Biotech Beat: Analysts Bullish on Celgene Corporation (CELG) and Regulus Therapeutics Inc (RGLS)

By Kate George

Analysts separately explain why they are bullish on both Celgene Corporation CELG and Regulus Therapeutics Inc RGLS as Celgene works to expand the use of Revlimid and Regulus releases early positive data for a pipeline HCV drug.

Celgene Corporation

Celgene's Revlimid is a FDA-approved treatment for multiple myeloma. Analyst John Sonnier of William Blair is bullish on the possibility of the drug being approved for another indication; non-Hodgkin lymphoma (NHL). The analyst focuses on the REMARC trial that is testing Revlimid for NHL. Data from the trial is expected in the middle of this year.

Sonnier explains, "Positive results from the REMARC trial should lead to a significant expansion of Revlimid in NHL." This trial is specifically evaluating Revlimid in elderly patients with diffuse large B-cell lymphoma, which encompasses about one-third of all NHL cases in the U.S. The analyst believes this addressable population is about 138K patients, though he notes this assessment is conservative.

The analyst explains that positive REMARC results could provide upside to shares, though the positive outcome is not necessary for the company to achieve its EPS guidance of $13. Sonnier elaborates, "Moreover, given the magnitude of the opportunity of the REMARC trial (which nearly doubles the addressable patient population), we do not believe that the full impact of positive results are baked into Street estimates. Based on our analysis, we believe that 12% penetration into the U.S. market and a 9% penetration in the European Union, while assuming no price appreciation, would result in incremental contribution of $1.7 billion in revenue, or $1.10 per share in 2020."

Due to Sonnier's bullishness on the REMARC trial, the analyst reiterated an Outperform rating on the stock on February 17, though the analyst did not provide a price target. Sonnier has a 47% success rate recommending stocks with a +3.4% one-year average return per rating.

According to TipRanks, 12 analysts are bullish on Celgene while 1 remains on the sidelines. The average 12-month price target between these 13 analysts is $153.78, marking a 46% potential upside from where shares last closed.

Regulus Therapeutics Inc

Shares of Regulus shot up nearly 20% yesterday after the company announced impressive early data from RG-101, a pipeline drug to treat hepatitis C. Eric Schmidt of Cowen & Co. commented on the data, explaining that the Phase II study demonstrated a 97% success rate of decreased HCV RNA levels. Only one patient did not experience a decrease in RNA levels.

Schmidt finds the results "impressive." He explains, "These three RG-101-anchored combinations are the first 4-week regimens to achieve very high viral load undectactable rates at 8 weeks (37/38 patients) and 12 weeks (14/14 patients) post dosing. In comparison, prior 4-week treatment regimens have fallen well short of this goal," pointing specifically to Gilead and Merck.

However, the analyst is quick to note one caveat: RG-101 can come with pharmacodynamics effects, which can last up to 12 weeks after dosing. Schmidt states that Regulus management is "keenly aware of this potential discrepancy," and long-term follow up in the fall may be necessary to be sure "whether the viral control observed with RG-101 translates into cures."

In light of the early data on RG-101, Schmidt reiterated an Outperform rating on the company on February 17, 2016, though the analyst did not provide a price target. Schmidt has a 37% success rate recommending stocks with a +14.5% average return per rating.

According to TipRanks, all 3 analysts who have weighed in on the stock in the last 3 months are bullish with an average 12-month price target of $33.50, marking a 347% potential upside from current levels.