Catalent’s CTLT shares fell 3.3% following problems at its Bloomington, IN-based production facility. These flaws caused the FDA to reject a drug application from Regeneron Pharmaceuticals REGN, marking another setback for manufacturing partners in the pharmaceutical industry.
Catalent’s shares nosedived 10.4% year to date compared with the industry’s decline of 3.6%. The S&P 500 Index has gained 15% in the same time frame.
The Latest Denial
Earlier this week, the FDA issued a complete response letter (CRL) for Regeneron’s Biologics License Application (BLA), seeking approval for a more potent formulation of its top-selling eye medication, Eylea. The CRL did not identify any issue with the aflibercept (Eylea) 8 mg clinical efficacy or safety, trial design, labeling or drug substance manufacturing. No additional clinical data or trial has been requested.
The reason for the denial was "solely due to an ongoing review of inspection findings at a third-party filler," the drugmaker said on Tuesday. Per a Bloomberg article, the filler in question is Catalent's Bloomington site, where the FDA made three observations during a pre-approval inspection.
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Regeneron submitted the BLA seeking approval for Eylea 8 mg for the treatment of patients with wet age-related macular degeneration, diabetic macular edema and diabetic retinopathy.
Previous Setbacks & Their Impact
The Regeneron incident is the latest in a series of highly publicized setbacks for CTLT. Previous deficiencies uncovered during an FDA inspection at the same Bloomington facility led to supply constraints for Moderna Inc.'s COVID booster shot last autumn.
Catalent was also reportedly linked to production issues with Novo Nordisk A/S' weight-loss drug, Wegovy, which experienced shortages for approximately one year.
Per a Morgan Stanley analyst, the series of high-profile therapy affected by inspection findings at a Catalent site is likely to have an impact on the company's ability to clinch future supply deals.
Any delay in the approval of the stronger formulation of Eylea could affect Regeneron. The drug may start to face competition from less expensive, near-identical versions of the same next year. Analysts are counting on the higher dose to help Regeneron stay ahead of the competition.
Danaher Corp. was reportedly eyeing CTLT before shelving its buyout pursuit earlier this year, which may be linked to such adverse inspection findings impacting drug launches.
What Lies Ahead?
Catalent has responded by stating that it takes all regulatory observations seriously and has already provided proposed corrective and preventative actions to address the observations. The company added that it will continue to support FDA's ongoing review of its response.
Earlier this year, CTLT reported that its gene therapy production site near Baltimore had some operational issues that caused delays. The company also said that it was introducing some improvements to its facilities in Bloomington and Brussels after regulators inspected them. These upgrades might affect their efficiency for the time being.
The persistence of problems at Catalent’s production facilities is likely to hamper the company’s ability to deliver on time as well as secure new deals. A faster resolution of deficiencies at its facilities is necessary for ensuring growth.
Catalent, Inc. Price
Catalent, Inc. price | Catalent, Inc. Quote
Zacks Rank & Stocks to Consider
Catalent currently has a Zacks Rank #5 (Strong Sell).
A couple of better-ranked stocks in the broader medical space are West Pharmaceutical Services WST and Dentsply Sirona XRAY, both carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
West Pharmaceutical Services has an estimated earnings growth rate of 13.2% for 2024. The company’s earnings surpassed estimates in three of the trailing four quarters and missed the mark in one, delivering an average surprise of 13.61%.
WST’s shares have risen 56.9% year to date compared with the industry’s 13% growth.
Dentsply Sirona has an estimated long-term growth rate of 9.1%. It delivered an average earnings surprise of 10.47% in the last four quarters.
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