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Shares of Celgene Corp.
[NASDAQ:CELG] soared 2.47% to close at $110.14 a share on Monday, after the U.S. Patent and Trademark Office
(USPTO) Patent Trial and Appeal Board (PTAB) put an end to Kyle Bass’s Revlimid patent challenge by denying institution of Inter Partes Review
(IPR) proceedings. According to Barrons, RBC Capital analysts Michael Yee and Judy Liu said that in denying IPR institution, estoppel rules prevent the Hayman Group, associated with Hayman Capital Management hedge fund manager Kyle Bass, from filing legal challenges on the same claims in the future.
The IPR procedure was initially created as a quick and relatively inexpensive way for technology companies and retailers to deal with so-called patent trolls. Biopharmaceutical and biotechnology companies say Kyle Bass abuses the patent review process by short-selling pharmaceutical shares that drop when a patent review challenge is filed. According to Forbes, Bass’s Coalition for Affordable Drugs has filed 33 challenges, winning one and losing four, which leads one to believe that Bass’s investment strategy may have failed to generate returns in excess of the market.
In mid-October, the PTAB denied another petition by the Hayman Group for an IPR of a patent for Pharmacyclics Inc.'s cancer drug
Imbruvica, saying it failed to establish it would likely succeed in showing the claims are
unpatentable. AbbVie [NYSE:ABBV] acquired Pharmacyclics for $21 billion in late May.
On November 5, Celgene announced third-quarter earnings of $1.23 a share, up 26.8% year-on-year, beating Wall Street expectations of $1.22 a share. Revenues came in at $2.33 billion, up 17.7% from the same period last year, missing expectations of $2.4 billion. The company reported $1.45 billion in sales of Revlimid
(lenalidomide), their multiple myeloma drug, up 11.8% year-on-year. Revlimid now accounts for about 62.2% of Celgene's total revenues. On an operational basis, including the impact from both foreign exchange rates and hedging activities, Revlimid sales were up 13.7% year-over-year.
Abraxane, a cancer drug indicated for the treatment of breast cancer, non-small cell lung cancer and metastatic adenocarcinoma of the pancreas, posted sales of $229.9 million, an increase of 8.3% year-over-year. Sales of Pomalyst in
U.S./Imnovid in Europe (pomalidomide), indicated for patients with specific multiple myeloma treatment conditions, were $256.5 million, up 41.6% year-over-year. Sales of Otezla
(apremilast), for the treatment of patients with active psoriatic arthritis or patients with moderate to severe plaque psoriasis, were $138.7 million, up 688% during the same period last year.
Looking forward, Celgene reaffirmed its full-year revenues to be between $9.0 billion and $9.5 billion in 2015, and adjusted diluted EPS in the range of $4.75-4.85. Celgene raised its Revlimid net sales forecast to approximately $5.8 billion, an increase from the previous range of $5.6 billion to $5.7 billion. Net sales of Abraxane are now expected to be in the range of $950 million to $1.0 billion, a decrease from the previous range of $1.0 billion to $1.25 billion.
For 2017, Celgene forecasts net product sales to be between $13 billion and $14 billion, and EPS of $7.50. The company expects to more than double its hematology and oncology sales in 2020 to $20 billion with an EPS of $12.5 per share.
The company said that they completed the $7.2 billion acquisition of relapsing multiple scerosis (RMS) and inflammatory bowel disease (IBD) drug developer Receptos Inc. [NASDAQ:RCPT]. The deal gives Celgene access to the drug Ozanimod, for the treatment of ulcerative colitis (UC) and multiple sclerosis (MS), with estimated peak annual sales of $4-6 billion.
Apart from Receptos, Celgene also said that they completed the $1 billion transaction with Juno Therapeutics, Inc. [NASDAQ:JUNO], $150 million in an upfront payment and $850 million in purchases of Juno’s common shares, in exchange for a 10-year global collaboration for the development and commercialization of immunotherapies focusing on Juno’s Chimeric Antigen Receptor Technology (CAR T) and T Cell Receptor (TCR) technologies.
Shares of CELG are down about 10%, in part, along with the biotech and healthcare sectors, since September 21 when U.S. presidential candidate Hillary Clinton sent the sectors tumbling when she went on a Twitter frenzy and sent out a tweet about “outrageous” price gouging by a pharmaceutical CEO and that she would reveal her own drug affordability plan. Many believe that Clinton's plan will not go anywhere since several items in her proposal would be very difficult to pass in Congress.
Disclosure: Long positions in CELG and ABBV. No position in any other stocks mentioned.
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