Morgan Stanley Dives in on Celgene Corporation (CELG) Following Physician Expert Lunch

Morgan Stanley analyst Matthew Harrison is out with a research note on shares of Celgene Corporation (NASDAQ:CELG) on the heels of hosting a lunch with two expert gastroenterologists to glean insights regarding their experience treating patients suffering from Crohn’s disease. Moreover, the physicians discussed their views on upcoming therapies, specifically with attention to the biotech firm’s leading pipeline oral Crohn’s drug candidate GED-0301.

Following the expert lunch, the analyst reiterates an Equal Weight rating on CELG with a price target of $120, which represents an 11% upside from where the shares last closed.

Harrison anticipates full topline data from the drug’s endoscopy trial in Crohn’s disease by early fall, expecting full data at a medical meeting in the second half of 2016, presented possibly at United European Gastroenterology Week (UEGW) come October.

First, Harrison notes that physicians treat 30% of Crohn’s patients with biologics, and most are successfully treated with 5-ASAs or 6-MP. Both gastroenterologists explained that “step-down therapy,” or treating patients afflicted with “worse disease” by first using biologics is “the new standard of care.”

Specifically assessing CELG’s Crohn’s drug, the experts note that GI physicians are already at ease with biologic treatment, finding it “necessary,” and therefore, are not inclined to “switch to a new mechanism with lower efficacy,” expecting 25% musocal healing needing to be achieved by the 12 week marker.

The most problematic takeaway Harrison notes for CELG following the lunch is a plunging probability for GED-0301 to become necessary in the gastroenterologist world. Harrison explains, “The physicians indicated that an oral drug (like GED) with lower efficacy than biologics would not likely be used. They specifically cited not being impressed with S1P1s in Crohn’s disease.”

“With the quality of the data clearly depending on baseline characteristics and the level of mucosal healing, details of which will likely be lacking in the top-line release, we see the full impact to CELG with the full data. Importantly, if the data does come at UEGW, there will also be another oral comparison with the filgotinib PhII endoscopy data. We continue to see risk to GED-0301 hitting biologic-like efficacy,” he concludes.

As usual, we recommend taking analyst notes with a grain of salt. According to TipRanks, one-star analyst Matthew Harrison is ranked #3,517 out of 4,147 analysts. Harrison has a 0% success rate and faces a loss of 28.6% in his yearly returns.

TipRanks analytics exhibit CELG as a Strong Buy. Based on 18 analysts polled in the last 3 months, 15 rate a Buy on CELG, while 3 maintain a Hold. The consensus price target stands at $142.50, marking a nearly 32% upside from where the stock is currently trading.


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