Celgene's Pipeline In Question After GED Failure

After announcing the termination of its mongerson program for Crohn’s disease, Celgene Corporation CELG is looking more and more unwell.

“While the loss of one of the company's most advanced and high-profile pipeline programs is, in and of itself, disappointing, we believe the announcement will have a broader impact of calling into question the value of the rest of the pipeline,” Baird Equity Research analyst Brian Skorney wrote in a Friday note.

The Last Hope

Although mongerson, or GED-0301, may still have a future in ulcerative colitis treatment, with data pending on recent studies, Skorney isn’t hopeful.

“We've removed the drug from our model, and lowered our prospects for long-term growth, as pressure to succeed in I&I [inflammation and immunology] is now almost exclusively on ozanimod,” he wrote, noting that mongerson had been a “cornerstone” of Celgene’s accelerating I&I program.

The firm boasts a notably large pipeline, but its candidates are relatively young and are not seen to be materially impactful in the short term. For now, the pharmaceutical relies on ozanimod to outperform already lofty Street expectations, particularly as revlimid approaches the end of its patent protection and Celgene anticipates 2018 hearings challenging revlimid rights.

The Bottom Line

Considering these risks, doubts around revlimid’s efficacy in lymphoma treatment, and slowing growth in otezla and abraxane sales, Baird downgraded Celgene to Neutral and lowered its price target from $162 to $136.

At time of publication, the stock was trading down 10 percent off the open at a rate of $122.35.

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