Health

Max Nisen is a Bloomberg Gadfly columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.

Sitting on a cash pile is a popular look for big biotech. But sometimes good things come to those that spend. 

A regulatory filing revealed Wednesday morning that Celgene expects to apply for FDA approval of AG-221 -- a drug it licensed from Agios that treats a tough form of blood cancer -- by the end of this year. 

Biotech Blues
Celgene's stock has had a bumpy year so far
Source: Bloomberg

This a faster path to market for AG-221 than many expected. It helps vindicate Celgene's aggressive R&D spending and outsourcing strategy and its ability to pick good partners. 

Just about every big pharma and biotech company teams up with smaller firms. The standard structure involves an up-front cash fee, future milestone payments and royalties upon FDA approval, in return for the right to license and market a drug. It's mutually beneficial: Small, money-losing firms get access to a bigger company's capital and expertise. Big firms get discounted and less-risky access to promising new treatments.

But Celgene is a licensing machine, with 33 such deals between 2012 and 2015, according to data from Bloomberg Intelligence. That puts it in the same league as pharma giants like Pfizer, which did 35 deals during that stretch. It has kept spending this year, including an additional $200 million to Agios to expand its partnership with the firm. 

Big biotech peers such as Amgen and Gilead have massive cash piles, $35 and $24.6 billion respectively, and have been far less inclined to share it with partners. 

Partnering Up
Celgene beats out not only its big biotech peers, but many massive pharma firms in seeking out deals with smaller firms.
Source: Bloomberg Intelligence

And Celgene has spent substantially more money up front on its deals than any biotech or big-pharma firm. It spent $3.3 billion from 2012 to 2015, beating out Sanofi ($2 billion), Merck ($1.8 billion) and Pfizer ($1.4 billion), according to BI records of disclosed fees.

And Celgene consistently spends more on R&D -- including some its partnership outlays -- than all of its big biotech peers. 

Outspender
Celgene's R&D spending as a percentage of net sales consistently beats its peers, in part due to its aggressive partnering strategy.
Source: Bloomberg

Beyond its pipeline, Celgene has a blood-cancer drug, Revlimid, which hit $5.8 billion in sales last year and is expected to pass $11 billion in 2020. It also has two other fast-growing approved drugs, Pomalyst and Otezla. All of this helps drive up its market valuation.

But Celgene's willingness to use its cash in myriad ways (it also spent $6.7 billion outright buying Receptos last year) is what truly distinguishes it from its peers. The sheer variety of its shots on goal has helped make it the most highly valued mature biotech, trading at 16 times forward earnings, compared with a peer average of 13. 

Its shares are down about 10.7 percent so far this year, which has been a bad one all around for biotech -- the Nasdaq Biotech Index is down 15.9 percent. But Celgene's stock has lagged both Amgen and Biogen so far this year, suggesting not everybody is sold on its approach.

AG-221 may still not work out. A rapid approval filing doesn't necessarily mean a rapid approval or commercial success. And Celgene has riskier bets in its pipeline, such as its major investment in Juno Therapeutics' cell therapies for cancer. 

But the stepped-up push for AG-221 approval is a reminder that Celgene has a better chance than most companies to pop up on a random Wednesday with happy news, and a portfolio that can endure some bumps.

And it's a lesson for competitors that would rather admire their cash heaps than spend them. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

  1. Not all up-front payments for licensing deals are disclosed.

To contact the author of this story:
Max Nisen in New York at mnisen@bloomberg.net

To contact the editor responsible for this story:
Mark Gongloff at mgongloff1@bloomberg.net