Celgene: Color on Relevance study failure
- Stifel lowers their CELG tgt to $130 from $149 after Celgene announced that its Phase III trial Revlimid (RELEVANCE) did not achieve superiority with its co-primary endpoints. This trial was testing Revlimid + Rituxan (R2) vs. Rituxan-CHOP (R-chemotherapy based regimen) in patients with untreated follicular lymphoma. While Celgene did not announce detailed data or its regulatory intent, their discussions with KOLs indicated that equivalent efficacy and the absence of chemo-associated side-effects would alter their script patterns to R2. However, the absence of R2 superiority, a much cheaper alternative with soon-to-be biosimilar Rituxan + chemotherapy regimen, and an ever increasing bold insurer climate, hamper any sales expectations. They are still positive on R2 r/r FL (AUGMENT) due to response rate expectations with Rituxan in patients who have previously failed Rituxan. AUGMENT is expected to readout during 1Q18.
- Mizuho notes CELG announced tonight that its RELEVANCE Ph 3 trial, Revlimid in untreated follicular lymphoma, failed. Timing of the readout was as expected (before YE 2017). They suspect investors were ~50/50 whether the trial would read out positive. It's not clear how much was in models for this particular trial or indication at peak (~2022) given it is one indication of a handful, however on a risk-adjusted basis, they would peg it around $500MM. Removing $500MM from their model is worth about <$2 or ~2% to DCF.
- SunTrust notes that while the news is disappointing and they anticipate the market reaction to be negative (shares currently down ~5% afterhours), they believe CELG's revised 2020 guidance for new hematology products/indications ($0.7B-$1.4B vs. prior $1.8B) has already reflected a more conservative view of Revlimid's potential label expansion opportunities. In fact, management confirms to them that today's news is not going to affect its 2018 financial goals (which are undisclosed at this point) and 2020 targets. In addition, they see limited read-through to the AUGMENT trial (in r/r FL and MZL; NCT01938001) for which data are expected in 1Q18.
- CELG down 4.5% premarket.