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.

A New Fron­tier: The In­ner Ear

What happens when a successful biotech venture capitalist is unexpectedly diagnosed with a chronic, life-disrupting vertigo disorder? Innovation in neurotology.

That venture capitalist was Jay Lichter, Ph.D., and after learning there was no FDA-approved drug treatment for his condition, Ménière’s disease, he decided to create a company to bring drug development to neurotology. Otonomy was founded in 2008 and is dedicated to finding new drug treatments for the hugely underserved community living with balance and hearing disorders. Helping patients like Jay has been the driving force behind Otonomy, a company heading into a transformative 2020 with three clinical trial readouts: Phase 3 in Ménière’s disease, Phase 2 in tinnitus, and Phase 1/2 in hearing loss. These catalysts, together with others in the field, highlight the emerging opportunity in neurotology.
Otonomy is leading the way in neurotology
Neurotology, or the treatment of inner ear neurological disorders, is a large and untapped market for drug developers: one in eight individuals in the U.S. have moderate-to-severe hearing loss, tinnitus or vertigo disorders such as Ménière’s disease.1 With no FDA-approved drug treatments available for these conditions, the burden on patients—including social anxiety, lower quality of life, reduced work productivity, and higher rates of depression—can be significant.2, 3, 4

Af­ter 4 years of furor, the FTC and New York state ac­cuse Mar­tin Shkre­li of run­ning a drug mo­nop­oly. And this time they plan to squash it

Pharma bro Martin Shkreli was jailed, publicly pilloried and forced to confront some lawmakers in Washington riled by his move to take an old generic and move the price from $17.50 per pill to $750. But through 4 years of controversy and public revulsion, his company never backed away from the price — left uncontrolled by a laissez faire federal policy on a drug’s cost.

Now the FTC and the state of New York plan to pry his fingers off the drug once and for all and open it up to some cheap competition.

Patrik Jonsson, the president of Lilly Bio-Medicines

Who knew? Der­mi­ra’s board kept watch as its stock price tracked Eli Lil­ly’s se­cret bid­ding on a $1.1B buy­out

In just 8 days, from December 6 to December 14, the stock jumped from $7.88 to $12.70 — just under the initial $13 bid. There was no hard news about the company that would explain a rise like that tracking closely to the bid offer, raising the obvious question of whether insider info has leaked out to traders.

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Short at­tack­er Sahm Ad­ran­gi draws crosshairs over a fa­vorite of Sanofi’s new CEO — with PhII da­ta loom­ing

Sahm Adrang Kerrisdale

Kerrisdale chief Sahm Adrangi took a lengthy break from his series of biotech short attacks after his chief analyst in the field pulled up stakes and went solo. But he’s making a return to drug development this morning, drawing crosshairs over a company that’s one of new Sanofi CEO Paul Hudson’s favorite collaborators.

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UP­DAT­ED: Ac­celeron of­fers thumbs up on a PhII suc­cess for would-be block­buster drug — and shares rock­et up

There’s no public data yet, but Acceleron $XLRN says that its first major trial readout of 2020 is a success.

In a Phase II study of 106 patients with pulmonary arterial hypertension (PAH), Acceleron’s experimental drug sotatercept hit its primary endpoint: a significant reduction in pulmonary vascular resistance. The drug also met three different secondary endpoints, including the 6-minute walking test.

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Civi­ca and Blue Cross Blue Shield launch new ven­ture to low­er gener­ic prices

Five years after Martin Shkreli put a smug face to the volatile prices companies can charge even for generic drugs, payers and governments are coming up with outside-the-box solutions.

The latest fix is a new venture from the Blue Cross Blue Shield Association, 18 of its members and Civica, the generics company founded in 2018 by hospitals fed up with high prices for drugs that had long-since lost patent protection. While Civica focused on drugs that hospitals purchased, the new company will aim to lower prices on drugs that, like Shkreli’s Daraprim, are purchased by individuals.

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Merck Invests in State-Of-The-Art Biotech Development Facility in Switzerland

Mer­ck KGaA match­es lofty R&D goals with €250M in­vest­ment in­to a new clin­i­cal man­u­fac­tur­ing site in Switzer­land

As Merck KGaA strives to prove itself as a capable biopharma R&D player, it has begun construction on a €250 million facility dedicated to developing and manufacturing drugs for use in clinical trials.

The German drugmaker chose a location at Corsier-sur-Vevey, Switzerland, where it already has a commercial manufacturing site, in order to “bridge together research and manufacturing.”

“This investment in the Merck Biotech Development Center reflects our commitment to speed up the availability of new medicines for patients in need, and confirms the importance of Switzerland as our prime hub for the manufacturing of biotech medicines,” CEO Stefan Oschmann said at the groundbreaking ceremony, according to a statement.

Breast can­cer ap­proval in tow, As­traZeneca, Dai­ichi armed an­ti­body scores in key gas­tric can­cer study

AstraZeneca kicked off Monday with a flurry of good news. Apart from unveiling positive results on its stroke trial testing its clot-fighter Brilinta, and welcoming its experimental IL-23 inhibitor brazikumab back from Allergan — the British drugmaker also disclosed some upbeat gastric cancer data on its HER2-positive oncology therapy it is collaborating on with Daiichi Sankyo.

Buoyed by the performance of its oncology drugs, last March AstraZeneca chief Pascal Soriot bet big to partner with Daiichi on the cancer drug, with $1.35 billion upfront in a deal worth up to roughly $7 billion. Roughly 8 months later, as 2019 drew to a close, the FDA swiftly approved the drug — trastuzumab deruxtecan — for use in breast cancer, months ahead of the expected decision date.

Sor­ren­to shrugs off an anony­mous pri­vate eq­ui­ty group’s $1B of­fer to buy the com­pa­ny

San Diego-based Sorrento Therapeutics isn’t going the M&A route — at least not today.

The biotech caused quite a stir when it put out word a few weeks ago that an unidentified private equity group was bidding a billion dollars-plus for the company. The news drove a quick spike in the company’s share price as investors hooked up for the ride — that didn’t happen.

The update sparked a 5% drop in the share price $SRNE ahead of the bell. It’s now trading just above $4, without any evidence that the $7 price looked like it was firm.