Healthcare stocks and healthcare ETFs were among the worst performing areas of the S&P 500 Monday as Celgene (NasdaqGS: CELG) shares plunged in response to Morgan Stanley’s projecting that a key experimental drug could be delayed.
The Health Care Select Sector SPDR (NYSEArca: XLV), the largest healthcare exchange traded fund, fell 0.7% Monday and was testing its short-term supporting trend line at the 50-day simple moving average. Additionally, the iShares Nasdaq Biotechnology ETF (NASDAQGM: IBB), the largest biotech exchange traded fund by assets, declined 1.1%.
Celgene shares dropped as much as 6% earlier Monday after Morgan Stanley argued that the drugmaker’s experimental multiple sclerosis drug, ozanimod, could be delayed by up to three years, reports Allison Gatlin for Investor’s Business Daily.
CELG is 2.2% of XLV’s underlying portfolio, and it is the largest underlying component in IBB at 8.5%.
Why Ozanimod Could Be Delayed
Morgan Stanley analyst Matthew Harrison said argued that the holdup for ozanimod, an investigational multiple sclerosis drug, is due to converting the amounts used in preclinical studies in rats and monkeys to human-size doses.
“Given the timeline to start the study, produce the study reports and refile, we believe the delay is at a minimum one year and up to three years if management must redo all animal work,” Harrison said in a note to clients.
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Celgene recently filed for Food and Drug Administration approval of ozanimod in relapsing multiple sclerosis, but the FDA wouldn’t green light the plans, contending there were insufficient sections in the drug application, reports Emma Court for MarketWatch. Celgene will likely need to re-run preclinical toxicology studies, further delaying the re-filing by at least a year.
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