(Reuters) - Celgene Corp said it would abandon testing a drug to treat Crohn’s disease, in a major setback to the U.S. biotechnology company’s pipeline amid attempts to lower dependence on its mainstay Revilimid.
The company’s shares fell 6.4 percent to $136.96 in extended trading on Thursday.
Celgene said it would stop two trials of the drug, mongersen, and would not initiate a third study following a risk-benefit analysis by a data monitoring committee.
Morgan Stanley analysts said the decision was likely based on lack of efficacy, given that management did not identify any safety imbalances.
The drug was being tested in late-stage and extension studies as a treatment for Crohn’s.
Investors thought the drug was a significant potential upside driver despite being one of the more risky assets in Celgene’s pipeline, Morgan Stanley analysts said.
Mongersen is forecast to rake in sales of more than $1 billion by 2023, according to Thomson Reuters I/B/E/S.
Celgene is waiting to review full data from a mid-stage study testing mongersen as an ulcerative colitis treatment to determine next steps.
The company said it expects pre-tax charge in the range of $300 million to $500 million, or 27 cents to 45 cents per share after tax, from the discontinuation.
Celegene’s flagship multiple myleoma treatment, Revlimid, brought in sales of $3.92 billion and accounted for about 63 percent of total revenue in the second quarter ended June 30.
Inflammatory bowel diseases, which include Crohn’s, affect about 1.6 million Americans, according to Crohn’s & Colitis Foundation.
Crohn’s affects the lining of the digestive tract and can cause abdominal pain, diarrhea and rectal bleeding.
Celgene is also testing ozanimod as a treatment for inflammatory bowel disease.
“We expect recent increased nervousness on Celgene stock to prevail given various sell-side and bearish commentary has picked up,” Jefferies analyst Michael Yee wrote in a note.
Reporting by Tamara Mathias and Ankur Banerjee in Bengaluru; Editing by Sriraj Kalluvila