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Celgene Now a Hep C Stock With Avila Buy 1/26/12

Celgene announced the Avila acquisition Thursday and focused more on the latter company's early-stage cancer drug AVL-292, a Bruton's tyrosine kinase (Btk) inhibitor currently in a phase I trial.

Investors these days, however, are obsessed with anything related to hepatitis C so they may be more interested in what Celgene plans for Avila's two hepatitis C protease inhibitors, both in preclinical development.

Celgene is paying $350 million in cash to acquire Avila, plus up to $195 million for milestones contingent upon the development and regulatory approval of AVL-292. Avila investors are also eligible for up $380 million in potential milestone payments tied to the company's other pipeline drugs.

Celgene said the Avila transaction will be neutral to 2012 adjusted earnings, which the company forecasts to reach a range of $4.70 per share to $4.80 per share -- a 25% increase over 2011 earnings.

Interest in BTK inhibitors as a potential new class of drugs for the treatment of various lymphoma, or blood cancers, is high. Recently, Pharmacyclics licensed its BTK inhibitor to Johnson & Johnson.

Celgene also announced fourth-quarter results, which were notable mainly for lower-than-expected sales of the multiple myeloma drug Revlimid.

Revlimid worldwide sales during the fourth quarter totaled $885 million, shy of the $874 million consensus estimate. While a revenue miss is never a good thing, investors are more likely to be focused on the upcoming European regulatory decision to expand Revlimid's use as a treatment for first-line multiple myeloma.

Celgene reiterated Thursday the 2012 financial guidance it provided earlier this month at an investor conference. The company expects adjusted earnings in the range of $4.70 per share to $4.80 per share on total revenue of $5.4 billion to $5.6 billion.

Celgene shares were up 19 cents to $73.98 in early Thursday trading

HCV Protease Inhibitor Program

AVL-181 and AVL-192 are novel, orally available, covalent drugs that target the HCV protease (also known as NS3), a promising target of intervention for the treatment of hepatitis C infection.

Hepatitis C is a viral infection of the liver caused by the hepatitis C virus ("HCV"). HCV infection causes severe liver disease and can lead to liver cancer. The World Health Organization estimates that 170 million people worldwide are chronically infected with HCV and 3-4 million are newly infected each year. The current standard of care is only effective in approximately half of infected individuals. But clinical studies have validated the NS3 protease, a protein encoded by the virus, as an important target of pharmaceutical intervention for vastly improved outcomes.

Our covalent approach to silencing the NS3 protein has resulted in a product candidate with a potential best-in-class profile due to:

· the ability to retain potency against clinically-arising resistance mutations;

· potential breadth of activity across all HCV genotypes; and

· anticipated once-per-day oral dosing.

Preclinical data have demonstrated that AVL181 and AVL-192 each achieve very high potency and selectivity for NS3 and also potently and effectively inhibit the drug-resistant mutations observed clinically.

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