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Celgene Corporation (CELG): Does This BiotechStudy Matter to You?

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Note: This article has been amended to remove the specifics of the Questcor investigation. Motley Fool apologizes for the error.

Celgene Corporation (NASDAQ:CELG) fell 2.6% on Thursday after disappointing clinical data for its blood cancer drug Revlimid. Investors don’t appear too concerned, but I believe this news could be more crippling than the stock’s reaction suggests.

What Is Revlimid?

Revlimid is already approved to treat multiple myeloma and myelodysplastic syndromes (MDS), but is testing the drug on several forms of lymphoma and leukemia. It’s also trying to expand its use in multiple myeloma and MDS.

Celgene Corporation (NASDAQ:CELG) has one of the largest pipelines in the biopharmaceutical industry, but a large bulk of that pipeline revolves around its five FDA-approved drugs. In fact, Revlimid is being tested in nine total clinical studies. One of those studies delivered a potentially big blow on Thursday.

Celgene Corporation (NASDAQ:CELG)Revlimid is mostly being developed to treat forms of blood cancer, and is being tested in three studies for leukemia. One study was in B-Cell chronic lymphomatic leukemia for the elderly. In the 450-patient study, split into two near-equal groups, 34 treated with Revlimid died, while 18 on another drug passed away. This shows that Revlimid accelerated or caused the death of patients in this one indication, which forced the FDA to discontinue the study.

Initial analysis says that Revlimid is not the primary driver to Celgene Corporation (NASDAQ:CELG)’s future, and that the company’s pipeline is large enough to handle a few disappointments. While this may be true, Revlimid’s sales grew 16% last quarter, and contributed $1 billion to the company’s $1.43 billion in total revenue. Therefore, Revlimid is very important to Celgene.

The Importance Of Off-Label Usage

As a 20-year veteran in the biopharmaceutical space, with high roles in both R&D and in marketing, I think this news could be more impactful then people realize. To explain, Questcor Pharmaceuticals Inc (NASDAQ:QCOR) lost 50% of its valuation last year. A government investigation into the marketing practices of its only drug, Acthar Gel, created panic among shareholders.

Questcor Pharmaceuticals Inc (NASDAQ:QCOR) has recovered, still producing 40% sales growth, and is now trading near its 2012 all-time highs. However, Questcor’s marketing practice is not uncommon. Companies that rely on the sales and success of one product will often test the drug in multiple clinical trials, as seen with Celgene Corporation (NASDAQ:CELG). Then, if trials progress as planned, companies will begin to advertise, disclose early study results, and produce off-label sales for indications that are being studied.

Too Dependent On One Drug?

Now, I am not saying that Celgene Corporation (NASDAQ:CELG) is definitely involved in this practice, but I do believe it’s possible. The company earned $3.7 billion from sales of Revlimid last year. Yet analysts believe the drug could reach peak global sales of $6 billion. Therefore, at 60% of peak sales, it’s reasonable to suggest that off-label usage is occurring, with only two of its 11 possible indications FDA approved.

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