Dive Brief:

• Celgene Corp. announced Thursday evening that its discontinuing development of its potential blockbuster immunology treatment mongersen in Crohn's disease due to lack of efficacy. The drug was acquired for $710 million through a 2014 acquisition, calling into question the validity of the company's M&A strategy.
• In an Oct. 19 statement, the big biotech said it was stopping REVOLVE and an extension study, and not moving forward with the planned late-stage DEFINE trial. Celgene is holding out for Phase 2 data on mongersen in the ulcerative colitis setting before making more final decisions on the drug's future development.
• The decision follows an independent committee's review of the efficacy and risk-benefit profile of Celgene's mongersen. Through an interim evaluation of the Phase 3 REVOLVE study, which tested the drug in Crohn's disease patients, the committee found no safety concerns.

Dive Insight:

Mongersen (GED-0301) is an oral therapy that targets a protein called Smad7 as a way of regulating the body's immune response. The treatment first came under Celgene's belt back in 2014, when the company paid $710 million to Irish drugmaker Nogra Pharma Ltd.

That large investment underscored Celgene executives' optimism in their new asset, as did prior mid-stage investigations looking into mongersen as a Crohn's disease treatment. "GED-0301 is a potentially transformative therapy that demonstrated striking clinical activity in a phase 2 trial for Crohn's disease," one company exec said in 2014. "It strengthens our expanding pipeline of novel therapies intended to address significant unmet medical need in immune-mediated diseases."

Investors, understandably, didn't take Thursday's news well. Celgene shares opened at $124.50 apiece on Friday, down 8.4% from the previous close of market.

"While we certainly thought GED-0301 might work based on management confidence and known commentary, prior scrutiny of the Phase 2 data by the company and diligence they did," Jefferies analyst Michael Yee said in an Oct. 19 note.

Yee acknowledged, however, that Wall Street wasn't entirely sold on mongersen in the first place due to factors like the drug's mechanism of action. "It's not a total surprise," he said of Celgene's decision to pull back the program.

At least one analyst believes that removing mongersen from the company's pipeline could be a good thing for its overall pipeline — and namely in regard to the company's highly anticipated candidate ozanimod.

"[Celgene] was facing an internal cannibalism issue simultaneously developing both GED-301 and another late-stage drug, ozanimod, in Crohn's disease and Ulcerative colitis," Mizuho Securities USA analyst Salim Syed wrote in an Oct. 20 note. "Now that GED-301 for all practical purposes is dead, this cannibalism issue goes away in our view and investors can reallocate some sales back to ozanimod."

Earlier this week, Celgene reported even more positive results for ozanimod in both Crohn's disease and ulcerative colitis. The data was a "surprise upside ... so that offsets the GED disappointment a little," according to Yee.

The discontinuation of mongersen adds further pressue on Celgene to make sure ozanimod is a success, both clinically and commercially.