With profitability reached last year, a rise in its stock price of more than 25 percent since the start of 2004, the FDA reviewing Thalomid for blood cancer and a 2-for-1 stock split due for shareholders next month, Celgene Corp. is sitting pretty - and also could be quite a takeover candidate for a deep-pocketed pharma company looking for a good cancer story.

"I think that's probably one thing that's in the back of a lot of investors' minds," said Christopher Raymond, an analyst with Robert W. Baird & Co. "It's possible. Honestly, that it hasn't happened already is a little bit surprising."

But the company's drug Revlimid, which Raymond called "the key to future growth," and due for a new drug application filing late this year or early next, could travel various approval routes, each perhaps not as fast as investors would like. Raymond maintained a "neutral" rating on the stock this month.

Celgene has said it plans to file the NDA for oral Revlimid (a derivative of Thalomid, the company's brand name for thalidomide) based on data from a Phase II trial in myelodysplastic syndromes (MDS) patients.

"It's a three-tiered approach they've outlined," Raymond told BioWorld Financial Watch. The most aggressive effort will be in MDS. "If that doesn't work, they have a very nice, robust Phase II trial in multiple myeloma. If that doesn't work, they have a special protocol assessment for a Phase III trial," also in multiple myeloma.

And Celgene's Thalomid, "while it's not approved for that indication, is the standard care in front-line multiple myeloma," Raymond pointed out.

"The sizeable collection of data for Thalomid across various cancer settings suggests that the drug may have therapeutic utility far beyond multiple myeloma, and even beyond oncology," he wrote in his research report.

Thalomid first won FDA approval more than five years ago for a condition related to leprosy. In February, Celgene said the FDA accepted its supplemental NDA for multiple myeloma.

Revlimid, the derivative of Thalomid, failed against melanoma in April, which was not a major surprise for Celgene but put a dent of about 11 percent in the firm's stock on the day the news was disclosed. Still, Raymond modeled launch of the drug in late 2005, based on approval from the Phase II myeloma data.

He previously assumed the MDS filing would be in late 2004, which would mean approval in the first half of 2005 at best. An early 2005 filing instead would mean approval as late as the second half of the year - causing Raymond to estimate $55 million in Revlimid revenue for 2005, and an overall earnings per share in 2005 of 94 cents.

That compares with a consensus of $1.11 EPS for the year, thanks to optimism regarding the timing of approval. For the higher number to be accurate, Raymond said, the FDA review would have to be "substantially shorter" than the customary six-month priority review, a scenario he characterized as "a long shot."

Celgene also early this month reaffirmed earnings guidance for 2004, shooting for 50 cents to 60 cents per share. The range was revised upward in June from 42 cents to 52 cents per share, and Thomson First Call analysts are predicting Celgene will hit the high end of the new estimates, probably coming in around 57 cents per share.

"What has me a bit concerned is that Velcade is starting to show up on the radar screen and take a big chunk of patient share in second-line [multiple myeloma]," Raymond said, referring to Millennium Pharmaceuticals Inc.'s bortezomib, approved for the indication in May 2003 for relapsed and refractory patients. "A lot of people have been waiting for Velcade to make that migration from third-line into earlier use, and it's finally started to happen."

Celgene's maintenance of its position "hinges on how quickly Revlimid gets approved," he added. "If it's approved as early as they say it should be, they'll be OK."

On the other hand, if Millennium offers strong front-line data with Velcade at the December meeting of the American Society of Hematology, and if Revlimid doesn't move along as quickly as Celgene hopes, Thalomid and the company might find themselves in a fix, Raymond said.

Second-line use of Velcade began rising just after Millennium provided results at the American Society of Clinical Oncology meeting. "Physicians are following the data," he said.

MDS is a set of five diseases regarded as precursors to leukemia, in which the bone marrow doesn't function as it should to make normal blood cells.

Patients with what is known as 5q- syndrome, primarily older women, have an abnormality in their DNA. (They are the patients being tested in the Phase II trial on which Celgene aims to base its NDA.) Hypoplastic MDS is a syndrome similar to a type of anemia, and patients with that syndrome have low numbers of blood cells in the bone marrow, where those cells are produced. Other forms are MDS with myelofibrosis - in which bone marrow cells grow inside the spleen and liver and the bone marrow is replaced by fibrous tissue - and MDS with prominent eosinophilia or monocytosis, both of which represent an excess of types of white blood cells.

MDS can be caused by chemotherapy, radiation, viral infection or a genetic flaw. The symptoms are anemia, with weakness, fatigue, frequent infections, easy bruising, bleeding, fever, weight loss and a sense of feeling full.

First classed as a disease unto itself in 1976, MDS was then believed to show up in about 1,500 new cases every year, but numbers have proven to be much higher, possibly because of improvements in diagnosis. About 7,000 to 12,000 new cases are diagnosed annually in the U.S., mainly in people older than 60, according to figures from the Myelodysplastic Syndromes Foundation.

Approved in May for MDS was Pharmion Corp.'s injectable Vidaza (azacitidine), in-licensed from Pharmacia & Upjohn Co., now part of Pfizer Inc. The compound belongs to a class of hypomethylating or demethylating agents.

Also viewed as promising is Cell Therapeutics Inc.'s Trisenox (arsenic trioxide) for injection, cleared by the FDA for marketing as a therapy for relapsed/refractory acute promyelocytic leukemia. In the first quarter, the drug sold $3.9 million. The company reported in June preliminary data from a Phase II, multicenter European study that showed single-agent Trisenox in patients with high-risk and low-risk MDS yielded a hematologic response rate of 27 percent. Nine of 48 patients (19 percent) who had single-lineage red blood cell transfusion dependence became transfusion independent after therapy.

Another potential competing product with Celgene's oral Revlimid is injected Dacogen (decitabine), from SuperGen Inc., which aims to finish its rolling NDA for the product in the fourth quarter of this year - despite trial results this spring that were viewed by the market as equivocal.

SuperGen officials said the Phase III trial in MDS hit the primary endpoint of delaying either progression to acute myelogenous leukemia or death. Patients randomized to the Dacogen arm had an increased time to progression to AML or death (p=0.042 Wilcoxen test, p=0.198, log-rank test), compared to patients randomized to supportive care only. Median time to progression to AML or death in Dacogen patients was 338 days vs. 263 days in patients on supportive care.

SuperGen lost more than 33 percent that day, closing at $8.56, and late last week was trading at less than $7. The problem was that the Wilcoxen test proved positive but the log-rank test failed. Investors might have figured the company used the Wilcoxen test only after finding the other didn't work, although SuperGen said from the beginning it would use both measures.

MGI Pharma Inc. found the MDS indication enticing and apparently wasn't fazed by the confusion, signing with SuperGen late last month a deal for exclusive worldwide rights to develop, manufacture, commercialize and distribute Dacogen. Under the terms, MGI made a $40 million equity investment in SuperGen at $10 per share and could pay up to $45 million in milestones. SuperGen gets a royalty on worldwide net sales starting at 20 percent and escalating to a maximum of 30 percent, with MGI committing to fund more costs associated with Dacogen, at least $15 million worth.

Might Celgene find itself in line for a similar deal, if not an outright buyout?

"I would argue they represent kind of a plug it in and turn it on' entrée into oncology" for a major pharma firm, Raymond said. "There aren't many independent oncology companies around."

Meanwhile, he said he has "no doubt" Revlimid will be approved and, with the other MDS drugs, will find its place.

"This will be one of those fascinating things to watch, and see how they all play out," he said.

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