complete response (nCR) rate (based on EBMT criteria) with REVLIMID plus dexamethasone was 17 percent (p<0.001), compared with 4 percent for placebo plus dexamethasone. And these are patients who had had been heavily treated prior to enrollment, many having failed three or more rounds of therapy with other agents. In addition, more than 50 percent of patients in the study had undergone stem cell transplantation. THESE ARE THE SPA trials the FDA have reviewed for pending RLI MM approval.
36) John Jackson, CELG's CEO at 2005 ASCO conference has said: "I think Revlimid has the potential to be a multibillion dollar drug, assuming it is approved in multiple myeloma and myelodysplastic syndromes," If Revlimid is approved, Jackson said, "it will be a transforming event for Celgene and enable us to transform ourselves into a worldwide organization."
37) Focalin XR was approved by the FDA in 2005. Introducing a chirally pure, once a day formulation with lower dosage and less side effects is powerful motivation for Novartis to invest significant additional marketing dollars and gain market share. The NDA covers both the existing pediatric market as well as adult ADHD, which is new for them. Ritalin LA already has shown results of superiority to Concerta with Focalin XR potentially that much better.
38) Substantial increase in royalty percentage to 30% for ALL Ritalin/Focalin products. FIRST time original inventor has paid royalties on an entire line – brilliant CELG negotiations.
39) Ritalin/Focalin franchise “re-energized.” Increasing volume and market share has been spurred by new extended release versions of Focalin XR and Ritalin LA - sales are now surging. Revenue from Focalin and the Ritalin family of drugs increased of 84.4% in Q106 versus same quarter last year. Expect acceleration to continue with royalties going right to CELG bottom line and exceeding analysts’ estimates. JJ confirmed that Focalin XR market share is over 10% and Ritalin/Focalin combined over 18% and surging without the cannibalization anticipated by analysts. At the B of A Novartis presentation, a senior Novartis Executive noted how well Focalin XR is doing in 2006.
40) Physicians are extremely bullish on the prospects for Focalin XR, as they believe that as a cleaner and differentiated drug with a favorable side effect profile, Focalin XR will be a strong competitor with ALL THREE CLASSES of ADD/ADHD drugs, not just the methylphenidate class.
41)Novartis is running head-to-head trials of Focalin XR versus Concerta, which may further fuel cross-over sales if the results are favorable. Concerta generated about $840M in 2005 and may cross $1B in 2006. Novartis only generated about $135M last year but now Focalin XR is causing a sales surge. Over 900 sales reps will be selling Focalin XR, so upside contributions to the bottom line can be expected in 2006.
42) CELG prudently retained the commercial rights to Focalin/Focalin XR for oncology related disorders like cognitive dysfunction with chemotherapy (so-called “chemo-brain”) and will receive a royalty equivalent to 95% of revenue in that indication. Data from Phase II trial very positive – Celgene has stated publicly that it will articulate its development strategy in this indication in 2006.
43) Management team has demonstrated excellent timing in capital markets with over-subscribed $400M convertible debt deal with then lowest coupon rate of 1.75% at a 50% premium in June 2003 as well as a $300M secondary offering in 2000 before the window for deals closed.
44) Management team has enhanced CELG’s R&D capabilities and pipeline through well-timed acquisitions of Signal Pharmaceuticals in August 2000 and Anthrogenesis (placental stem cells and cord blood banking) in December 2002 without depleting cash resources during times, when the biotech IPO market was weak using CELG stock as currency.
45) CELG recognizes the importance of controlling its destiny. Example is the acquisition in Oct 2004 of Penn T in the UK to control Thal production given the importance of this revenue stream.
46) Negotiated partnerships demonstrates exceptional business acumen as evidenced by the Novartis relationship, where CELG receives 30% royalty across the entire Ritalin/Focalin product line (escalating from an initial 10%) as the first time where the company that brought the original drug (Ritalin) to market paid a partner royalties on that stream in addition to new revenue generated by partnered drugs like Focalin. The Dec2004 PHRM deal to reduce Thal royalty rates for PHRM in exchange for an enormous upfront payment clearly indicated CELG’s appreciation of its leverage timed with PHRM’s last quarter of last year before becoming profitable and elimination of the clawback of marketing rights if PHRM did not successfully receive Thal approval in UK by 2006.
47) CELG exhibits corporate leadership with generous compassionate free access to Thal representing 17-18% of 2005 sales, much of which has started to convert under the 2006 Medicare Rx plan as management guided that 70% of those receiving free access are Medicare eligible This helped the Q106 and should help future quarters even more.
48) CELG owns the patents for the STEPS registration program (expiring between 2018 and 2020), which was required to gain approval from the FDA to distribute Thalomid, but now also provides an example of cashing in on IP by licensing the STEPS technology for the four manufacturers of accutane/generic accutane with additional prospects in the future. The signed deals with Roche and Allergan to license rights to their STEPS program (revenues and earnings from such agreements are currently excluded from ALL analysts financial models) should go right to the bottom line. STEPS and RevAssist also allow better than usual tracking of indications, patient demographics, etc.
49) Management understands the benefits of leveraging its sales force. Per the 2005 10K, a top shelf 234 person U.S. sales and commercialization team is responsible for RLI, Thal, Alkeran (in-licensed from GSK approved in core MM indication as well as ovarian cancer) and Celgene’s Cellular Therapeutics’ products. According to the TNS Healthcare 2004 Quantitative Image Survey Celgene’s sales team ranked #10 among hematological oncology companies even though they are unable to market Thal (indication for ENL until 25May2006 with a newly diagnosed MM label) and prior to RLI’s approval in MDS 5q- (with new indication for r/r MM on or before 30Jun2006).
50) CELG is one of JP MORGAN’s top Biotech picks for 2006. After blowout Q106 earnings, JPM reiterated it’s “OUTPERFORM” rating in a report titled “Multiple catalysts should continue to drive outperformance”. Report continued: ”These include formal approval of Revlimid for MM (likely ahead of the 6/30 PDUFA) and 2H06 decisions in the EU for MM and MDS, a strong ASCO (June 2-6) with 24 posters and presentations, NHL data for Revlimid at EHA (Euro Hematology Assoc; June 15-18), upcoming registration trials of Revlimid in CLL, NHL, as well as trials in myelofibrosis and sickle cell anemia (Actimid) and in moderate to severe psoriasis (CC- 10004), indications that are not in our current operating model.” JPM further commented:”Given Celgene’s valuation on a P/E/growth basis, which we view as reasonable, the rapid acceleration of earnings over the next few years, and the abundance of meaningful near-term catalysts, we expect Celgene shares to outperform its biotech peers.”
