Celgene clears way for merger with Bristol-Myers Squibb by divesting Otezla to Amgen for $13.4 billion

Celgene, in connection with its pending takeover by Bristol-Myers Squibb, has entered into an agreement for Amgen to acquire global rights to Otezla (apremilast) for $13.4 billion in cash, the companies announced Monday. In June, Bristol-Myers Squibb said it would offload the therapy in an effort to ease concerns expressed by the US Federal Trade Commission (FTC) regarding its proposed $74-billion Celgene takeover.

Bristol-Myers Squibb CEO Giovanni Caforio stated "this agreement represents an important step toward completing our pending merger with Celgene." He added that "together with the Otezla team, Amgen has the capabilities and infrastructure to continue to support this important medicine and ensure a seamless transition for patients and healthcare providers." The drugmaker noted that it will "prioritise" use of the proceeds from the divestiture for debt reduction. 

According to Amgen, the deal for Otezla and certain related assets and liabilities is worth approximately $11.2 billion, net of the present value of $2.2 billion in future cash tax benefits. "The acquisition of Otezla offers a unique opportunity for Amgen to provide patients an innovative oral therapy for psoriasis and psoriatic arthritis that fits squarely within our portfolio," noted Amgen chief executive Robert Bradway, continuing "we will take advantage of our 20 years of experience in inflammatory disease to realise the full global potential of Otezla as an affordable option for patients."

Celgene employees primarily dedicated to Otezla will also be transferred in the deal. The divestiture is contingent on Bristol-Myers Squibb entering into a consent decree with the FTC in relation to the pending Celgene merger and finalising the takeover, which is now expected by the end of this year. 

Commenting on the news, RBC Capital Markets analyst Brian Abrahams, who had suggested that Gilead Sciences might be a better fit for Otezla, pointed out the high price offered by Amgen for the PDE4 inhibitor. An analyst had previously valued a potential deal for the drug at roughly $9 billion. 

Otezla is approved in the US for the treatment of active psoriatic arthritis in adults, certain patients with moderate-to-severe plaque psoriasis and adults with Behçet's disease. Sales of the treatment, which Amgen says will have US market exclusivity until at least 2028, jumped 31% in the second quarter to $493 million. 

Commenting on the news, analyst Geoffrey Porges of SVB Leerink suggested the price is higher than anticipated, with Amgen valuing Otezla at nearly seven times the expected 2019 sales, although "Otezla should certainly be immediately profitable for Amgen." Porges, who anticipates Otezla revenue of more than $2 billion in 2020 and nearly $2.5 billion in 2021, said that "even with earlier generic introduction, for the total cost of the purchase Amgen has still secured incremental product sales, with a synergistic operational footprint."

Porges also questioned how anti-competitive the sale really was, noting that "from a policy standpoint, it is hard to understand how Amgen's commercialisation of Otezla is any less anti-competitive than Bristol-Myers Squibb's." According to the analyst, the FTC is trading the anti-competitive effects of one combined portfolio, comprising Bristol-Myers Squibb's late-stage TYK2 programme, with another that combines Otezla with Amgen's Enbrel (etanercept) and Amjevita (adalimumab-atto) biosimilar.

RBC Capital Markets analyst Brian Abrahams originally viewed $8 billion to $10 billion as a fair price for Otezla, so the $13.4-billion acquisition price "represents what was likely a highly competitive bidding process." Abrahams had also suggested that Gilead Sciences might be a better fit for Otezla, adding that "while Gilead does lose an opportunity to easily bolt on a rheumatoid/inflammation commercial infrastructure, we believe bidding the asset up further would have been a mistake for the company.

Meanwhile, Jefferies analyst Michael Yee described the transaction as "positive and smart" for Amgen, and boosted his 2020 revenue forecast for the company from $23 billion to $25.2 billion.

Also on Monday, Bristol-Myers Squibb indicated that it was widening a previously planned accelerated share repurchase programme from $5 billion to $7 billion. The company noted that the share buyback would be executed following the close of the Celgene transaction. 

For related analysis, see ViewPoints: Amgen agrees to book Bristol-Myers Squibb’s big bet on TYK2

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