Bristol-Myers Squibb made a splash Thursday morning when it announced its plan to acquire Celgene in a $74 billion cash and stock deal. But in a conference call with executives from the two companies, financial analysts also prodded them on lingering concerns, especially patent expirations on big-ticket drugs over the next several years.
The announcement came as Summit, New Jersey-based Celgene has been under pressure due to the fact that its top-selling drug, Revlimid (lenalidomide), will lose patent protection and face generic competition from several players in the latter half of the next decade. However, BMS CEO Giovanni Caforio insisted on the call that the New York-based drugmaker had done its due diligence on the Revlimid situation. He also emphasized that the two companies’ pipelines were complementary, particularly in hematology-oncology, with several that may be candidates for combination studies, as well as immunology and inflammatory disease.
Celgene’s stock, which had closed at $66.64 per share Wednesday on the Nasdaq, opened Thursday at $87.62 and closed at $80.43. However, BMS shares, which closed at $52.43 Wednesday on the New York Stock Exchange, opened down 10.5 percent, closing at $45.12, remaining mostly flat in after-hours trading.
In the near term, the two companies have six products in Phase III development that could be launched through 2020, five from Celgene, with the potential to generate up to $15 billion in revenue. Along with those, their early-stage pipelines include 50 potential drug assets, with a number of data readouts expected in the near term.
BMS’s near-term product candidate is TYK-2, under development for psoriasis and other autoimmune disorders. Among Celgene’s five, there are two for which it plans to file for Food and Drug Administration and European Medicines Agency approval within the next several months: luspatercept, for myelodysplastic syndrome and beta-thalassemia; and ozanimod, in multiple sclerosis. Fedratinib is a JAK inhibitor that the company has positioned for use in patients with myelofibrosis who have relapsed from or are intolerant to Incyte Corp.’s Jakafi (ruxolitinib), also a JAK inhibitor and a mainstay in treatment of the disease. The other two near-term assets are CAR-T therapies: lisocabtagene maraleucel, which targets the CD19 antigen in diffuse large B-cell lymphoma; and bb2121, for multiple myeloma, which targets BCMA. Luspatercept is being developed under a partnership with Acceleron, while the company is partnered with bluebird bio for bb2121 and acquired lisocabtagene maraleucel when it bought Juno Therapeutics last year.
While lisocabtagene maraleucel – also known as JCAR017 or liso-cel – would be a late entry relative to the two CD19-targeting CAR-Ts already FDA-approved for DLBCL – Gilead Sciences’ Yescarta (axicabtagene ciloleucel) and Novartis’ Kymriah (tisagenlecleucel) – it has also been touted as having a potentially better safety profile and less cumbersome administration than both. Meanwhile, in addition to bb2121, Celgene has two BCMA-targeting antibodies in development – one bispecific and another that is an antibody-drug conjugate – that could present competition against Amgen’s BCMA-targeting bispecific antibody, AMG 420.
Still, in the conference call, some analysts expressed concern, particularly about Revlimid, Celgene’s primary source of product revenue, which had $7.1 billion in global sales in the first nine months of 2018. One analyst noted Celgene had the lowest price-earnings ratio in the innovative biopharma space, which “speaks to investor concerns about Revlimid.” Revlimid’s patent expiration will come in the same period as those of BMS’s Opdivo (nivolumab) and Eliquis (apixaban), in the second half of the 2020s, which raise concerns about BMS’s earnings visibility and how buying Celgene would contribute to that, another analyst said. Moreover, the combined $15 billion in sales from the aforementioned six products is still less than the likely peak sales forecast for Opdivo, a flagship product for BMS, he added.
Several generic drugmakers have challenged Revlimid’s patent protection, with court decisions anticipated at the earliest in 2020, according to an investor presentation released for the conference call. Celgene has an agreement with Natco that would allow the latter to start sales of its Revlimid generic – limited by indication – starting in March 2022, followed by full generic entry in January 2026. Revlimid is approved for multiple myeloma, deletion-5q myelodysplastic syndrome and mantle cell lymphoma.
Despite the concerns, analysts had been upbeat about Celgene’s prospects. In an Oct. 25 analyst note following the company’s third quarter 2018 earnings, Cowen called it “undervalued” and pointed to the anticipated five product launches and quarterly financials that exceeded investors’ consensus. In a Dec. 21 note, Cowen further said that while the probability was low, Celgene being taken private ranked second on a list of potential surprises in store for 2019.
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