Now No. 9 in Biotech Celgene Corp’s Climb to the Top Began With Revival of Once-Loathed Thalidomide

SUMMIT, N.J. – After two decades of staking its future on the infamous drug Thalidomide, Celgene Corp. is branching out.

Over the next 12 months, it’s expected to win approval from the U.S. Food and Drug Administration for two new drugs. One of them – for attention deficit hyperactivity disorder, a thriving market segment – could be approved before the end of the month.

Future sales from those drugs could quickly double or triple the company’s annual revenue of about $400 million and reduce its dependence on Thalomid, the successor to Thalidomide.

“Today, we’re in a wonderful position,” John W. Jackson, Celgene’s chairman and chief executive said. “Going forward, we have an incredibly promising future.”

Celgene was started in 1986 by scientists developing technology to use enzymes to “eat” pollution in water. When they found it wasn’t economically feasible, they moved on to study Thalidomide, a morning-sickness drug that caused grievous birth defects before being banned in 1962. Research showed Thalidomide can stimulate or suppress the immune system, giving it potential to treat many disorders. It can also prevent growth of blood vessels that feed tumors, Sol J. Barer, Celgene’s president, said.

Redeveloped as Thalomid, a popular treatment for a type of bone cancer, the drug’s steady revenue has helped Celgene grow into one of the 10 largest biotech companies in the world. That bankrolled its research on treatments for cancer and other disorders. Celgene Corp. also owns a Baton Rouge laboratory that harvests and freezes stem cells from placentas.

At Bon Carre Business Center, the former-Anthrogenesis lab stores placenta stem cells from the Medical Center of Louisiana in New Orleans and Earl K. Long Medical Center in Baton Rouge.

Celgene reported on April 28 that its first-quarter profit rose 110 percent to $19 million. Revenue for the quarter jumped 35 percent to $112 million. The company’s stock price has climbed steadily for the past three years and closed last week at $39.42, just off its historical high of $40.90. Those numbers could improve still. Celgene is awaiting an FDA decision on Focalin XR, an extended-release drug for ADHD.

The long-acting drugs are widely preferred because they limit between-dose behavior problems, and children don’t have to go to the school nurse for an afternoon pill. ADHD is a $3 billion-a-year market. Focalin XR appears to have the same efficacy as Ritalin and fewer side effects, said Dr. Sherie Novotny, a child and adolescent psychiatrist and associate professor of psychiatry at Robert Wood Johnson Medical School in New Brunswick. She said her patients on regular Focalin will be thrilled to have a drug they only take once a day.

Yaron Werber, biotech analyst at Smith Barney Citigroup, called Focalin XR a modest improvement over existing ADHD drugs. But noted that competing drugs such as Concerta will face generic competition soon and are likely to be advertised less. A marketing campaign could build a good niche for Focalin XR, he said.

Another Celgene drug, Revlimid, is up for two FDA approvals, to treat the bone cancer multiple myeloma as well as a rare form of the bone marrow disease myelodysplastic syndrome, or MDS.

“They’ve really developed the world’s best multiple myeloma franchise and what looks to be one of the leading hematology franchises,” Werber said.

Some analysts don’t expect use for MDS to be approved. Revlimid has only been tested on a small number of patients, said biotech analyst Matthew Osborne of investment banker C.E. Unterberg Towbin.

Osborne, disagreed, saying he thinks Celgene has a good shot at that approval. He projects that Revlimid eventually could bring the company total annual sales of $500 million to $1 billion.

“If it’s not approved, then the stock may pull back,” said Osborne, who has had a Buy rating on Celgene for about two years.

Werber is forecasting annual Revlimid sales of about $1.2 billion by 2009. But he cautions that Celgene needs to develop a marketing team outside this country to generate sales that high.

Celgene is also expecting official FDA approval to use Thalomid to treat multiple myeloma. The drug already provides 90 percent of company revenue, mainly through doctors’ off-label use to treat bone cancer. FDA approval would allow the company to openly market Thalomid for that use.

That approval could boost sales by 10 percent. The Medicare drug benefit could bring additional revenue as more patients get coverage for the drug, Werber said.

ON THE INTERNET: Celgene Corp.: http://www.celgene.com