Price Hikes Insulate Celgene From a Failure

After independent monitors concluded a phase 3 trial of GED-301 in Crohn's disease was a failure, Celgene (NASDAQ: CELG) shelved its plans to develop this drug for use in that billion-dollar indication. The setback is bruising for the company because management spent $710 million upfront to license it just three years ago. The failure forces Celgene to write down hundreds of millions of dollars and it eliminates a drug that could've added a billion dollars or more in annual sales.

Overcoming the headwinds associated with GED-301's failure pressures Celgene to succeed in its efforts to boost demand for its existing drugs and develop new drugs, but drug development isn't the only way Celgene will close the gap created by GED-301. Drug price increases will also help make up the difference.

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Source: Fool.com