Analyst: FDA Letter Could Lead To 1-Year Delay For Celgene's Ozanimod

Celgene Corporation CELG is under continued stock pressure Wednesday after the U.S. Food and Drug Administration rejected its New Drug Application for ozanimod in the treatment of relapsing multiple sclerosis.

Some bulls were undeterred by the sell-off, though.

The Rating

William Blair analyst Andy Hsieh reiterated an Outperform rating on Celgene. 

The Thesis

Celgene intends to meet with the FDA to clarify expectations for resubmission, which may include progress in new or ongoing studies, according to William Blair. The company expressed confidence that it would not need to pursue another pivotal trial.

While William Blair anticipates a resolution of issues, it also forecasts a one-year delay in U.S. rollout, with commercial launch pushed to the fourth quarter of 2019. This may be compounded by a “high chance” of delay in Europe, altogether hindering Celgene’s sentiment recovery, Hsieh said. 

“In our view, well-managed and high-quality large-cap biotech companies do not make execution mistakes like the one disclosed on Tuesday,” the analyst said in a Wednesday note.

“While Celgene has been diligently attempting to regain investors' trust — fourth-quarter Otezla sales appeared to experience a robust rebound — this development will undoubtedly set the turnaround plan back a few months.”

Nonetheless, Hsieh said he's encouraged by reaffirmed top- and bottom-line guidance for 2020, as well as the FDA’s ostensible contentment with ozanimod’s safety and efficacy profile.

Price Action

At the time of publication, shares were trading down 8.62 percent at $87.52. 

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