Celgene Shares Good News On Ozanimod, Quietly Dumps Pricey GED-0301

Strong Q1 results and a plan to refile ozanimod in early 2019 may help investors regain confidence in Celgene, but a lot depends on the company's pipeline, which had an additional setback with discontinuation of all GED-0301 development.

Celgene Corp. told investors almost exactly what they needed to hear during its earnings report on May 4 – that the company's first quarter revenue exceeded expectations enough to boost full-year guidance, and that multiple sclerosis drug ozanimod is on track for resubmission at the US FDA in the first quarter of 2019. 

The good news couldn't have come at a better time for Celgene after a string of setbacks that caused investors to lose confidence in the company's prospects for growth beyond the multiple myeloma blockbuster Revlimid (lenalidomide).

But any newfound respect hangs by a thread as Celgene's business development strategy remains in question, due to setbacks for the company's pipeline drugs acquired from or partnered with outside sources.

Even Jefferies analyst Michael Yee, who generally is bullish about Celgene and its growth prospects, acknowledged in a May 4 note that bearish investors believe the results of the company's aggressive business development strategy are "mixed at best." (Also see "Celgene's Partnered Pipeline Delivers Successes And Setbacks" - Scrip, 21 Nov, 2017.)

Leerink analyst Geoffrey Porges, referring to a recent drug discovery deal with Vividion Therapeutics Inc. worth $101m up front, said in a same-day review of the first quarter earnings that "with the luster clearly off Celgene’s business development strategy and implementation, investors are unlikely to have much interest in this transaction, and seem inclined to discount much of the company’s prior business development activity as well. (Also see "Deal Watch: Roivant Adds Ligand's Glucose Receptor Antagonist To Metavant Pipeline" - Scrip, 7 Mar, 2018.)

Ozanimod Update

But the first quarter financial and ozanimod updates were important indicators that Celgene's short-term as well as its mid- to long-term strategy are getting back on track.

Resubmission of the new drug application (NDA) in the first quarter of 2019 for ozanimod in relapsing multiple sclerosis (RMS) was particularly important. The drug, acquired in the $7.2bn purchase of Receptos Inc., was seen as a sure bet for approval, so the refuse-to-file (RTF) letter the FDA issued in February was particularly devastating for investors. (Also see "Celgene diversifies with $7.2bn Receptos buy" - Scrip, 15 Jul, 2015.)

Now, alongside the NDA resubmission, a marketing authorization application also will be filed with the European Medicines Agency in the first quarter of next year.

Celgene's stock closed up 1.7% on May 4 at $86.89 following the positive ozanimod and first quarter earnings news.

Revenue, Guidance Up

The company reported $3.53bn in net product sales, which was up 20% from the first quarter of 2017, while total revenue of $3.54bn was up 19% year-over-year and beat analyst consensus of $3.47bn. Adjusted diluted (non-GAAP) earnings per share (EPS) was up 23% at $1.67, including $0.05 in dilution due to the $9.1bn Juno Therapeutics Inc. acquisition that was completed on March 6. (Also see "Celgene Seeks CAR-T Leadership, Hematology Diversification With Juno Buy" - Scrip, 22 Jan, 2018.) 

Celgene raised its full-year 2018 guidance to $14.8bn in total revenue and pegged non-GAAP EPS at $8.95 excluding the impact of the Juno deal or $8.45 with dilution from the transaction. Prior guidance was $14.4bn-$14.8bn in revenue and $8.70-$8.90 for EPS. The company's 2020 guidance was reaffirmed at $19bn-$20bn in revenue and $12.50 in non-GAAP EPS.

Sales of Revlimid rose 19% year-over-year to $2.23bn in the second quarter, driven primarily by longer treatment durations and increased multiple myeloma market share, which contributed to the company's revised Revlimid guidance of $9.5bn in 2018 sales versus the earlier prediction of $9.4bn; the drug will make up about 64% of Celgene's 2018 revenue.

Celgene also reported that the psoriasis and psoriatic arthritis drug Otezla (apremilast) continues to gain market share in the targeted segment of post-topical, pre-biologic patients, delivering $353m in first quarter sales, which was up 46% from the year-ago period. The drug adds important non-Revlimid, non-hematology/oncology sales to the company's revenue base; guidance for 2018 was unchanged at $1.5bn in sales for the full year.

Quiet Disclosure Of GED-0301 Discontinuation

However, an additional setback for a partnered program in the Inflammation and Immunology (I&I) franchise was quietly revealed in the first quarter earnings report — Celgene has discontinued development of GED-0301 in all indications.

Celgene paid Nogra Pharma Ltd. $710m up front to access GED-0301 with the promise of up to $815m in development and regulatory milestone fees plus royalties and up to $1.05bn for commercial milestones. (Also see "1Q EARNINGS: Celgene boosts sales, bets big on Crohn's drug" - Scrip, 25 Apr, 2014.)