51) CELG is one of MERRILL LYNCH’S top bios for 2006. Prior to Q1 blowout earnings, ML raised its price objective from $39 to $49 and increased estimates, but called its Revlimid estimates “purposely conservative” and called CELG a must have core biotech holding.
52) CELG is also a top MORGAN STANLEY pick. They recently raised their FY2006 Revlimid sales to $260MM (from $190MM) based on the strong first quarter. They now have a $48 price target. Comments from their April 27th report-“We expect the stock to maintain its positive momentum with strengthening of street confidence in: 1) a blockbuster Revlimid launch for multiple myeloma and 2) the potential for wider use of Revlimid in low risk MDS. Additionally the aggressive development of Revlimid in expanded indications like newly diagnosed MM, NHL, and CLL has the potential to provide greater upside in the long term and maintain positive news flow in the near to mid term. Upcoming catalysts are 1) Thalomid PDUFA for MM (May 25, 2006), 2) Revlimid PDUFA for MM (June 30, 2006), 3) Revlimid pricing for MM, 4) 24 presentations at ASCO, and 5) Revlimid in NHL at EHA in June.
53) FRIEDMAN, BILLINGS, RAMSEY added Celgene to their “Top Picks List” on April 27th after Q1 earnings citing the strong Revlimid rollout and the big plans in NHL and CLL. They have their highest Outperform rating on the stock and a $48 target and raised their Thalomid sales, Revlimid sales, earnings and EPS estimates and noted their could be significant further upside as CLL and NHL could DOUBLE Revlimid’s addressable market. Celgene will present at FBR growth conference on May 31st.
54) PIPER JAFFREY recently initiate coverage of CELG with an “Outperform” rating and a $50 target price and noted there could be additional upside above that: ”based on our expectations that Revlimid sales will drive strong top-line and bottom-line growth over the next several years, coupled with expanding operating margins and the benefit of a lower tax rate.”
55) BEAR STEARNS on April 28th upgraded CELG to “Outperform” and increased its Dec 2006 target to $52 after RLI Q1 sales of $32.4 million crushed their $7 mill estimate. “We see further upside to Celgene shares based upon continued growth of Revlimid, positive data for Revlimid in myeloma, CLL, and NHL at the upcoming ASCO and European Hematology Association meetings in June as well as the anticipated US approval Revlimid in multiple myeloma”. They also expect positive trial results from a Phase II study of Revlimid in amyloidosis and positive data for Revlimid in renal cell carcinoma. They are also very “bullish on the Small/Mid Cap Biotechnology due to the continued innovation and strong long-term fundamentals”.
56) JMP Securities issued a CELG report Apr 28 stating: ”Revlimid Surpasses Expectations; Thalomid Sales Still Strong; Raising Price Target from $42 to $48”. While they raised estimates, as with most firms they quickly stated their estimates were conservative with “potential upside remains from EU sales and additional RLI indications”. They have zero in their models for EU and despite 10% of Q1 sales being non-MDS/MM, they have zero in their models for indications outside of MDS/MM. They understand the upside though – “Moreover, the company is planning for global commercialization of Revlimid with submissions in preparation for Switzerland, Japan, Australia, and Canada and broadening clinical trials in countries. In addition, progress has been made in other hematologic and solid cancer indications, including front-line MM, non-Hodgkin’s lymphoma (NHL, Phase II), chronic lymphocytic leukemia (CLL, initiate registration program), myelofibrosis, renal cell carcinoma, and prostate cancer. While we do not model revenue from these earlier-stage programs yet, we believe NHL could represent the largest potential hematologic market with over 200,000 patients in the US. We anticipate a single-agent trial and two Phase III trials in combination with Rituxan to be submitted to the FDA for Special Protocol Assessment (SPA) and initiate in 2H06. We also look for interim data from the NHL trial at the European Hematology Association (EHA, June) and a strong presence from the company at ASCO (June), where 24 oral and poster presentations (11 on Revlimid, 33 on Thalomid) and a plenary session on Thalomid in front-line combination therapy will be presented.”
57) Citigroup/SB has their highest “Buy” rating on CELG’s stock and after the blowout first quarter stated “We are particularly impressed by the widespread potential of Revlimid in hematological malignancies and expect multiple positive ph II results at ASCO. CELG is moving to sign SPA’s for ph III studies in CLL and NHL by year-end. Reiterate “BUY” due to strong launch, solid news flow, and unappreciated pipeline.” And while they are one of the most bullish firms on Wall Street, they realize the need for them to increase their $43 price target per their May 7th report which stated “We recognize the dissonance between our buy rating and 4% expected total return, we plan to address this issue over the next few weeks once results from our ongoing physician survey become available.” That was over 2 weeks ago so expect a Citigroup target increase and positive physician comment report VERY soon.
58) Over the last 12 months, almost each time Celgene did upwards cross the -80 Williams oversold indicator, the stock did have a significant run up. Last week, Celgene was in oversold territory and on Friday May 19, we did cross the Williams -80 upwards. Based on historical indicators, we can expect a 30% to 50% jump based on historical chart data and on strong upcoming catalyst. Chart with Williams Indicator:
skylinetools.com
59) On April 13th, 2006 the number of shares shorted was 19.5 million and it will take about 6 days for those shorts to buy back those shares and "buy cover" in order to return those shares back to the broker from whom they were borrowed from . The anticipated maximum pain price the shorts will buy cover is when Celgene will be trading at $46.22. This could create a powerful short-squeeze. It could drive the stock to $50+ within a few hours/days on very high volume when CELG hits the $46.22 area.
60) Last year the BTK “Biotech Index” was following a similar downtrend pattern as this year. Biotech is considered a safe-haven during the so called “Sell in May and Go Away” period based on S&P 500 price action from 1945 to the present. When we study the BTK chart, we can see a similar pattern repetition of last year. Biotech index chart:
skylinetools.com.
