Shares of Celgene Corp. plummeted 18.5% on Thursday after the pharmaceutical company cut its earnings forecast for the year and lowered its long-term financial outlook.
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This comes amid slowing market growth for a key drug and a clinical trial failure last week that undermined the company's new product development.
Celgene's recent setbacks have led to a stark shift in market sentiment toward the company, which had been one of the drug industry's most favored and widely held stocks. The Summit, N.J., firm has lost a third of its market value, or about $37.4 billion, since the beginning of the month.
Celgene remains one of the fastest-growing large drugmakers, but its recent market value decline reflects concerns that its pipeline won't deliver fast enough if its core stable of cancer drugs face increased competition in the coming years.
"Investors are likely to ask whether the company's good fortune has run out, with disappointments.... and negative revisions.... left and right, " Geoffrey Porges, a Leerink analyst, said in a note to clients on Thursday. Celgene executives are likely to "face tough questions from investors about the company's direction and leadership after the operational and guidance disappointments this quarter," Mr. Porges wrote.
The company said it now expects 2020 revenue of $19 billion to $20 billion, or 4.8% to 9.5% less than its previous forecast of greater than $21 billion. The company lowered 2020 targeted revenue from new hematology products, oncology products, and inflammation and immunology products. It also lowered its 2020 adjusted earnings per share forecast to $12.50 per share, down 3.8% from its previous target of $13.
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And Celgene decreased its revenue estimate for the current year to about $13 billion, down from a previously range of $13 billion to $13.4 billion.
The revised outlook was driven in part by lower-than-expected sales of Otezla, which was launched in the U.S. in 2014 as a treatment for psoriasis, a dermatologic disease that causes dry, itchy skin. Celgene "did not adequately anticipate the deep and persistent slowing growth of the psoriatic arthritis and psoriasis markets, especially during the entire third quarter," Chief Executive Mark Alles said on a conference call with analysts on Thursday.
Growth in the U.S. psoriasis drug market has slowed significantly this year, the "result of increasingly restrictive" controls on patient access enacted by pharmacy-benefit managers, Terrie Curran, president inflammation and immunology at Celgene, said on a conference call with analysts on Thursday.
Celgene has taken an aggressive discounting strategy to increase market access in the crowded psoriasis market, which significantly reduced revenue in the quarter, the company said. U.S. prescriptions for Otezla grew 17% in third quarter compared with the prior-year quarter, but net revenue rose just 2.5% from $244 million to $250 million over the period.
The company said last week it ended two clinical trials for an experimental drug to treat Crohn's disease and halted plans to launch a third, following a recommendation from an independent data-monitoring panel. Celgene acquired the drug, called GED-0301, in 2014 for an upfront payment of $710 million from closely held Nogra Pharma Ltd.
"This pipeline failure is a major disappointment," Mr. Alles said. He later added that the "GED-0301 failure gives us pause and makes us think about on the margin, are there some risks to the portfolio that maybe we haven't captured in the more recent past."
Celgene's acquisition of GED-0301 was part of an aggressive business development strategy that has led the company to make a spate of deals to bolster its pipeline in recent years, including a collaboration with Juno Therapeutics Inc., that haven't yet translated into significant sales growth.
Celgene acquired experimental drug developer Receptos Inc. for $7.2 billion in 2015 and is counting on the top asset in that deal, an anti-inflammatory drug called ozanimod, to receive U.S. regulatory approval and validate its business development strategy.
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(END) Dow Jones Newswires
October 26, 2017 12:41 ET (16:41 GMT)