Shares of Celgene (CELG) are sliding after the company announced that it has received a Refusal to File letter from the Food and Drug Administration regarding its New Drug Application for ozanimod. Following the news, SunTrust analyst Yatin Suneja downgraded the stock to Hold as ozanimod was center to his "bull thesis to re-accelerate growth." Meanwhile, his peer at UBS also voiced concern, saying Celgene's NDA application denial raises execution questions.

NDA APPLICATION DENIAL: Last night, Celgene announced that it has received a Refusal to File letter from the U.S. Food and Drug Administration regarding its New Drug Application for ozanimod in development for the treatment of patients with relapsing forms of multiple sclerosis. Ozanimod is a novel, oral, selective sphingosine 1-phosphate 1 and 5 receptor modulator. Upon its preliminary review, the FDA determined that the nonclinical and clinical pharmacology sections in the NDA were insufficient to permit a complete review. Celgene intends to seek immediate guidance, including requesting a Type A meeting with the FDA, to ascertain what additional information will be required to resubmit the NDA.

MOVING TO THE SIDELINES: In a research note to investors, SunTrust's Suneja downgraded Celgene to Hold from Buy and lowered his price target on the shares to $106 from $139. The analyst noted that following pipeline setbacks in late 2017, ozanimod was central to his "bull thesis to re-accelerate growth" in the Inflammation & Immunology franchise and provide much needed diversification away from myeloma. Suneja pointed out that while he continues to view ozanimod's efficacy and safety profile as favorable for an eventual approval, the RTF could result in a 24-month or longer delay for a launch of the drug for an indication of treating relapsing forms of multiple sclerosis. Given the delay, the analyst also reduced his ozanimod peak sales estimate to about $3.5B from $5B.

EXECUTION QUESTIONS: Meanwhile, UBS analyst Carter Gould lowered his price target on Celgene's shares to $106 from $120, while reiterating a Buy rating on the stock. The analyst told investors in a research note of his own that he believes the NDA application denial for ozanimod will likely delay its approval until at least 2019 and raises another round of questions on Celgene's execution as the last six months have brought clinical, regulatory, and commercial setbacks. His peer at Piper Jaffray had voiced a similar opinion, as Celgene's diversification story "takes another hit." Analyst Christopher Raymond argued that investors may now have to contemplate a multiple sclerosis launch that potentially coincides with Gilenya's loss of exclusivity unless a more aggressive timetable can somehow be salvaged. Raymond reiterated a Neutral rating and $95 price target on Celgene shares.

PRICE ACTION: In morning trading, shares of Celgene have dropped about 8% to $88.03.