61) Historically, biotech stocks have significantly outperformed the market during periods when oil has risen. Bio sector should outperform in the summer with commodities investors likely to sell and look for a new sector and oil, despite backing off recently, at relatively high historical levels. In addition, according to Standard and Poors, the healthcare sector has a historical 5.6% increase during May to October, which is the highest increase of all sectors.
62) Analysts are projecting continued significant move in bios through 4th qtr 2006 as earnings acceleration is realized due to 2006 Medicare changes/drug launches.
63) Current IBD overall rating for CELG is 94% (A). As of May 23, it is the number 2 ranked stock in Medical/Biomed/Biotech Group, #2 of 273 (99%). Technical rank is #7 of 273 (97%), fundamental rank #5 of 273 (98%),and attractiveness rank #13 of 273 (95%).
64) On May 23, there was a major technical reversal in the .25 P&F chart for CELG. The new target is 45.25
65) Multi-year CELG cup with handle breakout chart will be finalized shortly.
66) CELG will most likely hit a new all-time high this month. Remember that IBD says “Breakouts to new highs are "the most dependable indicator of a continuing trend"!!!! Per IBD: "…You must learn to recognize a new high as a potentially bullish signal....When a stock price nears or enters new high ground or breaks above a previous trading range, the market has found some reason to reappraise the underlying company ..most of us are taught to look for bargains....avoid stocks that have made big run-ups. The investor...figures he missed the boat - which becomes a self fulfilling prophecy. Other investors try to get cute....they get interested but wait for a pullback...The trouble is, the sale may never come. You probably get a modest pullback 4 of 5 times. However, the one time you don't get a pullback, the market moves very quickly up, never giving you a chance to enter -your lost opportunity on that one of 5 times is much larger than the amount saved the 4 times. ... Breakouts to new highs show the market is up to something. They are the most dependable indicator of a continuing trend"
67) A myriad of major Wall Street firms currently cover CELG including JP Morgan, Merrill Lynch, Bear Stearns, CiticorpSmithBarney, CE Unterberg, Leerink Swann, Piper Jaffray, Sky Capital, Thomas Weisel Partners, FBR, Morgan Stanley and JMP Securities.
68) These firms are outwardly admitting that they are not including major potential income drivers in there models and are significantly underestimating the Revlimid market and revenue potential. VERY IMPORTANT POINT IS ONCE RLI IS APPROVED IN MM AND WITH LIKELY POSITIVE SUPRISES COMING FROM A FEW AREAS, ALL OF THESE MAJOR FIRMS WILL LIKELY HAVE TO RAISE THEIR EPS ESTIMATES SIGNIFICANTLY HIGHER VERY SOON. OF PARAMOUNT IMPORTANCE IS UNDERSTANDING THAT WHEN THE REVENUES ACTUALLY COME IN WELL ABOVE THESE PURPOSELY CONSERVATIVE ESTIMATES THEY WILL BE AT HIGH SALES PRICES AND 95% MARGINS WHICH WILL CAUSE STAGGERING EARNINGS BLOWOUTS ABOVE CONSENSUS. AND JUST WAIT FOR AN EU APPROVAL – THAT WILL BLOW THEIR CONSERVATIVE MODELS OUT THE WINDOW. “THE POWER OF 95”
69) BLOOD Online published results of a phase 1/2 clinical trial of thalidomide in combination with fludarabine as initial therapy for patients with treatment-requiring chronic lymphocytic leukemia (CLL) that showed a stunning overall response rate of 100%, with 55% of patients achieving complete remissions. At a median follow-up of 15+ months none of the patients have had a relapse and the median time to disease progression has not yet been reached. Responses were noted at all dose levels. An ongoing phase 2 part of this study will help validate the clinical efficacy of this regimen. Based upon early RLI results in CLL noted below, it is likely a RLI/fludariabine combination may have even stronger efficacy then the stunning thal/flud trial results noted above.
70) At ASH, clinical results were presented on REVLIMID as an innovative approach for treating patients with relapsed or refractory chronic lymphocytic leukemia (CLL). Dr. Chanan-Khan of the Roswell Park Cancer Institute, Buffalo, New York reported that 16 of 19 (84.2%) evaluable relapsed or refractory CLL patients responded to treatment with REVLIMID including 15% CR, 53% PR and 15% stable disease (SD). The three remaining patients to date showed progressive disease (PD), but adding Rituxan to Revlimid resulted in all three showing responses. Big market not contemplated in any analysts estimates. These promising results led to a decision to pursue P III SPA trial with 10 CLL trials expected by YE2006.
71) Early results in CLL are important as another large indication market with 100K patients in the U.S. and reaffirms belief that RLI is more than just an MM/MDS drug, but a broad hema drug. This view is supported by many cooperative group-funded trials and other trials in a broad array of indications. Examples include SWOG/ECOG in newly diagnosed MM, CALG-B maintenance after HDM with SCT, COG pediatric tumors, CALG-B NHL, ECOG myelofibrosis. OVER 50 REVLIMID TRIALS ARE ONGOING in an extensive list of indications from malignant blood disorders to solid tumor cancers and initial indication is that most have significant efficacy. Remember CELG management’s comments that MDS/MM are only the beginning for Revlimid.
72) In a JP Morgan report, they said “we expect to see a broad clinical program emerge for Revlimid in both the solid and liquid tumor setting including non-Hodgkins lymphoma (NHL), non-small cell lung cancer (NSCLC), renal cell carcinoma (RCC), ovarian cancer and prostate cancer among others”.
73) Celgene was added to the Nasdaq-100 on July 5, 2005 causing index related funds to purchase a lot of shares and making the short hedge fund manipulation of the past more difficult.
74) Many brokers and analysts believe CELG will be added to the even more important S&P 100 in the near future, which would cause demand for millions of shares of stock.
75) Ridiculously low PEG ratio calculation based upon 2006 PE and the long term growth. JP Morgan’s recent report noted the reasonable PEG ratio.
76) Many CELG insiders in the first qtr 2005 exercised thousands of options that had years left before expiration and have not sold. Celgene board member and former IBM CEO Frank Cary exercised 30,000 UPSIDE DOWN options with 7 years left before expiring. The only reason to do this is for tax purposes if you think there will be very, very significant appreciation in the stock price. The stock soared shortly thereafter and has continued higher.
