ViewPoints: Celgene’s blowout quarter may not be a one-off

Drugmakers somtimes report earnings well above what the Street was expecting thanks to special circumstances or accounting artefacts, or both, but neither appears to be the case for Celgene, which may only be getting started thanks to the unexpectedly strong performance of flagship blood cancer drug Revlimid (lenalidomide).

Celgene reported $3 billion in third quarter revenues and non-GAAP earnings per share of $1.58 compared to the respective $2.8 billion and $1.48 consensus estimates. Much of the beat can be ascribed to Revlimid, which posted $1.9 billion in sales (consensus $1.7 billion) on 30-percent year-over-year growth – not bad for a drug that was first approved by the FDA more than a decade ago.

Importantly, all signs point to the outsized performance this period being part of a larger trend.

On its quarterly earnings call, Celgene attributed the big beat on Revlimid to the usual combination of label expansions, improved European reimbursement, increased penetration, longer duration on therapy and some price increases in the US, but Cowen analyst Eric Schmidt suggested the company may be underselling itself a bit.

To be fair, the figure for Revlimid was boosted by a bolus payment of $70 million from the Russian government, but even after backing that out sales grew by 25-percent year-over-year “versus high teens in prior quarters,” according to Schmidt. In fact, this may be the beginning of a “real inflection” in Revlimid’s already impressive trajectory, he noted, based primarily on growing demand for the drug.

Among the factors expected to play in Revlimid’s favour is the increased usage of doublet and triplet regimens in multiple myeloma and looming reimbursement decisions in as many as 20 European countries. What’s more, “the average duration of Revlimid therapy in the US is now 24 months (across all lines of treatment) and growing, and is 13 to 14 months and growing in the EU,” said Schmidt.

If there is a rain cloud on the horizon for Revlimid it is that the drug’s breath-taking success has attracted a lot of admirers, including many generics companies that are itching to get in on the action as soon as possible.

This week, Celgene received word that the US Patent and Trademark Office’s Patent Trial and Appeal Board (PTAB) ruled that two of the company’s patents covering its proprietary REMS programme for Revlimid are invalid, though management was quick to minimise the threat.

“We continue to believe in the validity of these challenged REMS patents, which are due to expire in 2018 and 2020, and right now, because we just received the decision, are considering options for rehearing and appeal,” noted Mark Alles, Celgene’s CEO. “As a reminder, we have 13 other patents that cover REMS, including nine patents that expire in 2020. These are not patents subject to this decision. And then there are additional non-REMS patents extending as far as 2027 for Revlimid, and we will continue to assert those patents. So I don't think that this decision was necessarily unexpected. We're disappointed, but as you can tell, we're prepared to move forward,” he added.

One thing that is certain is that there will be no shortage of motivation on Celgene’s part to aggressively defend the Revlimid patents.

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