Generic Threat Hanging Over CELG - Analyst Blog

Celgene Corporation (CELG) could receive notification shortly regarding a patent challenge for its lead drug Revlimid (lenalidomide) 25 mg capsules.

The company announced that according to a post on the site of the US Food and Drug Administration (FDA), a generic company is looking to launch a generic version of Revlimid.

The FDA site indicated that the Office of Generic Drugs (OGD) has received an abbreviated new drug application (ANDA) which contains "paragraph IV" patent certification, for cancer drug Revlimid, which is the key growth engine at Celgene.  The paragraph IV certification implies that the filer believes the relevant patent to be invalid or will not be infringed by the generic version of the drug. Such an application can be filed four years after the FDA approval of the drug.

Management stated that it intends to defend the patents on the drug and will file a complaint alleging patent infringement against the applicant on receipt of the notification letter. Currently, Revlimid is covered by 12 issued patents which are listed on the FDA's approved drug products List (Orange Book) with more patent applications pending. The patents take care of the drug's composition, method of use and polymorphs, as well as Celgene's RevAssist system. The system refers to the restricted distribution program and is approved by the FDA.

The FDA approved Revlimid as a treatment for transfusion-dependent patients with myelodysplastic syndromes (MDS) with a 5q deletion chromosomal abnormality in 2005.

Revlimid is also approved in Canada for MDS. The label was expanded the very next year when the US regulatory body approved Revlimid in combination with dexamethasone for patients suffering from multiple myeloma (MM), who have not responded to at least one prior therapy. Subsequently, Revlimid has been approved by the health authorities of many countries around the globe.

Celgene, which is looking to expand the label of Revlimid further, presented data earlier in the year suggesting that continuous treatment with Revlimid in patients suffering from multiple myeloma has the potential to become the standard of care. Celgene intends to file an application seeking marketing approval for Revlimid as a front-line treatment for multiple myeloma in Europe by the year-end. The submission will be based primarily on late-stage data supporting continuous Revlimid therapy in patients with newly diagnosed myeloma.

Our Take & Recommendation

Celgene, which boasts of Vidaza and Thalomid apart from Revlimid in its oncology portfolio, is seeking to expand its portfolio through acquisitions.

We believe that the impending acquisition of Abraxis BioScience (ABII) coupled with the purchase of Gloucester Pharmaceuticals should boost Celgene's cancer portfolio and drive growth. The purchase of Abraxis will add the cancer injection Abraxane to Celgene's portfolio. Abraxane is already available in the US and European markets as a second-line therapy for metastatic breast cancer. The drug is being developed for other indications such as skin, lung and pancreatic cancer.

Although the myelodysplastic syndromes market will continue to be dominated by Celgene's Vidaza and Revlimid, competition in the multiple myeloma market remains tough. Additionally, the negative growth of Thalomid is also a concern. This is likely to continue due to competition from better alternatives in the multiple myeloma market.

Consequently, we believe that the risk/reward profile is balanced at Celgene. This forms the basis of the Zacks #3 Rank on the stock, which translates into a short-term Hold rating, and our long-term Neutral stance on Celgene shares.