What To Do With Celgene Now With Major Catalysts Gone

Celgene Corporation CELG’s discontinuation of mongerson for Crohn’s disease is decidedly negative. The stock plunged 8.2 percent in premarket trading.

But the extent of justified pessimism depends on prior expectations.

UBS had long discounted mongerson’s prospects and, at its loss, maintains a Buy on the stock. But Citi’s faith was shaken.

“This removes a major upside catalyst in late 2018 as the street was skeptical about its opportunity, but it was part of our Buy thesis,” Citi analyst Robyn Karnauskas wrote in a Friday note.

Karnauskas downgraded Celgene to Neutral and lowered her price target to $140 (see Karnauskas' track record here).

Life Without Mongerson

The loss of mongerson places extra emphasis on upcoming phase 3 trials for luspatercept and ozanimod in ulcerative colitis. The two candidates face high Street expectations, with extra pressure on ozanimod for treatment of inflammatory bowel disease. Citi expects the latter’s results in either 2018 or 2019.

Their success is critical in countering the effects of impending competition to revlimid, which loses patent protection in 2021.

“Celgene is now a show me story,” Karnauskas wrote. “We acknowledge the company has LOTS of opportunity for upside from their broad pipeline. But many of their products are EARLY.”

At the time of publication, Celgene was set to open down 8 percent off Thursday’s closing rate of $135.96.

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