After two decades of staking its future on the infamous drug thalidomide, Celgene is branching out. An offshoot of chemical maker Celanese...

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SUMMIT, N.J. — After two decades of staking its future on the infamous drug thalidomide, Celgene is branching out.


An offshoot of chemical maker Celanese, Celgene is expanding its portfolio. During the next 12 months, it’s expected to win approval from the U.S. Food and Drug Administration for two new drugs.


One — for attention deficit hyperactivity disorder (ADHD), a thriving market segment — could be approved before the end of the month.


Future sales from those drugs could quickly double or triple the company’s annual revenues of about $400 million and reduce dependence on Thalomid, the successor to thalidomide.


“Today, we’re in a wonderful position,” said John Jackson, Celgene’s chairman and chief executive. “Going forward, we have an incredibly promising future.”


Celgene was started in 1986 by scientists developing technology to use enzymes to “eat” pollution in water.


When they found it wasn’t economically feasible, they moved on to study thalidomide, a morning-sickness drug that caused grievous birth defects before being banned in 1962.


Research showed thalidomide can stimulate or suppress the immune system well, giving it potential to treat many disorders, and it can prevent growth of blood vessels that feed tumors, said Sol Barer, Celgene’s president.


Redeveloped as Thalomid, a popular treatment for a type of bone cancer, the drug has produced steady revenues that have helped Celgene grow into one of the 10 largest biotech companies in the world. Thalomid sales have bankrolled the company’s research on treatments for cancer and other disorders.


Celgene reported in April that its first-quarter profit more than quadrupled to $48.2 million on record sales and a large, one-time income tax benefit; profit rose 110 percent to $19 million without the benefit.


Revenues for the quarter jumped 35 percent to $112 million. Celgene said it expects total 2005 revenues of around $525 million.


The company’s stock price has climbed steadily for the past three years and closed last week at $39.42, just off its historical high of $40.90. Yesterday, Celgene shares slipped 26 cents to $39.16.


Those numbers could improve if the FDA gives its approval to two Celgene drugs in the pipeline.


Celgene awaits a decision on Focalin XR, an extended-release drug for ADHD, a $3 billion-a-year market. The long-acting drugs are widely preferred because they limit between-dose behavior problems, and children don’t have to go to the school nurse for an afternoon pill.


Celgene manufactures the original, twice-a-day version of Focalin for Swiss pharmaceutical giant Novartis, which created the first ADHD drug, Ritalin, decades ago.


Focalin XR appears to have the same efficacy as Ritalin and fewer side effects, said Dr. Sherie Novotny, a child and adolescent psychiatrist and associate professor of psychiatry at Robert Wood Johnson Medical School in New Brunswick.


She said her patients on regular Focalin will be thrilled to have a drug they only take once a day.


Under what analysts call a unique licensing deal, Celgene gets royalties on 30 percent of all Novartis revenues from Focalin as well as Ritalin, a setup that discourages Novartis from promoting Ritalin over Focalin.


Celgene estimates royalties and payments on those ADHD drugs will bring it $60 million in 2005.


Yaron Werber, biotech analyst at Smith Barney Citigroup, called Focalin XR a modest improvement over existing ADHD drugs. But he noted competing drugs such as Concerta will face generic competition soon and are likely to be advertised less, so a marketing campaign could build a good niche for Focalin XR.


Another Celgene drug, Revlimid, is up for two FDA approvals, to treat the bone cancer multiple myeloma and a rare form of the bone-marrow disease myelodysplastic syndrome, or MDS.


“They’ve really developed the world’s best multiple-myeloma franchise and what looks to be one of the leading hematology franchises,” said Werber.


Most analysts don’t expect use for MDS to be approved, because Revlimid has only been tested on a small number of patients, said biotech analyst Matthew Osborne of investment banker C.E. Unterberg Towbin.


Osborne disagrees with that view, saying Celgene has a good shot at approval. He projects Revlimid eventually could bring the company total annual sales of $500 million to $1 billion.


“If it’s not approved, then the stock may pull back,” said Osborne, who has had a “buy” rating on Celgene for about two years.


Werber forecasts annual Revlimid sales of about $1.2 billion by 2009 but cautions that Celgene needs to develop a marketing team outside the U.S. to generate sales that high.


Celgene is also expecting official FDA approval to use Thalomid to treat multiple myeloma. The drug provides 90 percent of company revenues, mainly through doctors’ off-label use to treat bone cancer.


FDA approval would allow the company to openly market Thalomid for that use. That approval could boost sales about 10 percent, and the Medicare drug benefit could bring more revenues as more patients get coverage for the drug, said Werber.