Safety Worries Over Celgene's Experimental Crohn's Drug Overblown

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.

Celgene has proven to be one of the savviest dealmakers in the biotech sector. Last April, the company purchased GED-031 from a small Irish drug maker, paying $710 million upfront. Including future milestones and sales payouts, Celgene committed $2.6 billion to acquire rights to GED-031. As a pill, GED-031 has the potential to become a preferred Crohn's therapy over injectable drugs like Abbvie's (ABBV) top-selling Humira. 

Importantly, Celgene bought GED-031 after seeing the data from the phase II study in Crohn's. We're not privy to those GED-031 data yet, but we do know the multi-center, randomized, placebo-controlled study met its primary endpoint of achieving Crohn's remission at week 2 and maintenance to week 4. The study also compares maintenance of remission rates between GED-031 and placebo at week 12 as a secondary endpoint. 

The first public presentation of the GED-031 phase II data will be on Oct. 21 at a European medical conference.

Sobek is long Celgene.

David Sobek has been writing on biotech for a number of years through various outlets with a general focus on small cap oncology and antibiotics companies. He received his PhD in political science from Pennsylvania State University in 2003 and a BA in international relations from The College of William and Mary in 1997.

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