77) Recently, we have similar option action. A Form - 4 was released showing John Jackson on May 1 exercised hundreds of thousands of options that had 7-8 years left before expiration. He exercised stock options that DO NOT EXPIRE UNTIL 2010, 2013 and 2014 and, while (similar to in May 2005 pre trial halt) he sold enough shares to pay the exercise price / taxes, he increased his shares owned by 44% to 1,942,435 Celgene shares up from 1,346,374 owned last week. Sol Barer also recently on April 7th (before Stellar earnings were released) exercised options that DO NOT EXPIRE UNTIL June 2013 and Jan 2014 and he did not sell and increased his direct ownership of shares to 713,150 Celgene shares. Once again, this appears to be a brilliant tax planning move as they will pay higher ordinary income taxes/alt min taxes on the diff between the FMV on day exercised and the strike price and could result in MUCH lower capital gains tax treatment on the rest of the huge gains they MUST BE expecting. History and a review of income tax rules strongly suggests that this is a HUGELY BULLISH sign and would only be done for tax purposes if the execs expect the share price to appreciate SUBSTANTIALLY in the NEAR TERM. Very similar to the play made immediately before the MM trial was stopped for staggering efficacy. Jackson now owns 596,000 more CELG shares than he did April 30. Those who have been around for the past year or so understand just what a HUGELY BULLISH sign this is - that an insider closest to the trial results, company negotiations and earnings who thinks the stock is about to move MUCH higher from the stock price the day of exercise. It really is the ONLY way to LEGALLY utilize such inside knowledge to profit, by reducing tax expenses and the ONLY reason to exercise these options 7/8 years early and HOLD your related shares. THIS IS LIKE SENDING A FLARE THAT GOOD THINGS ARE COMING FOR CELG STOCK PRICE IN THE NEAR TERM.
78) Stem Cells –Brilliant acquisition of Anthrogenesis , now branded as Celgene Cellular Therapeutics (CCT), in November 2002 using the leverage of CELG’s currency in an all stock deal. CELG had an earlier collaboration with Anthrogenesis, which gave a glimpse of the future value of this investment with the ability to combine the Signal Research group’s cellular signaling technology with the IMiDs immunmodulatory characteristics to promote particular types of cell differentiation. The long-term view is stem cells have the potential to deliver long-term management, if not cures of some diseases. The company kept a relatively low profile on CCT until intellectual property for placental stem cells (PSC) was solidified. Early CCT efforts focused on biomaterials and partnerships with academic institutions in areas such as wound covering and heart transplant as well as LifeBank USA’s umbilical cord blood enrollment, collection and storage. Expect big clinical news in 2006-2007. CCT has developed a PROPRIETARY method for harvesting LARGE quantities of placentally-derived stem cells - setting the stage for the potential therapeutic use of (non-controversial) stem cells in the area of regenerative medicine. Not on analysts’ radar screens but VERY much on CELG execs’ minds – you can hear the excitement in their voices.
79) Placental stem cells (PSC) are in their infancy in terms of contribution. The spotlight is shining bright as CCT received its first PSC patent award with media coverage on major outlets such as CNBC and CNN. Patent #7,045,148 covered methods of collecting PSC. Additional IP will be built with 16 additional pending patent applications for PSC. One of the most exciting is a 2004 vintage covering methods of using JNK or MKK inhibitors to modulate cell differentiation and to treat myeloproliferative disorders and MDS, which brings together all three major CELG research groups. Patent protection will provide the impetus to bring PSC into the clinic. CCT chose to start with cord blood in an IND for sickle cell anemia with PSC to follow once IP was firmly protected.
80) Sickle cell anemia (SCA) is a potentially powerful target for PSC. This genetic disease causes fetal hemoglobin (HbF) to be silenced at birth with adult hemoglobin (HbA) taking over. SCA reduces life expectancy by 30 years. The PSC approach involves using IMiDs to modulate stem cells that reawaken HbF and diminish production of HbA. Given the current administration’s position re Embryonic Stem Cells, non-controversial placental-sourced stem cells may provide significant value to CELG shareholders and hopefully bring relief to many patients in need. The best method of unlocking this unit’s shareholder value may be as a pure play spin-off traded under a separate ticker as stem cell companies will benefit from different (more speculative) valuation metrics than CELG. Of course, CELG would retain significant ownership given the interactive research and development activities.
81) CELG’s pipeline is not even remotely represented in the current stock price with attention focused on existing products and the success of RLI in MM and MDS. Earlier stage pipeline families such as kinase inhibitors, ligase modulators, benzopyan and tubulin inhibitors are well under the radar in development at Signal’s San Diego facilities. Valuable IP is being built. Dominant IP in areas such as JNK/ligases will likely result in millions in licensing revenues.
82) Undervalued assets on CELG Balance Sheet. Celgene owns 3.35M shares of preferred stock convertible into 16.75M common shares of Entremed in addition to 7M common shares exercised on 31Mar2005. CELG overall ownership in ENMD is 24.9% with the current market cap 109M. ENMD investment was written down to zero on CELG balance sheet. CELG also has the rights to a new ENMD molecule. ENMD licensed the development and commercialization of tubulin inhibitors from CELG in March 2005 in exchange for a $1M upfront payment, future milestone payments and future royalties. In some respects, this investment serves as an additional research arm. CELG enjoys a substantial unrealized gain on 1.94M shares of PHRM acquired at an average price of $10.65 based on conversion of a note and warrants with PHRM trading over $20 per share as of 22May2006. This stake currently represents a 6.1% ownership on PHRM.
83) Acquisition of Penn T in Oct2004 facilitated control of global Thal manufacturing and increased PHRM royalties significantly, provided significant upfront cash and increased EPS in future quarters.
84) Celgene’s Investor/Analyst Day provided incredible update about our extensive pipeline AI; CC-11006, 10015 entering clinic; PDE4 program CC-10004 currently in P II Proof of Principle; Kinase CC-401 JNK in AML; reviewed earlier stage ligase, benzopyran, NfKB; PCS and biomaterial in wound healing, hemapoetic reconstitution, cardiac repair, sickle cell anemia. Wall St has taken some notice, but they are assigning zero values in their targets to “the rest” of this unbelievable pipeline.
85) Jerome Zeldis, MD, PhD CELG's Chief Medical Officer said at the 3Nov2005 Investors Day meeting, "Signals we are getting from clinic in other diseases besides MDS and MM. I want to echo what Shawn said - MM and MDS is only the beginning of Revlimid and Revlimid is indeed only the beginning of the IMiDs.I don't know if they have a term "MEGABLOCKBUSTER" but it would be a MEGABLOCKBUSTER".
86) CELG management has now stated publicly several times that Revlimid is the “tip of the iceberg” for the IMiDs and that they expect one new “designer” IMID to enter the clinic each year and that the new IMiDs will be able to be more targeted to specific diseases and differentiated from other IMiDs. And CELG owns all of the intellectual property for all of the IMiDs
87) It appears that Celgene management think Actimid (CC-4047) is even better than Revlimid in certain indications - mind boggling! Actimid has shown the highest complete response rate EVER SEEN in Multiple Myeloma. Actimid is an orally administered small molecule, and one of our most potent IMiDs compounds under development. CELG is planning Phase III trial to start in 2006 as a potential treatment for myelofibrosis with additional P II trials in sickle cell anemia, amyloidosis and potentially small cell lung cancer (SCLC). CC-4047 and Revlimid have different mechanism-of-action profiles, which may lead to their evaluation in different diseases or different stages of the same disease.
88) The third IMiD, CC-11006 is now in the clinic in inflammatory/immunological indication. This IMiD does not cause neutropenia, which is dose limiting aspect of Revlimid and Actimid. CC-11006 is an oral compound that Celgene has identified as a potential treatment for hematological malignancies and chronic inflammatory diseases. Many of these diseases, such as inflammatory interstitial pulmonary fibrosis and scleroderma, are largely untreatable today. CC-11006 entered clinical trials in late 2005, and Celgene will evaluate their development options upon their completion.
89) A fourth IMiD, CC-10015 is a potent, orally administered IMiDs compound that has shown the ability to penetrate the central nervous system (CNS) in multiple animal models. Celgene expects CC-10015 to enter Phase I clinical testing in CNS-related immunological or inflammatory diseases by the end of 2006.
90) Looking beyond these initial IMiD compounds, Celgene will continue to make a substantial investment in immunomodulatory compounds designed with different attributes and offering exciting clinical potential in both oncology and non-oncology applications. In addition, Company scientists are honing in on the precise cellular and molecular mechanisms that are IMiDs’ compounds targets. This research will lead to a more thorough understanding of IMiDs biology resulting in new clinical and commercial applications.
91) Celgene has significantly strengthened one of the already strongest bio/pharma management teams in the industry with significant additional regulatory and European expertise added. The ability of CELG to recruit top talent speaks volumes about CELG’s future prospects.
92) Several IMPRESSIVE key additions came in advance of key regulatory actions, product launches and international expansion. The Celgene clinical and regulatory management team has been further strengthened by the addition of Robert J. DeLap, M.D., Ph.D., as Vice President of Global Medical Research. Dr. DeLap has extensive medical and scientific background, and a broad range of experience in academic medicine, pharmaceutical drug development, and regulatory affairs. His prior experience has included several years at the U.S. Food and Drug Administration, where he served as Director of the Division of Oncology Drug Products and later was Director of the Office of Drug Evaluation in FDA's Center for Drug Evaluation and Research. He has also held senior positions in drug development and regulatory affairs, at other major pharmaceutical companies, and was on the faculty of the Georgetown University School of Medicine. The sales team is now led by Shawn Tomasello in her role as Vice President of Sales after a 17 years at Genentech (DNA) and 23 years overall in the pharmaceutical industry. In her most recent position, she led the National Sales Force responsible for Rituxan, the #1 selling Oncology Product in the U.S. Marketing is now led by Mark Alles in the role of Vice President of Marketing with 13 years of oncology experience and 18 overall in the pharmaceutical industry. He served most recently as VP of the Oncology Business Unit at Aventis working on a variety of oncology products including #3 U.S. selling oncology drug Taxotere.
93) Confirming CELG’s long-term vision of becoming a major global biopharma,
Aart Brouwer joined in November 2005 as President, Celgene International. His forty year career in global biotech and pharmaceutical industries includes developing the European market for the world’s largest biotech firm, Amgen, as Vice President, Europe, from 1989 to 2002. He served as Chairman of IsoTis NV and ran the BioNetwork consultancy after leaving Amgen. His significant network and CELG’s growth prospects have been instrumental in recruiting top talent for country managers and medical directors in Europe. Beyond Europe, significant regulatory discussions are taking place in Canada, Singapore, Japan and Australia. The stated goal is building a world class international organization with country specific P IV trials in Europe and Asia.
94) On 26Oct2005, the European Medicines Agency (EMEA) accepted the Marketing Authorization Application (MAA) for Revlimid in MDS 5q- based on P II data that resulted in FDA approval on 28Dec2005. While there is no guarantee that this aggressive regulatory strategy will be approved, Revlimid could be on the market for this indication by the fourth quarter of 2006. On 7Apr2006, CELG announced that the Feb2006 submission of the MAA for Revlimid in refractory/relapsed MM was accepted for review based on SPA P III trials MM-009 and MM-010.
95) Revlimid appears to have STAGGERING potential in CRPS and Pain. The analysts are missing the enormous possibilities of Revlimid/IMIDS in treating CRPS and Neuropathic pain. Someday this year - it could be soon - we will get an update on RLI in CRPS and other pain indications that will be staggering, Just another HUGE area not even slightly contemplated in analysts or investors expectations but they may come out of the ether soon. During the Nov 3 Investors Day, a presentation was made by Don Manning, MD & PhD and the Executive Director of Neurosciences Clinical Reserach and Development. titled "Neuroimmune Mechanisms in Chronic Neuropathic Pain - The Potential Role for IMiDs". It noted that immunomodulatory cytokine-oriented therapy works in this area - an area with very little help currently available - DEBILITATING pain - CRPS is "the worst of the worst" of pain syndromes. There is a high rate of disability, amputations and suicide. And Revlimid helps! Open label study proved it and the results were presented at the World Congress of Pain in Australia. Patients who took it had: 1) Significant, sustained reduction in pain ratings, 2) Significant improvement in mood, sleep, work, walking, relations with others and enjoyment of life, 3) Broad CRPS symptom relief. 4) Sustained Benefit for >1 yr. The largest neuropathic pain condition in the world is Painful Radiculopathy (see www.clinicaltrials.gov for trial info). 4-5% of the population involved. Over 8 million potential patients in 2005. And encouraging IMiD data presented at World Congress of Pain. Trials are ongoing. The presenter showed a slide and stated that1) IMiDs are a logical and innovative approach to chronic neuropathic pain therapy, 2) Revlimid data for CRPS treatment are VERY promising and suggest a BROAD BENEFIT BEYOND PAIN RELIEF, 3) Entry into CRPS could allow future expansion into other neuropathic pain area".
