This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Celgene CVR: Upside Into Abraxane Pancreatic Cancer Trial Data

[<b>Threshold Pharmaceuticals</b> <span class=" TICKERFLAT">(<a href="/quote/THLD.html">THLD</a> - <a href="http://secure2.thestreet.com/cap/prm.do?OID=028198&amp;ticker=THLD">Get Report</a><a class=" arrow" href="/quote/THLD.html"><span class=" tickerChange" id="story_THLD"></span></a>)</span>, <b>Clovis Oncology</b> <span class=" TICKERFLAT">(<a href="/quote/CLVS.html">CLVS</a><a class=" arrow" href="/quote/CLVS.html"><span class=" tickerChange" id="story_CLVS"></span></a>)</span> and <b>Newlink Genetics</b> <span class=" TICKERFLAT">(<a href="/quote/NLNK.html">NLNK</a> - <a href="http://secure2.thestreet.com/cap/prm.do?OID=028198&amp;ticker=NLNK">Get Report</a><a class=" arrow" href="/quote/NLNK.html"><span class=" tickerChange" id="story_NLNK"></span></a>)</span> are among Celgene's competitors pursuing development of their own pancreatic cancer drugs.]

Celgene's ongoing phase III study compares the combination of Abraxane and gemcitabine versus gemcitabine and a placebo with a primary endpoint of overall survival. The study is being led by a pancreatic cancer Dream Team of oncologists and some doctors are already prescribing Abraxane off label to pancreatic cancer patients, according to reports posted on various patient advocacy web sites. The results reported by some of these patients is anecdotal, of course, but does appear to be consistent with the strong results reported in the Abraxane phase II studies.

Make no mistake, the outcome of the Abraxane phase III study in pancreatic cancer remains high risk. But what I like most about the Celgene CVR at $TK is that the market is hardly pricing in success at all.

Each holder of the Celgene CVR receives a pro-rata share of $300 million in cash, paid if FDA approves Abraxane for pancreatic cancer with a survival claim in the label. If the approval occurs before April 1, 2013, Celgene pays an additional $100 million.

Additionally, Celgene CVR holders will receive an ongoing royalty tied to Abraxane sales that starts at 2.5 % for annualized sales of $1 billion and scales higher. Abraxane sales today are annualizing at about $450 million, but pancreatic cancer sales, alone, could exceed $1 billion.

Some investors may prefer to play the Abraxane pancreatic cancer trial event by owning Celgene itself. I own the Celgene CVR because of the favorable risk-reward. I would expect the CVR to trade closer to $7.50 (from $TK today) if Abraxane improves overall survival in the pancreatic cancer trial. The risk is the CVR could become almost worthless if the pancreatic cancer trial fails. Results from the study are expected late this year or early next.

Silverman is long Celgene CVR.
Jim Silverman is the managing member of RRC Bio Fund LP, a Boston-based hedge fund focused on small-cap biotech. RRC Bio was launched in 2007. Silverman also founded Risk/Reward Capital Management in 1997, a registered investment advisory. He lives in Cambridge, Mass., and received a BBA in finance from The George Washington University.
2 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
CELGZ $2.04 -2.40%
CELG $114.91 -2.55%
CLVS $83.83 -2.50%
NLNK $43.00 -3.60%
THLD $3.94 -4.80%

Markets

DOW 17,596.35 -350.33 -1.95%
S&P 500 2,057.64 -43.85 -2.09%
NASDAQ 4,958.4680 -122.0370 -2.40%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs