As Otezla struggles, Celgene wipes $1B to $2B off its 2020 guidance

Right on the heels of a major Crohn's disease trial failure that took a bite out of share prices, Celgene on Thursday reported third-quarter financial results that further spooked investors. 

The big biotech hauled in $3.28 billion in quarterly revenue, missing consensus estimates by $139 million, according to data provided by Bernstein analyst Ronny Gal. Key medications Revlimid and Otezla came short of analyst expectations, while Pomalyst slightly beat consensus estimates. Taking the performances into consideration, the drugmaker rolled back its 2020 sales guidance to $19 billion to $20 billion, from a previous target of $21 billion. 

A big part of the story was Otezla, which missed consensus estimates by $103 million around the world and $91 million in the U.S., according to Gal. Providing an early takeaway from the results, Gal said "Otezla has flattened early and much more than we thought" following its 2014 launch.  

Why the slowdown? Otezla is operating in an increasingly crowded field against competitors such as Novartis' Cosentyx and Eli Lilly's Taltz.

RELATED: Celgene cans phase 3 trial of $710M Crohn’s drug GED-0301 

In its third-quarter earnings release, Celgene said sales for the psoriasis and psoriatic arthritis med were hit by "an increase in gross-to-net adjustments from contracts implemented in January and a slowing in overall category growth due to a more challenging market access environment." Speaking with analysts on Thursday's conference call, Celgene CEO Mark Alles cited the recent trial failure and "new dynamics" on the market for Otezla as top drivers for the 2020 guidance reduction. 

As a result of those new dynamics, the company chopped $250 million off its 2017 guidance for Otezla.

Looking further out, Celgene cut more than $1 billion off of its 2020 forecast for its inflammation and immunology franchise, for which Otezla is the only current med on the market. The company adjusted its 2020 guidance for the franchise to $2.6 billion to $2.8 billion, from a previous estimate of $4 billion. 

Thursday's results follow a major pipeline setback for Celgene on a med it previously picked up for $710 million. Last week, the biotech had to end a phase 3 trial in Crohn's disease and call off plans for another late-stage trial. Celgene is now waiting on phase 2 data in ulcerative colitis to see if it can press forward there.

That same day, the drugmaker took its most aggressive price hikes ever on hematology drugs Revlimid and Pomalyst, according to an analyst, sending their total increases for the year up nearly 20%. Since introducing the multiple myeloma med, Celgene has nearly doubled Revlimid's list price, to $18,546 for a 28-count bottle from $9,853 back in December 2010.

As the hikes will partly offset struggles elsewhere, Celgene bumped up its 2020 hematology sales guidance by $600 million on the low end and $1.3 billion on the high end.      

In the wake of the results, Gal said the company's focus should turn to returning cash to shareholders before Revlimid generics enter the fray. Celgene's shares were down about 18% right after the market opened Thursday.