96) Celgene was the star of ASCO and ASH in 2005 and will be again in 2006 with the RLI in MM, MDS and CLL leading the way. Investors should re-review the recent reports from JP Morgan, Merrill Lynch, Freidman Billings, Morgan Stanley and others. ASH 2005 included 107 abstracts submitted globally from MM to MDS, CLL, lymphoma, myelofibrosis, amelydosis, NHL. Thal had 74 abstracts with 13 oral and 32 poster sessions. Revlimid had 30 abstracts with 9 oral and 17 poster sessions including a plenary session on MM-010, the Europe P III SPA trial for r/r MM. Some ASH highlights include (1) update on MM-010 showing TTP for RLI+dex 13/3M versus 4.7 dex only and overall response rate 59% versus 24%; (2) RLI+dex in newly diagnosed MM demonstrating 91% objective response in a 34 patient P II trial with 6% CR and 32%. Celgene garnered significant positive press during 2005 ASH. Expect more of the same form 2006 ASCO.
97) The upcoming ASCO meetings June 2-6, 2006 in Atlanta promise to expand the
understanding of diversity of applications in Revlimid and Thalomid. Revlimid currently has 6 oral presentations and 8 poster sessions. Some key sessions include (a) improved survival data from U.S. P III SPA MM-009 in r/r MM RLI+dex vs dex by Donna Weber; (b) RLI+dex more effective than dex after first relapse and encourages than as salvage therapy in relapsed MM; (c) RLI+melphalan (Alkeran)+prednisone or R-MP in newly diagnosed MM by Antonio Palumbo (**MPT vs MP in newly diagnosed MM is the plenary session with a reminder that Thal is used as roadmap for RLI); (d) cost-effectiveness of RLI for transfusion dependent MDS patients; (e) RLI inducing high
response rates with molecular remissions in r/r CLL (our lead new RLI indication for
a proposed P III SPA trial); (f) P II studies in myelofibrosis, AL amelydosis, metastatic renal cell cancer (MRCC). Thal has 4 oral and 12 poster sessions. Some key sessions include (a) the first presentation of the Sunday plenary session discussing the superiority of MPT versus MP in newly diagnosed MM by T Facon (remember that MP is the European standard treatment comparison for MM whereas dex is more common in U.S. per the ASH 2005 Investor and Analyst presentation); (b) P III trial of Thal+dex vs dex
as initial therapy in newly diagnosed MM by S. Vincent Rajkumar; (c) multi-center prospective randomized study thal 100 mg/day versus 400 mg/day in r/r MM; (d) prospective randomized P III in extended disease small cell lung cancer (SCLC) after response to chemotherapy; (e) P II Thal+irinotecan in anaplastic gliomas; (f) P II Thal+DTIC in metastatic melanoma; (g) GM-CSF+Thal for men with high risk prostate carcinoma; Thal+Vidaza in MDS and AML. Celgene will “own” ASCO.
98) Celgene will present updated data on Revlimid in Non-Hodgkin’s Lymphoma (NHL) at the European Hematology Association meeting June 15-18. On a recent Bloomberg Interview, Sol Barer said he was VERY pleased with this NHL data. NHL efficacy could be a huge positive for Revlimid and Celgene stock. The company should also provide more color on the 10 NHL clinical trials they anticipate by the end of 2006.
99) Besides the staggering trial updates at ASCO and EHA meetings in June, CELG management has stated publicly that they anticipate an amazing 50 to 60 peer review publications in BLOOD, The Lancet, NEJM, etc. These publications, the ASCO/EHA data and early data on the ongoing 50 RLI trials could help spur SIGNIFICANT off-label use of Revlimid not currently in analysts’ models as well as multiple compendia listings in the future.
100) Key publications have already been published through Q2 including the Actimid article in Apr15 BLOOD article showing that Actimid inhibits osteoclast formation by down regulation of PU.1. The article concluded that Actimid could show promise for targeting both tumors and osteoclastic activity in patients with multiple myeloma and many other diseases associated with osteolytic lesions.
101) A March 2006 article in Journal of NeuroScience showed that Thalomid and Revlimid Extend Survival in Amyotrophic Lateral Sclerosis and that “our findings provide additional evidence for a role of pro-inflammatory cytokines in ALS and suggest that TNF-_ and FasL and related cytokines have important triggering roles in the
pathogenesis of ALS in initiating a cell death pathways”.
102) A March 2006 article in BLOOD highlighted Revlimid therapy in myelofibrosis with myeloid metaplasia including results of two similarly designed but separate phase II studies, involving single agent Revlimid in a total of 68 patients with symptomatic MMM. Overall response rates were 22% for anemia, 33% for splenomegaly, and 50% for thrombocytopenia. Response in anemia was deemed impressive in 8 patients who normalized their hemoglobin from a baseline of either transfusion dependency or hemoglobin level < 10 g/dL. The article concluded that Revlimid engenders an intriguing treatment activity, in a subset of patients with MMM, THAT INCLUDES AN UNPRECEDENTED EFFECT ON PERIPHERAL BLOOD AND BONE MARROW ABNORMALITIES.
103) Multiple articles on Revlimid and Thalomid in Multiple Myeloma appeared in the April 2006 issue of The Lancet including a lead article called "Historic moment in Multiple Myeloma therapy".
104) A prepublished BLOOD Online article clearly shows that Revlimid should be used with Natural Killer T ("NKT") cells targeted approaches for protection against tumors. The article ended with “Together these data demonstrate that Revlimid and its analogues enhance CD1d mediated presentation of glycolipid antigens and support combining these agents with NKT targeted approaches for protection against tumors”. This could be huge.
105) Myriad of ongoing trials with positive "buzz", including very important solid tumor trials. Prostate and other solid Tumors – positive results seen.
