Analysts had plenty of questions but few data-driven answers about Celgene Corp.'s decision to pay $710 million up front to privately held Nogra Pharma Ltd. to develop and commercialize GED-0301, a phase III-ready, oral antisense DNA oligonucleotide targeting Smad7 mRNA for the treatment of moderate to severe Crohn's disease (CD) and other indications.

During a conference call related to first quarter earnings, Summit, N.J.-based Celgene's officials justified the agreement – though they could not yet disclose details of the phase II results that made it happen – with Dublin-based Nogra, which includes regulatory, development and net sales milestone payments and tiered royalties.

The total payout if all regulatory and development goals are met could go as high as $815 million for multiple indications. Sales milestones starting from global annual sales of $500 million could reach more than $1 billion, if sales hit the $4 billion mark.

Asked by analyst Michael Yee, of RBC Capital Markets, about the "ton of deals" the company has done lately and the "particularly large" one with Nogra, CEO Robert Hugin said Celgene's appetite for business development is driven by what's offered.

"So far, the opportunities, as we've seen them, have been supportable under the financial model that has been built for Celgene," Hugin said. "Obviously, late-stage assets are going to be more expensive than earlier-stage assets, but when you find one like this one that we believe can be really transformative to the way medicine is practiced in this unmet area of medical need, we're going to act on them."

Robyn Karnauskas, of Deutsche Bank, noted that "Isis [Pharmaceuticals Inc.] has been trying oral antisense for a while," and she wanted to know what gave Celgene such confidence in the mechanism of action. Scott Smith, the firm's global head of inflammation and immunology, cited GED-0301's "coupling of the antisense technology with a delivery system that delivers the drug right on site in the gut, at the site of the pathophysiology of the disease."

Jacqualyn Fouse, chief financial officer, said the transaction "has the nature of an acquisition of a product. It's a little bit more of an up-front amount, but if you think back to the Avila [Therapeutics Inc.] acquisition we did a couple of years ago, it was much earlier for $350 million up front. I think you can put it in perspective. When you see the data, I think you'll understand why we were so interested" in GED-0301.

In the buyout of Waltham, Mass.-based Avila, Celgene also pledged up to $195 million in milestones contingent upon the development and regulatory approval of phase I-stage Bruton's tyrosine kinase inhibitor AVL-292, as well as up to $380 million in potential milestone payments related to more candidates from the firm's Avilomics platform. (See BioWorld Today, Jan. 27, 2012.)

Hugin promised to "talk more fully about it when the [GED-0301] data's out there in the world. I think it will be striking and obvious as to what direction we're going to take the molecule." Nogra has completed a 166-patient phase II trial and submitted the data to a major medical journal, with plans to disclose the data during an upcoming scientific conference.

Smith called the results in CD "exciting," with a "consistently high response rate and rate of remission after just four weeks of treatment." Although he did not provide a start date for the trial, Smith said the company will "work aggressively toward beginning the phase III trial later this year."

Celgene was not alone in its interest. "I think it would be safe to characterize [the bidding process] as having been highly competitive," Fouse said, adding that Celgene feels "quite good about the intellectual property [related to GED-0301]. There are some differences that we could see with respect to extensions and things like that, but [protection] would go beyond the 2027 time frame."

FIRST QUARTER 'A BIT SOFT''

Deutsche Bank's Karnauskas called the Nogra deal "bold" in a research report and cited published phase I data that seem encouraging. "In the gut[s] of patients with CD, high SMAD7 blocks the immune suppressive activity of TGF-B," she wrote, whereas SMAD7 expression was shown to restore TAF-Beta signaling and dampen CD-like colitis. In the phase I open-label trial, 15 active CD patients were enrolled at three doses. No dropouts, no serious adverse events and mostly mild adverse events were seen, but the drug turned up strong efficacy at eight days in all patients.

Credit Suisse analyst Ravi Mehrotra also quizzed Celgene execs about the "high sum paid" and asked whether "something else in the phase II" caused their optimism. He later wrote in a research report that "the assumption is that the speed of onset of remission, as well as magnitude and maintenance of remission, for GED-0301 is significantly better than biologics (Cimzia, Remicade, Simponi and Tysabri are approved for CD) and could position GED-0301 as a first-line agent."

As for earnings, Celgene reported net product sales of about $1.7 billion for the first quarter of 2014, a 19 percent increase from the same period in 2013. Adjusted net income rose 19 percent to $705 million compared to $592 million in the first quarter of 2013. For the same period, adjusted diluted earnings per share increased 22 percent to $1.67 from $1.37. Based on U.S. GAAP, Celgene chalked up GAAP first quarter of 2014 net income of $280 million, or 66 cents per diluted share. For the first quarter of 2013, net income was $385 million, or 89 cents per diluted share.

Karnauskas noted that Revlimid (lenalidomide) and Abraxane (nab-paclitaxel) sales, though they rose, came in somewhat lower than consensus hopes, though Celgene maintained its guidance on the top and bottom lines for the year, and Karnauskas' 2015 earnings per share guess remained "roughly unchanged" at $10.17 (vs. $10.15 before). Eric Schmidt, of Cowen and Co., deemed the quarter "a bit seasonally soft," but hailed the "robust" earnings outlook.

Specifically, Revlimid sales increased 14 percent to about $1.1 billion and were driven by overall market share, increased duration of therapy and geographic expansion. U.S. sales of $642 million and international sales of $502 million increased 13 percent and 16 percent, respectively.

Abraxane sales for the first quarter totaled $185 million, a 51 percent increase. U.S. sales of $142 million and international sales of $43 million increased 51 percent and 49 percent, respectively. The rise in sales reflects the impact of the ongoing U.S. launch in pancreatic cancer and early launch success for pancreatic cancer in Europe, Celgene said.

Vidaza (azacitidine) sales decreased 27 percent to $148 million. U.S. sales decreased 83 percent to $14 million, due to a full quarter of generic competition. International sales were $134 million and increased 14 percent from 2013, fueled by increased demand in Europe and Japan. Pomalyst/Imnovid (pomalidomide) sales were $136 million, with U.S. sales $89 million and international sales making up the remainder.

Separately, Celgene and Cambridge, Mass.-based Acceleron Pharma Inc. disclosed interim phase IIa data showing dose-dependent increases in hemoglobin in patients with end-stage renal disease on hemodialysis who were treated with sotatercept, formerly known as ACE-011. The compound is designed to boost red blood cell levels by targeting TGF-beta molecules. Presented at the National Kidney Foundation 2014 Spring Clinical Meeting in Las Vegas, the results came from a randomized, placebo-controlled, dose-escalation study to evaluate sotatercept for the correction of anemia. Four sotatercept dose groups were included (0.3 mg/kg, 0.5 mg/kg, 0.7 mg/kg, or 0.7 mg/kg loading dose followed by 0.4 mg/kg). Hemoglobin increase at or greater than 1 g/dL was achieved by 20 percent, 37 percent and 40 percent of patients in the placebo, sotatercept 0.3 mg/kg and sotatercept 0.5 mg/kg cohorts, respectively, in the first 28-day cycle following a single dose. The mean peak hemoglobin increase in the first 28-day dose cycle was 0.1 g/dL, 0.5 g/dL and 0.8 g/dL in patients in the placebo, sotatercept 0.3 mg/kg and sotatercept 0.5 mg/kg cohorts, respectively.

Celgene's stock (NASDAQ:CELG) closed Thursday at $141.25, down $3.57.