In April, embattled Celgene bid goodbye to its chief operating officer and business development guru, and now it’s moving up its executive ranks to make more changes. Chief Financial Officer Peter Kellogg is planning to retire next year, but Celgene has already named his replacement—and the new CFO is joining the company a month from now.
Celgene announced that Johnson & Johnson veteran David Elkins will join the company July 1 and become CFO effective a month after that. Kellogg will take the position of chief corporate strategy officer until he retires in mid-2019.
The news comes after a series of stumbles that prompted investors to shove Celgene’s stock down 25% since the start of this year. It was bad enough late last year, when the company pulled out of a phase 3 trial of a drug it had acquired for more than $700 million and knocked down its 2020 sales guidance from $20 billion to $19 billion.
But then Celgene’s troubles got worse. In February, the FDA handed Celgene a “refuse to file” verdict on its highly anticipated multiple sclerosis drug ozanimod, citing the need for more pharmacology data.
In April, COO Scott Smith, who once managed Celgene’s struggling immunology unit, suddenly left. Celgene said CEO Mark Alles would take over his responsibilities. Then, just two weeks ago, bus-dev chief George Golumbeski posted a resume online revealing he also left Celgene in April.
Celgene’s new CFO certainly has the chops to help engineer a turnaround. He served as CFO of medical device giant Becton Dickinson from 2008 to 2012 and as CFO for patent licensor Round Rock Research. Most recently, he oversaw $40 billion in revenues and 1,800 employees at J&J, where he was worldwide VP and CFO for consumer products and medical devices.
Elkins “strengthens and expands our leadership team and positions us to capitalize on our significant opportunities through 2020 and beyond,” Alles said in a statement.
That may well be the case, but the merry-go-round of executive changes could raise some concern on Wall Street. After Smith’s departure, Mizuho analyst Salim Syed suggested that further management changes would be a reminder of what happened at Biogen in 2015—namely, that the company slashed its revenue forecast in half and saw the departures of commercial head Tony Kingsley and CEO George Scangos. What’s worse, Syed suggested, Celgene’s “turmoil” at the top could be a sign that the company may have more of a problem on its hands with ozanimod than it has indicated.
Analysts have predicted that ozanimod could be a $5-billion-a-year blockbuster if Celgene can get it on the market. The company picked up the oral drug in a $7.2 billion acquisition of Receptos in 2015 and had been planning to market it as a safer alternative to MS pills from Novartis, Biogen and Sanofi.
During a conference call with analysts in late April, following Celgene’s first-quarter earnings release, the company confirmed that it plans to refile ozanimod to the FDA in the first quarter of 2019. Alles said that he expected launches of fedratinib to treat myelofibrosis and Juno’s lymphoma CAR-T treatment JCAR017 would help Celgene “to absorb the financial impact caused by the delay in the expected launch of ozanimod.”
But analysts weren’t buying it. Alles and his colleagues were pounded with questions about why the FDA was demanding more information about ozanimod and what executives had learned from the experience of getting an initial rejection. The company’s chief medical officer, Jay Backstrom, explained that the agency had asked for more details about a particular active metabolite produced by the drug in the body, including safety data, which Celgene is now collecting in an ongoing study.
The need to characterize the metabolite “was something that we simply underestimated,” Alles admitted during the call. “I think what we learned is that as we become bigger, more complex, as we have a lot of moving parts, there are times when we need to slow down and double and triple check where we are in certain judgments about what we're doing in areas of the company.”
Now Alles will be embarking on that careful process with an overhauled executive team.