106) Celgene has “Best in Class” Drug Discovery Programs. In addition to the IMiD research, Celgene has five other drug discovery programs that contribute to their robust pipeline. The first of these programs is devoted to providing a novel oral approach to chronic inflammatory diseases. CC-10004, the lead investigational drug in this class, is a novel, orally available small molecule that inhibits the production of multiple pro-inflammatory mediators including PDE-4, TNF-alpha, interleukin-2 , interferon-gamma, leukotrienes and nitric oxide synthase. Based on promising results from Phase II proof-of-principle clinical trials, Celgene is advancing the clinical development of CC-10004 for moderate-to-severe plaque-type psoriasis. This is part of a strategy to broadly evaluate this unique oral PDE-4 and TNF alpha inhibitor in a variety of diseases to select the most promising indications to pursue. THIS IS A COMPOUND THAT COULD HAVE A PROFOUND IMPACT ON THE AILMENTS BEING TREATED, MODULATING THE DISEASE RATHER THAN MERELY HAVING A TEMPORARY EFFECT ON ITS SYMPTOMS. A second TNF alpha lowering compound, CC-11050, is being evaluated in ongoing preclinical studies for inflammatory diseases.
107) In March 2006, Celgene announced results from an open-label Phase II study in 19 patients (15 evaluable). After ONLY one-month of treatment, 15.8% of patients demonstrated a greater than 50% reduction in their PASI scores. In addition, 52.9% of patients showed an improvement in their physicians' global assessment scores. CELG announced that it is planning additional studies in psoriasis, evaluating a longer duration of therapy and higher doses.
108) At the May 10, 2006 Baird presentation, Perry Karsen, SVP, Business Development called CC-10004 “an oral Enbrel, if you will”. This was consistent with the comment made on June 9, 2005 at a Friedman, Billings, Ramsey conference by CEO John Jackson who, commenting on the PDE4/TNF alpha inhibitor program said: "Enbrel, one of great biotech successes, modulates TNF alpha with annual sales in excess of $2 Billion. If we get an oral version, it could be very significant."
109) Another best-in-class program showing promise involves the benzopyran compounds. CC-8490, the lead compound in this area, is in Phase I clinical trials for glioblastoma, a form of brain tumor, with investigators at the National Cancer Institute. CC-8490 is well tolerated in critically ill patients. Animal studies have demonstrated that the compound could also have activity in solid tumors such as non-small-cell lung cancer and colon cancer.
110) Several of Celgene’s most important and exciting programs are in cell signaling research. Cell-signaling targets comprise a variety of enzymes including kinases, phosphatases and ligases, as well as transcription factors, and more than 1,000 of these molecular targets are suitable for drug development. Celgene is well positioned to compete effectively in this field with a strong program and intellectual property estate.
111) Three of the compounds Celgene is currently evaluating are inhibitors of c-Jun N-terminal kinase, or JNK, which has been associated with a number of key clinical indications in cancer and inflammation. These indications represent unmet medical needs. CC-401, the lead JNK candidate, is currently in a Phase I trial targeting acute myeloid leukemia. CC-359 is a long-acting compound that is under evaluation for treating ischemia and reperfusion injury. And a third JNK compound, CC-930, is being evaluated as a potential treatment for fibrosis. Beyond these exciting opportunities, Celgene is pursuing a number of other kinase inhibitors, all of which can be used for very distinct diseases, for example, acute inflammation and cancer (bRAF, IKK2, mTOR) and T-cell-mediated diseases and chronic inflammation (IKK1, PKC_, TYK2).
112) Another exciting area of research is Celgene’s discovery program in the NFkB pathway, which plays a critical role in cell proliferation and various aspects of metastasis and angiogenesis, and is emerging as a possible link between chronic inflammation and cancer. Celgene Research San Diego has been establishing a substantial position in this field for a number of years.
113) Exceptional decision to offer Expanded Access Program (EAP) for r/r MM with Revlimid as Bob Hugin indicated at Morgan Stanley on 3May2006 that the FDA indicated that CELG is the only company to offer EAP post-approval in another indication (MDS 5q-). While this decision sacrificed short-term off-label RLI revenue, the long-term chess game was significantly enhanced by (a) familiarizing both patients and practitioners with administration of RLI in r/r MM with approximately 75 sites and an estimated 700-1,000 patients ready to convert to billable within 30 days after approval with a 30Jun2006 PDUFA date; (b) building upon the good corporate citizenship established by industry-leading free access Thal program; (c) creating some “chits” and goodwill with the FDA, who made it clear at the Sep2005 ODAC that the EAP would be desirable (hopefully, CELG will be rewarded with early approval.)
114) The huge buildup of 700-1000 Revlimid patients in the EAP at 75 sites ENSURES a revenue and earnings acceleration shortly after approval as they will become paying customers within a month of approval. IF approved by ASCO as many think, most of these patient will be paying customers for the entire Q3.The earnings acceleration at double sales price and 95%+ gross margins will be tremendous and ensure that Q3 and Q4 are blowouts versus estimates. This is a “Q3 EAP EPS/earnings dam ready to burst”.
115) CELG has the best short, medium and long-term pipeline in the industry and has already attained profitability (that is accelerating) WHILE MAINTAINING ALL FUTURE OWNERSHIP/ROYALTIES/INTELLECTUAL PROPERTY ON ALL OF THEIR CORE DRUGS. This one should be read and re-read and is the real differentiator from the pretenders. Most of this amazing pipeline and related IP is not priced in to the current price or targets. If you look at all the analysts models, most come to their targets (which are higher than current price) by a discounted cash flow or PE of future earnings. These earnings are based upon Thalomid, Ritalin/Focalin royalties, some small other stuff and RLI revenue that is WAY understated. None of the IP of CC-4047/Actimid, the entire Signal pipeline, the third and fourth IMiDs, the PDE4/TNF alpha inhibitors, Stem Cells, etc., is in their models. NONE!
116) Analyst estimates severely underestimate the size of the RLI market. RLI sales will grow significantly upon approval for MM, the 50-60 peer review publications, the revealing of the CLL/NHL data in June and updates of the 50 RLI ongoing trials. Longer term, the European CELG organization development and Japanese partnerships will add further to RLI sales . “Named patient” has the potential for some nice more immediate contribution in the EU based upon PHRM’s Thal roadmap in Europe pre-EMEA approval.
117) CELG is the dominant player in the MM space with Thal outselling Velcade despite pricing 55-60% of Velcade’s level, as Thal is the #1 prescribed drug for MM. Once approved, RLI in MM will further strengthen CELG’s position at a significantly higher price point and should take further market share from Velcade as Revlimid has shown a superior safety profile compared to Velcade (Velcade causes peripheral neurotoxicity) and convenience (Revlimid is taken orally while Velcade requires twice-weekly intravenous infusion). Dominance in an indication has been identified as attractive for potential acquirers.
118) Celgene management will get a chance to articulate this incredible story at the May 31st Friedman Billings Ramsey 2006 Growth Investor Conference at 9:45 a.m. ET.
119) Celgene management will get another chance to tell the story to a separate group of investors at the Nasdaq 17th Annual Investor Program in London on June 20 through June 22. The last 2 years the stock appreciated nicely for a few days after this conference.
120) Yet another big presentation to Wall Street on June 27 at the Jefferies & Co BioPharma/MedTech Conference in New York.
121) CELG gauged the exceptional value of international RLI sales. John Jackson reconfirmed Celgene TURNED DOWN $1 billion in 2004 from Merck for RLI in ROW. In 2005, CELG’s preference for a “go it alone” strategy appeared to change as "intense interest" grew from others. Rumors of at least 5 interested parties with serious offers that met the company’s original requirements, but then the company turned them all down because at double the analysts expected pricing and 95% margin, it was too valuable to sell. The addition of Aart Brouwer as President, International, was a flare that CELG indeed decided to pursue Europe and perhaps several other regions on an independent basis. You don’t bring in that caliber of talent to partner in a region like Europe.
122) International headquarters were established in Neuchatel, Switzerland in 2004. This excellent choice was a result of negotiating an 11 year incentive tax holiday in Switzerland that expires in 2015 and exempts CELG from certain income taxes. During the 4Q2004 earnings conference call on 27Jan2005, the long-term vision of CELG management was apparent by planning for international expansion of Revlimid by maximizing tax planning with a new planned Swiss GMP manufacturing facility and selling international Revlimid and Actimid (CC-4047) intellectual property to international subsidiaries. While this sale generated a U.S. gain and raised tax rates in the short term, the long-term benefit will contribute for years to come.
123) The new production center is also being built in Neuchatel. Celgene was one of four U.S. companies to receive the 2004 “Tell Awards” along with Google, e-Bay and Proctor&Gamble for significant investment projects in Switzerland. The Tell award was in the category of manufacturing based on locating CELG’s first production center creating an estimate 100 jobs in the medium term. This facility will be used to formulate, encapsulate, package, warehouse and distribute future products.
124) While long-term investors would prefer CELG remain independent, clearly Celgene’s ownership of one of the best pipeline’s in the industry, surging profitability and successful RLI launch makes it a likely acquisition target by multiple big pharmaceutical companies in desperate need of pipeline and new drug development drivers. Industry publications predict multiple biotech acquisitions in 2006/2007. Several articles have appeared recently discussing this topic including the May 6th article in Investors Business Daily that stated “Big Pharma must acquire biotechs or die”. The article noted that “"Biotech drugs and drug pipelines are winning the battle. Big pharma needs to recognize that if they can't beat them, they need to buy them." While Celgene management is clearly building the company for the long-term, management has noted that this strategy will also ensure any potential acquisition is appropriately valued and that they would “step aside if the valuation was right and the acquirer could be a better steward for our assets and help develop our pipeline more quickly.” Once RLI is approved in MM, the ASCO trial results and Q2 and Q3 earnings help appreciate CELG’s share price to the $60 some expect, the 40%-50% premiums biotech acquisitions are now attracting will put CELG in the $90 to $100 valuation that may be more acceptable to CELG management and shareholders. This appears possible over the next 6-9 months. If negotiations occur, it is a huge positive that the best CFO in biotech, Bob Hugin, is now our President and will negotiate the highest possible valuation with multiple bidders to ensure shareholders receive the proper offer. Hugin’s negotiating prowess and business acumen have been repeatedly demonstrated with the Signal deal, the brilliantly timed secondary, the convertible, the NVS Ritalin/Focalin deal and others.
125) It is almost impossible to tell what this company, its future earnings stream and the best pipeline in the industry is worth especially with the ownership of all of this intellectual property. Most certainly, Wall Street’s admittingly conservative estimates exclude many, many revenue and share price appreciation drivers, especially the IP. A caller on Mad Money once asked about the generics as a play in the group. Cramer actually nailed this one and started screaming: "we don't need factories and pill makers, ITS ALL ABOUT OWNERSHIP OF THE INTELLECTUAL PROPERTY"
Hmmmm, the intellectual property, the HOLY GRAIL of biotech/pharma investing. CELG now has approximately 800 (and counting) international patents on the best short, medium and long-term pipeline in the industry. CELG's brilliant management team has taken great care over the years to assemble patents that cover a wide variety of areas across multiple discovery and regulatory programs, ranging from composition of matter, pharmaceutical composition and process patents, to methods of treatment, screening methodologies, business methods and diagnostics. Because they have the capability to finance new drug development from the revenue generated by their current product portfolio, they've been able to retain full ownership of the rights to their core pharmaceutical properties. The result is that they will be able to realize FULL FINANCIAL POTENTIAL OF NEARLY ALL THE DRUGS IN THEIR RESEARCH AND CLINICAL PIPELINE FOR THEIR SHAREHOLDERS. In other words, the best financial rewards are yet to come, because of the ownership of the intellectual property.
And let’s add one intangible - the excitement in the voices and twinkle in the eyes of this very, very, very conservative management team. They have previously been extremely conservative with their enthusiasm, they have now said publicly a few times that the Celgene is “remarkably well positioned to reach our vision of becoming a highly profitably, global biopharmaceutical company specializing in cancer and inflammatory diseases”. This team has for years bypassed the short-term glory, income and stock appreciation for the future. The future they dreamed of years ago is now upon us – their brilliant vision becoming a reality.
Oh yes – and we are investing in a company alleviating suffering in hundreds of thousands of people and determined to find treatments for devastating cancers and inflammatory diseases.
Are you in? |
