Celgene Corporation (NASDAQ:CELG) shares are stumbling in pre-market trading to the sour note of a 4% dip. It appears investors were none too thrilled last night to hear the biotech giant’s Phase III RELEVANCE trial failed to show a benefit for the combination of Revlimid with Rituxan when up against standard of care in frontline follicular lymphoma (FL).
Cantor analyst Mara Goldstein looks at the bigger picture, considering the company has more than one iron in the fire, with “multiple REVLIMID trials ongoing.” However, though “a negative outcome on one does not necessarily translate to others,” the analyst cannot help wondering: “in the context of a recent guidance trim and wounded confidence in longer-term growth, this news may have a greater impact on valuation.”
Needing to see a clearer view of the giant’s long-term growth, the analyst remains on the sidelines, reiterating a Neutral rating on CELG stock with a $112 price target, which represents an 8% upside from current levels. (To watch Goldstein’s track record, click here)
Goldstein notes, “We have factored additional growth for REVLIMID into our valuation and believe there are still opportunities to achieve this, but irrespective of this, greater clarity on long-term growth and the ability to dilute REVLIMID’s P&L dominance is needed, in our view.”
Meanwhile, “In the past, CELG has provided guidance in January for the coming year, but with guidance updated with the reporting of 3Q17 EPS, we do not see this as a near-term catalyst for the shares,” continues the analyst, anticipating shares will keep feeling the heat from “near-term pressure.”
What happened in the Phase III RELEVANCE trial that led to the clinical miss? Celgene’s data failed to achieve superiority across not just one, but two primary endpoints: complete response (CR) at 120 weeks as well as progression-free survival (PFS). Goldstein’s hesitant takeaway is that this failure could obstruct even more “clarity” for Celgene’s growth opportunities at hand.
On a final note of caution, Goldstein surmises: “Although we think a key focus for investors is REVLIMID’s P&L dominance, the ability to lessen this and improve valuation is more a function of new products as sources of growth than of new indications for REVLIMID.”
TipRanks shows Goldstein’s cautious optimism is a popular take on Wall Street when it comes to Celgene’s market playing field advantage. Out of 24 analysts polled in the last 3 months, 14 are bullish on Celgene stock, 9 remain sidelined, and just 1 is bearish on the stock. With a solid return potential of 19%, the stock’s consensus target price stands at $128.47.