Development was discontinued for GED-0301 in Crohn's disease in October due to futility in Phase III, but Celgene was waiting for Phase II data in ulcerative colitis (UC) to determine the path forward for the drug. (Also see "Celgene IBD Pipeline In Question As Mongersen Crohn’s Disease Trial Ends" - Scrip, 20 Oct, 2017.)

I&I President Terrie Curran told Scrip in an interview earlier this year that the Phase II UC data were being evaluated and the company intended to make a decision on GED-0301's future in the near term. 

But the company noted in its first quarter earnings release that it has recognized unspecified wind-down costs for GED-0301 in Crohn's disease. Also, Curran said during the earnings call, "we remain committed to advancing novel oral therapies in inflammatory bowel diseases with ozanimod and Otezla and we'll discontinue development of GED-0301."

Celgene now expects to complete enrollment in the Phase III TRUE NORTH study of ozanimod in UC by mid-2019 instead of this year. Curran noted that enrollment has been slowed by competition to recruit severe UC patients for clinical trials, because there are more than 60 Phase II and III studies ongoing in this particular indication.

For Otezla, the company reported positive Phase II results in UC earlier this year and plans to initiate Phase III studies for the drug in mild-to-moderate UC and mild-to-moderate psoriasis sometime in 2018. (Also see "Celgene's IBD Franchise Boosted by Otezla Ulcerative Colitis Success" - Scrip, 16 Feb, 2018.) Otezla's FDA-approved label in psoriasis is for moderate-to-severe patients.

Path Forward For Ozanimod In MS

However, Jefferies' Yee noted that the most important pipeline update during Celgene's earnings call was the plan to resubmit ozanimod for RMS in the first quarter of 2019, in contrast with worst fears of a 2020 re-filing and delay.

Chief Medical Officer Jay Backstrom explained during Celgene's call that "the key issues for the refusal-to-file centered on the completeness of the clinical pharmacology and the non-clinical portions of the NDA. These issues relate to the major active metabolite CC-112273."

Backstrom described CC-112273 as "a major metabolite accounting for approximately 90% of [ozanimod] activity. CC-112273, which has a similar structure and the same selectivity and potency as ozanimod for the S1P1 and S1P5 receptors, is disproportionately formed in humans and was not identified as a major metabolite in the non-clinical pharmacology studies."

He continued: "Based on the totality of the clinical data, including safety in approximately 4,000 patients, the similarity of CC-112273 with respect to structure, selectivity and potency for the S1P1 and S1P5 receptors, we proceeded with the NDA submission. However, FDA requested further characterization of CC-112273."

Based on FDA feedback, Backstrom said, "we plan to address the non-clinical safety assessment of CC-112273 by bridging to the existing non-clinical study and to address the clinical pharmacology assessment for CC-112273 by utilizing the PK/PD data from the completed and ongoing clin pharm study."

Importantly, that means Celgene won't have to conduct new Phase III studies to characterize the activity of ozanimod's main metabolite in patients, which could have taken up to two years. Backstrom noted that the resubmission actually will involve the filing of a new NDA, which means the company will request a pre-NDA meeting with the FDA later this year.

Learning Lessons, Moving Forward

CEO Mark Alles talked about the lessons that Celgene has learned as executives looked back at the ozanimod RTF letter and other recent challenges. With respect to ozanimod in particular, he indicated that the company was not tripped up by its entrance into a new disease area – neuroscience – because it successfully expanded into new disease areas before, through the launch of Otezla and the I&I franchise.

"I think what we learned is that as we become bigger, more complex, as we have a lot of moving parts, there are times when we need to slow down and double- and triple-check where we are in certain judgments about what we're doing in areas of the company," Alles said. "And I think that we learned from this that while we stand behind the decision on benefit/risk … to submit the NDA, the hindsight view is that the characterization of [the] metabolite was something that we simply underestimated in the context of FDA's decision."

Celgene recently brought in an executive that may have provided needed insight in relation to the ozanimod NDA if she had been hired before the application's submission. The company announced on April 30 that it recruited former GlaxoSmithKline PLC regulatory affairs executive Jennifer Dudinak as its own senior vice president of global regulatory affairs. Celgene tried for more than a year to fill that position.

The company also recently appointed three new board members and revealed on April 2 that President and Chief Operating Officer Scott Smith was leaving the company. Alles is taking over Smith's duties, which include oversight of the Hematology and Oncology and I&I franchises, manufacturing, regulatory issues and clinical development. (Also see "Pharma Q1 Results Preview: Merck & Co, Pfizer, Gilead, Novo Nordisk, Teva, Celgene" - Scrip, 27 Apr, 2018.)