Celgene (CELG) shares dipped last week on investor concerns related to the safety of the company's experimental Crohn's disease drug GED-031. These concerns are overblown. The weakness in Celgene's stock price is a buying opportunity.
At an investor meeting last week, Celgene management noted a theoretical risk of GED-031, dosed as a pill, causing strictures (fibrosis) in the gut. For this reason, the company is thinking about different dosing schemes for GED-031 in future Crohn's studies to mitigate the potential side effect risk.
Some investors unduly inflated Celgene's comments to mean that reports of strictures were popping up in the ongoing phase II study of GED-031. This is not true. Results from the phase II study are being presented in October, and Celgene has already said there are no reports of strictures. Celgene is merely thinking through the drug's mechanism of action and game-planning potential dosing strategies to minimize the risk of strictures while maximizing commercial potential.
In other words, Celgene is engaging in prudent drug development.
Of course, there is still a risk that strictures could develop with longer term treatment of GED-031. It should not surprise anyone that active drugs have potential side effects that need to be examined and moderated. No drug program is risk free.
Celgene's phase II study of GED-031 in Crohn's involves induction treatment only. The next phase III studies will have both induction and maintenance treatment protocols. It's entirely reasonable for Celgene to consider mitigation of potential stricture risk if the company believes GED-031 could have a role in the long-term maintenance of Crohn's treatment.