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Celgene (CELG) Down 21% So Far in 2018: What Lies Ahead?

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Shares of Celgene Corporation CELG have been down 21% in the year so far compared to a 3.3% decline for the overall biotech industry.



Setbacks in Recent Times

Celgene has been sailing in troubled waters for quite some time now. Notably, things have been on the downturn for the company since last October, after Celgene announced a phase III trial, REVOLVE, (CD-002) on pipeline candidate GED-0301 in Crohn’s disease, and the discontinuation of the extension trial, SUSTAIN (CD-004), following a recommendation from the Data Monitoring Committee, which assessed overall benefit/risk during a recent interim futility analysis.

In December 2017, a late-stage study on its lead cancer drug Revlimid in combination with Roche Holdings’ RHHBY Rituxan failed. Celgene’s key growth engine is Revlimid. While Revlimid sales continue to be impressive, we are concerned about the company’s dependence on the product for growth. The drug is set to lose patent exclusivity soon and hence Celgene is desperately trying to revive its portfolio.

The company suffered a setback in early 2018, when it received Refusal to File letter from the FDA regarding its New Drug Application (“NDA”) for multiple sclerosis candidate, ozanimod. The candidate is being developed for the treatment of patients with relapsing forms of multiple sclerosis (“MS”). The FDA stated that the nonclinical and clinical pharmacology sections in the NDA were inadequate to allow a complete review. Hence, Celgene will request a Type A meeting with the FDA to ascertain the additional information needed for resubmission of the NDA. The news comes as a great disappointment for investors, given the potential the MS market holds.

Thereafter, the company’s president and chief operating officer, Scott A. Smith, resigned from his position.

Pipeline Looks Promising

Nevertheless, things are looking up for this troubled biotech company. Celgene acquired Juno Therapeutics and added JCAR017 (lisocabtagene maraleucel; liso-cel) to its lymphoma pipeline. JCAR017 is a best-in-class CD19-directed CAR-T candidate, currently in a pivotal program for relapsed and/or refractory diffuse large B-cell lymphoma. The candidate is expected to obtain regulatory approval in the United States in 2019 with potential global peak sales of approximately $3 billion. Another candidate for multiple myeloma is JCARH125.

The company also announced a development and co-promotion agreement with bluebird bio, Inc. BLUE. Both companies have entered into a deal to co-develop and co-promote bb2121, an experimental anti-B-cell maturation antigen chimeric antigen receptor (CAR) T cell therapy for the potential treatment of patients with relapsed/refractory multiple myeloma in the United States.

Celgene is poised to launch two CAR-T therapies for blood cancers in the next three years with bluebird’s bb2121 for myeloma and JCAR017 for relapsed lymphoma.

Most recently, Celgene and partner Acceleron Pharma Inc. XLRN announced positive top-line results from a phase III, multi-center study, MEDALIST. The MEDALIST study evaluated the efficacy and safety of luspatercept versus placebo in patients with very low, low or intermediate risk myelodysplastic syndromes (MDS) with chronic anemia, and refractory to, intolerant of, or ineligible for treatment with an erythropoietin-stimulating agent (ESA), ring sideroblast-positive and require frequent red blood cells (RBC)  transfusions.

The study showed that luspatercept achieved a highly statistically significant improvement in the primary endpoint of RBC transfusion independence of at least eight consecutive weeks during the first 24 weeks compared to placebo. Luspatercept also met the key secondary endpoint of demonstrating a highly statistically significant improvement in RBC transfusion independence of at least 12 consecutive weeks during the first 24 weeks. The study also achieved modified hematologic improvement-erythroid (IWG mHI-E), a meaningful secondary endpoint. Based on these results, the company expects to file for submissions, and regulatory submissions are planned in the United States and Europe in the first half of 2019.

Hence, while the first half of 2018 was dismal for the company, we do expect a better performance in the second half and thereafter.

Zacks Rank

Celgene carries a Zacks Rank #3 (Hold).

You can see the complete list of today’s Zacks #1 Rank stocks here.

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