Analysts Have Mixed Views on Celgene Corporation (CELG) and Celldex Therapeutics, Inc. (CLDX) Following Recent Announcements

Celgene Corporation (NASDAQ:CELG) announced an ANDA for its drug Abraxane yesterday. Due to the complex circumstances and probable litigation, one analyst predicts a minimal effect on the stock and remains bullish. On the other hand, a recommended discontinuation of a Phase 3 study due to disappointing results has caused another analyst to downgrade Celldex Therapeutics, Inc. (NASDAQ:CLDX).

Celgene Corporation

Analyst Matt Roden of UBS weighed in on Celgene yesterday after the company announced that Actavis, a generic drug manufacturer, filed an abbreviated new drug application (ANDA) to the FDA to manufacture a generic version of Abraxane, one of Celgene’s cancer therapies. The analyst notes that Celgene has 45 days after it receives an ANDA to file an infringement suit to prevent the FDA from approving a generic drug. The analyst notes a high probability of such a filling “as would typically be the case to protect revenues for a branded product,” with a 30-month stay for the FDA generic approval process. This will give the company adequate time to file lawsuits regarding patent infringement, as the company has US patents through 2016 and EU patents through 2022. The analyst notes that patent infringement suits “typically take years to play out.”

The analyst believes “the regulatory process will be more involved” than a traditional ANDA filing due to Celgene’s Citizen Petition to the FDA last March, for which it has not received a response. The company requested that the FDA modify its approval standards for nanomedicines and require that any generic use of Abraxane must undergo additional approval through the abbreviated 505(b)(2) pathway, a series of additional ANDA regulations. The analyst notes that “the FDA will have to formally respond to the Citizen Petition before it will be able to act on the Actavis filing.”

Roden reiterated a Buy rating on the company with a $145 price target. He explains, “based on the limited information that was released on the ANDA filing, we doubt there is near or mid-term risk to Abraxane cash flows.” Matt Roden has a 56% success rate recommending stocks with an average return of 15.2% per recommendation.

Matt Roden Stats

According to TipRanks, out of the 14 analysts who have rated the company in the past 3 months, 13 gave a Buy rating while 1 remains on the sidelines. The average 12-month price target for the stock is $151.40, marking a 47% upside from where shares last closed.

Celldex Therapeutics, Inc.

Analyst Biren Amin of Jefferies weighed in in Celldex Therapeutics yesterday after the company announced that the DSMB (data and safety monitoring board) recommended to discontinue ACT-IV, the company’s Phase 3 study of brain cancer vaccine Rintega in Glioblastoma, a specific type of brain cancer. In a second interim analysis, the DSMB determined the study was incapable of producing any useful results as there was no major difference between the survival length of patients treated with Rintega vs. the placebo. In fact, those treated with Rintega survived about 20.4 months, while those on the placebo survived about 21.1 months. Following this news, the analyst states, “We don’t hold hopes of any activity, and CLDX suggested as such that they likely will not invest any further in the program. As a result, we have removed our Rintega sales estimates from our model…”

The analyst also comments on other pipeline candidates. Glembatumabab, the company’s breast cancer and melanoma treatment, is currently undergoing Phase 3 and Phase 2 studies, respectively. The analyst notes that results for the METRIC Phase 3 study for breast cancer are expected in the first half of 2017. However, he notes a “risk to the trial given the patient population changed on trial amendment.” Data for the Phase 2 trial of the drug used in patients with melanoma is expected in the second half of 2016, enrolling patients who have previously failed to produce a response with other immune checkpoint therapies. While management expects a 10-12% response rate, the previous study has a 15% response rate, though Amin points out that “there were no differences in responses when evaluating patients based on GPNMB expression and therefore it’s unclear if targeting GPNMB expression in the PII data in 2H16 will yield a robust response rate.”

Finally, Amin states that CLDX is expected to present cancer therapy varlilumbab Phase 1 data at ASCO (American Society of Clinical Oncology) 2016, later moving to Phase 2 evaluating a 3mg/kg dose of the drug “in combination with Opdivo in solid tumors.” However, because “the PI component did not evaluate the 3mg/kg dose and was chosen based on data from the 1 and 10 mg/kg cohorts… the P1 data may not provide a conclusive answer.”

The analyst is downgrading Celldex to Hold from Buy and decreasing his price target to $4 from $31 due to “removal of Rintega revenues and increased risk discount on remaining pipeline assets.” Biren Amin has a 44% success rate recommending stocks with an average return of 2.6% per recommendation.

According to TipRanks, out of the 9 analysts who have rated the company in the past 3 months, 5 gave a Buy rating and 4 remain neutral. The average 12-month price target for the stock is $10.75, marking a 192% upside from current levels.

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