When Celgene’s Scott Smith was promoted from head of its inflammation and immunology unit to chief operating officer last April, the company was looking forward to a series of milestones, including a potential FDA approval for its multiple sclerosis candidate ozanimod.
But then everything seemed to go south, particularly in the unit Smith used to manage.
Last October, Celgene pulled the plug on a phase 3 trial of GED-301, a drug to treat inflammatory bowel disease that it paid $714 million to acquire in 2014. Shortly thereafter, the company missed earnings estimates and shaved its 2020 sales guidance from $20 billion to $19 billion, as sales of its psoriasis drug Otezla fell short. Then, in late February, the FDA handed the company the dreaded “refuse to file” on ozanimod, citing the need for additional pharmacology data.
So it wasn’t entirely surprising when Celgene announced on Monday that Smith is leaving the company “effective immediately.” CEO Mark Alles will take over Smith’s responsibilities, the company said in a brief statement. “Celgene is modifying its executive team structure to enhance leadership focus on building Celgene for continued long-term success,” the statement said. Alles is also taking over the “strategic leadership” of Celgene’s oncology unit, as well as manufacturing, clinical development and regulatory functions.
Celgene declined to provide further details.
The response to the news of Smith’s departure on Wall Street was mixed. Jefferies analyst Michael Yee said in a note to investors that he wasn’t surprised, given the recent disappointments in Celgene’s immunology franchise. “[W]hile it increases uncertainty about the execution in the short term, [Celgene] is clearly a question more about the medium to longer-term, and one might argue that this is one part of the process to try and turn execution around,” Yee wrote.
Salim Syed, an analyst at Mizuho, was considerably more concerned, however. If additional management changes are in the works, Syed wrote in a Monday note, that may be interpreted by investors as “a signal of turmoil,” similar to events at Biogen in 2015. That’s when Biogen cut its revenue forecast by half and then bid farewell to commercial chief Tony Kingsley and CEO George Scangos.
But Syed is also worried that Smith’s departure may mean that the FDA’s stiff-arm on ozanimod is worse than the company has led investors to believe. After the FDA’s decision, Chief Medical Officer Jay Backstrom, M.D., indicated that Celgene has ongoing pharmacology studies that may help address the agency’s concerns. But peak sales estimates for the drug stood at about $5 billion, so investors were understandably unhappy with the setback; Celgene shares fell 6% that day.
Syed suggested Smith’s departure may be a sign that the RTF could have been avoided. And he questioned whether Celgene would be able to stand by either its 2018 or 2020 guidance. In January, during the company’s fourth-quarter earnings release, it told investors to expect sales growth of 12% this year to $14.4 billion to $14.8 billion, driven largely by its multiple myeloma drug Revlimid.
Of course, everything was looking up for the company back then. Celgene had just announced its $9 billion acquisition of CAR-T player Juno, and it promised investors that its late-stage pipeline could pile $16 billion onto its revenues by 2030.
With its ability to fulfill that vow seriously in question, there will be some key events in the coming months to watch out for, Jefferies’ Yee told investors. Celgene will be providing an update on its multiple myeloma research just before the closely watched annual meeting of the American Society of Clinical Oncology in June. That will include bb2121, which Celgene is co-developing with Bluebird Bio. That project “is important to the overall multiple myeloma line item to replace in part Revlimid,” Yee noted.
By Arlene Weintraub
Source: Fierce Pharma
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