Celgene (CELG), Related Stocks Decline Amid Biopharma Weakness

(Updated - December 23, 2014 10:48 AM EST)

Celgene (NASDAQ: CELG) declined Tuesday amid weakness in the biopharma sector. Gilead Sciences (NASDAQ: GILD) also declined, extending losses from yesterday on concerns about a price war in HCV. Amgen (NASDAQ: AMGN), Biogen Idec (NASDAQ: BIIB), Pfizer (NYSE: PFE) and Johnson & Johnson (NYSE: JNJ) are other notable decliners.

Worries about AbbVie's (NASDAQ: ABBV) move yesterday to sign an exclusive with Express Scripts (NASDAQ: ESRX) for Viekira in HCV, despite Gilead Sciences' Harvoni being a better treatment option, has investors throughout the sector worried about a biosimilar price war.

"We believe this is the exact situation which makes us feel bullish about biosimilars," Deutsche Bank analyst Robyn Karnauskas said in a note to clients Monday. "We believe upon launch, biosimilars manufacturers will cut similar deals with PBMs to be on preferred formulary or may be exclusive formulary."

"We model Biosimilars cutting price by 30% which could force branded manufacturers to cut the price by 15% as well to compete with them," she added.

JPMorgan analyst Cory Kasimov echoed those concerns. He said the move "could set a precedent and embolden payors to fight back on pricing of new and expensive specialty drugs, which has potential sector wide repercussions."

Illustrating the sector-wide weakness, iShares Nasdaq Biotechnology (NYSE: IBB) is down 5.1% and SPDR S&P Biotech ETF (NYSE: XBI) is down 5.2%

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