Celgene (CELG) took a step forward toward becoming a major player in the multiple sclerosis treatment market with the announcement Friday of positive results from a late-stage clinical trial of ozanimod.

Two doses of ozanimod demonstrated statistically significant superiority over Biogen's (BIIB) Avonex in reducing the annual relapse rate for patients with relapsing multiple sclerosis, achieving the primary endpoint of the phase III study dubbed "Sunbeam." Ozanimod also bested Avonex by reducing the number of new brain lesions seen in multiple sclerosis patients, a key secondary endpoint of the study.

Celgene is conducting a second phase III study of ozanimid in multiple sclerosis patients, with results expected in the second quarter.

The positive results from the first phase III study validate Celgene's decision to gain control of ozanimod through the acquisition of Receptos for $7 billion in 2015. Ozanimod is part of Celgene's strategy to grow its inflammation and immunology business as a diversification hedge away from Revlimid, the blockbuster blood cancer drug responsible for a majority of its revenue and profits.

Ozanimod is dosed as a convenient pill, while most multiple sclerosis drugs must be injected. Ozanimod belongs to the same S1P modulating class of drugs as Novartis' (NVS) Gilenya, which delivered $3.1 billion in multiple sclerosis sales in 2016.

Gilenya has tolerability issues, most notably a slowing heart rate which forces doctors to monitor patients after the first dose is taken. Ozanimod appears to sidestep heart-related tolerability issues, although additional data will be needed to confirm. On Friday, Celgene said the safety and tolerability of ozanimod in the phase III Sunbeam study was "consistent" with results from previously reported phase II studies. No further details were provided.

Multiple sclerosis has become an increasingly crowded and competitive market for drug companies and might be particularly vulnerable to pricing pressures. Celgene is developing ozanimod in other indications, including ulcerative colitis and inflammatory bowel disease. How Celgene plans to move forward with ozanimod if the drug is approved has not been articulated although the company has said it might build out its own multiple sclerosis commercial team or seek out a partner. Celgene could also do something dramatic like acquire Biogen, although company executives have said mega-mergers are not a priority at this time.

Celgene shares were trading flat at $119 in Friday pre-market trading.

Adam Feuerstein writes regularly for TheStreet. In keeping with company editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.

More from Stocks

What You Need to Know About Facebook and Europe's New Privacy Rules

What You Need to Know About Facebook and Europe's New Privacy Rules

8 Bold Moves General Motors Could Make to Rev Up Its Battered Stock Price

8 Bold Moves General Motors Could Make to Rev Up Its Battered Stock Price

Is Your Investment Portfolio Prepared for Trade Wars, Inflation and More Trump?

Is Your Investment Portfolio Prepared for Trade Wars, Inflation and More Trump?

GE Is Too Opaque, Too Diversified and Too Poorly Managed: Doug Kass Insider

GE Is Too Opaque, Too Diversified and Too Poorly Managed: Doug Kass Insider

Dow Falls Over 200 Points as Apple's Slump Offsets Gains in General Electric

Dow Falls Over 200 Points as Apple's Slump Offsets Gains in General Electric