forbes.com
Leper Stock
by Stephan Herrera
TO HEAR Warren, N.J.-based Celgene (NASDAQ:
CELG) tell it, you'd think it had a blockbuster on its
hands as potent as Viagra or Prozac. What it has
got is a drug called Thalomid, and it is claiming that
it has the potential to treat such horrible diseases
as aids, cancer, Crohn's disease and leprosy. Ring
a bell? Thalomid is just another name for
Thalidomide, which became infamous in the 1950s
and 1960s as one of the biggest pharmaceutical
horror stories of the 20th century.
Thalidomide was a widely used sleeping pill and
morning-sickness cure in the 1950s. It was
implicated as the cause of grisly birth defects in
8,000 children. Never approved in the U.S., it was
banned worldwide in 1962. Lawsuits and headlines
lingered for years, making "Thalidomide"
synonymous with limbless newborns and scandal.
On July 16, 1998 Celgene got approval from the
Food & Drug Administration for Thalomid to be
used to treat a skin malady called erythema
nodosum leprosum (ENL) that mostly afflicts
leprosy patients who are on antibiotics. There are
less than 1,000 leprosy patients under treatment in
the U.S. Since only a fraction of them will need
Thalomid, the company is hyping off-label
uses—not yet fda approved—as the big payoff.
Since Celgene had only $1 million in revenues in
1997, mostly from its chiral agrochemical business,
it badly needs a boost. Bulls say Thalomid will
generate some $40 million in 1999. The hype
pushed Celgene's stock to $15 in July, and it was
recently selling at $9.25, giving it a market
capitalization of over $150 million.
Streetwalker sources report that many doctors and
patients are scared stiff of Thalidomide, especially
on off-label uses for the drug. It took six years to
develop Thalomid and secure approval from the
fda for the leprosy applications; count on many
more years for any cancer treatments.
Another problem for Celgene comes from its chief
competitor, EntreMed—the company that saw its
stock quadruple amid hyped news that its cancer
cure works in mice. EntreMed has already
secured "orphan drug" status for its own version of
Thalidomide for an aids-related skin cancer. That
means that if and when its drug is fda-approved, it
will receive seven years of exclusive marketing
rights for the drug in the U.S.
Drug analysts at firms like Prudential Securities
and Warburg Dillon Read rate the stock a "strong
buy." Streetwalker emphatically disagrees and
recommends shorting it. Celgene is running out of
cash. It lost $27 million in 1997, currently has $12
million in cash and is burning through $7 million per
quarter. Says one bear, "They've got another six
months unless they can get the stock up and do a
deal." |
