Celgene (CELG) President And COO To Step Down: What's Ahead?

Problems do not seem to end for biotech bigwig Celgene Corporation (NASDAQ:CELG) . The company’s president and chief operating officer, Scott A. Smith, has decided to step down from his position with immediate effect.

As a result, chairman and CEO Mark J. Alles will take up responsibilities.

The sudden exit of the president has added to the woes as Smith was primarily responsible for building the Inflammation and Immunology franchise, and particularly for the launch of Otezla.

Celgene stated that the company is reshuffling its executive team to enhance leadership focus.

The news comes at a time when Celgene is sailing in troubled waters. Celgene’s stock has lost 18.3% in the last three months, worse than the industry’s decline of 7.6%. Shares lost 2.4% on the news.

Last month, Celgene suffered yet another setback 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.

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 extension trial, SUSTAIN (CD-004) have been discontinued 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’ (OTC: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 recently announced a development and co-promotion agreement with bluebird bio, Inc. (NASDAQ: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.

Earlier in 2018, 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.

Zacks Rank & Key Pick

Celgene currently carries a Zacks Rank #4 (Sell).

A better-ranked stock from the same space is Regeneron Pharmaceuticals (NASDAQ:REGN) , which sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Regeneron’s earnings per share estimates have moved up from $18.65 to $18.68 for 2018 in the last 30 days. The company pulled off a positive earnings surprise in three of the last four quarters, with an average beat of 9.15%.

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