Af­ter some sting­ing set­backs, a top an­a­lyst ques­tions the high fail­ure rate for Cel­gene's drug pipeline

Mark Alles

When Mark Alles got the big pro­mo­tion to CEO of Cel­gene $CELG two years ago, the com­pa­ny was a wide­ly ad­mired big biotech which had com­mit­ted large por­tions of its rev­enue to build­ing a pipeline through some of the most in­tense deal­mak­ing ac­tiv­i­ties in the in­dus­try. To­day, its stock price is bad­ly banged up, its whole pipeline strat­e­gy is in doubt and some an­a­lysts are start­ing to give some care­ful at­ten­tion to de­ter­min­ing what’s gone wrong.

Leerink’s Ge­of­frey Porges has been look­ing at that much laud­ed pipeline strat­e­gy, and he’s point­ing to a record of set­backs and washouts that leaves him to con­clude much has gone wrong. 

In­vestors have as­signed very lit­tle val­ue to the pipeline Cel­gene has, and our analy­sis of the pro­duc­tiv­i­ty of Cel­gene’s R&D ac­tiv­i­ty in the past 5 years sug­gests the cur­rent neg­a­tive sen­ti­ment may be war­rant­ed….Since 2013 we find that two-thirds of the com­pa­ny’s named de­vel­op­ment pro­grams (typ­i­cal­ly phase II or lat­er) have failed, and of the ~20 named clin­i­cal de­vel­op­ment (non- mar­ket­ed) NCE’s in Cel­gene’s pipeline charts in 2013 and 2014, on­ly 1 has reached the mar­ket five years lat­er. This long term R&D per­for­mance is con­sis­tent with the per­for­mance of Cel­gene’s stock, and po­ten­tial­ly ex­plains the low val­ue ac­cord­ed to the com­pa­ny’s port­fo­lio of de­vel­op­ment stage pro­grams, de­spite their com­mer­cial prospects, com­pet­i­tive ad­van­tages and tech­ni­cal promise.

Ge­of­frey Porges, Leerink

Look­ing over the past 5 years, says Porges, you’ll find on­ly two drugs — Ote­zla and Id­hi­fa — that came through the pipeline. Fo­cus on 2013-2015, and you’ll see half of the ex­per­i­men­tal drugs list­ed in the pipeline have dis­ap­peared.

As a re­sult, Cel­gene re­mains heav­i­ly overde­pen­dent on Revlim­id, a sit­u­a­tion that drew some high-lev­el anger in the Trump ad­min­is­tra­tion af­ter the com­pa­ny was called out for rais­ing the price 20% over the past year — pur­su­ing a strat­e­gy that Wall Street en­cour­ages and law­mak­ers hate.

In­stead of get­ting bet­ter, the pipeline turnover rate is get­ting worse, says Porges.

Cel­gene has brought 15 and 11 new drug can­di­dates to its pipeline in 2016 and 2017, re­spec­tive­ly, com­pared to 2-6 can­di­dates per year in 2013-2015. These new adds ex­pand­ed Cel­gene’s pipeline by 71% and 38%, re­spec­tive­ly, from the pre­vi­ous years. At the same time, pri­or pipeline as­sets al­so dis­ap­peared, with 7 can­di­dates de-em­pha­sized (pre­sum­ably ter­mi­nat­ed) in each of 2016 and 2017, while this num­ber was more mod­er­ate at 1-3 per year in 2013-2015. These pro­grams orig­i­nal­ly ac­count­ed for one-fourth to one-third of the pipeline ros­ter of com­pounds in the pre­vi­ous years. In to­tal, Cel­gene has in­tro­duced 40 drug can­di­dates to its pipeline since Q1 2013, and re­moved 20 can­di­dates from its pipeline from Q1 2013 to Q1 2018.

Out of the 20 drugs that have dis­ap­peared from their pipeline (al­most cer­tain­ly ef­fec­tive­ly dis­con­tin­ued though not for­mal­ly de­fined as such), 11 (55%) were dropped at phase 1, 5 (25%) at phase 2, and 4 (20%) at phase 3. It is un­der­stand­able that phase 1 as­sets are typ­i­cal­ly riski­er and are there­fore like­ly to fail more fre­quent­ly, but the dropout of phase 3 as­sets is con­cern­ing.

No won­der the stock is down 24% year to date and down 42% since the fail­ure of mon­gersen last Oc­to­ber. Porges points to the poor pipeline per­for­mance as a good cause for the de­cline in faith in the big cap stock.

One thing is cer­tain: Un­less Cel­gene finds a way to fire up its rev­enue again with­out an­ger­ing elect­ed of­fi­cials, the pres­sure will con­tin­ue to grow on Alles to prove he can meet the chal­lenge. So far, he’s shak­en up man­age­ment and tak­en on more re­spon­si­bil­i­ty, as long­time in­sid­er George Golumbes­ki qui­et­ly ex­it­ed. And the spot­light is square­ly on the CEO.

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By Natasha Cowan, Content Marketing Manager at Blue Latitude Health.
Many stakeholders are confused by novel precision medicines, including patients and healthcare professionals. So, how can industry help them to navigate this complexity?

Precision medicine represents a new paradigm in healthcare. It embodies the shift from treating many patients with the same therapy, to having the tools to identify the best treatment for every patient.

Amir Nashat, World Medical Innovation Forum via Youtube

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Avalon Ventures chief Jay Lichter has a well-known yen for drug development programs picked up in academia. And what he found in Haoxing Xu’s lab at the University of Michigan pricked his interest enough to launch one of his umbrella biotechs in San Diego.
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