Celgene Expands in Cancer Drugs - Analyst Blog

Recently, Celgene Corporation (CELG) completed the acquisition of the privately held Gloucester Pharmaceuticals for $340 million in cash coupled with $300 million in future milestone payments. The deal is aimed at bolstering Celgene’s portfolio of cancer drugs. The deal is expected to be neutral to Celgene’s earnings in 2010 and accretive in 2011.
 
Gloucester, founded in 2003, focused on developing new therapies to fulfill unmet medical needs in cancer treatment. The acquisition adds Istodax (romidepsin) to Celgene’s already established cancer portfolio. Istodax received clearance from the U.S. Food and Drug Administration (FDA) in November 2009 for treating CTCL patients who have received at least one prior systemic therapy. Celgene is expected to launch the drug in the first half of this year. Furthermore, it will pursue the European approval for Istodax in CTCL besides advancing the drug's development for other cancer indications, including peripheral T-cell lymphoma (PTCL).
 
Additionally, Istodax has been granted orphan drug designation for the treatment of non-Hodgkin's T-cell lymphoma and Fast Track status in PTCL by the U.S. regulatory agency. The drug has received orphan status designation from the European Agency for the Evaluation of Medicinal Products for treating both CTCL and PTCL patients. We believe that the inclusion of Istodax in the cancer portfolio of a large company like Celgene would boost its sales and allow it a competitive edge over rival drugs such as Allos Therapeutics’ (ALTH) injectable treatment for PTCL − Folotyn − which hit the market in 2009.
 
The acquisition should further strengthen Celgene’s cancer portfolio. It already boasts of Revlimid, currently approved for myelodysplastic syndrome (MDS) and second-line multiple myeloma (MM) and the company is expanding its label into other indications. Furthermore, its product portfolio includes Vidaza for MDS, which should also drive growth.
 
However, sales of Celgene’s Thalomid have been declining. We feel this decline will continue since safer and more effective drugs are available for multiple myeloma in the form of Revlimid and Takeda’s Velcade.
 
We believe that the addition of Istodax is aimed to make up for the disappointing performance of Thalomid.
 
Currently, we are Neutral on Celgene.
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