Bristol-Myers Squibb entered an agreement to acquire Celgene under a cash and stock transaction with an equity value of approximately $74 billion, the companies announced Thursday. As part of the deal, Celgene shareholders will receive one Bristol-Myers Squibb share and $50 in cash for each share of Celgene, while also receiving a contingent value right (CVR) linked to the achievement of future regulatory milestones.
Giovanni Caforio, CEO of Bristol-Myers Squibb, said "as a combined entity, we will enhance our leadership positions across our portfolio, including in cancer and immunology and inflammation." Caforio added "we will also benefit from an expanded early- and late-stage pipeline that includes six expected near-term product launches," that have the potential to generate more than $15 billion in revenue.
The drugmakers noted that based on the closing price of Bristol-Myers Squibb stock of $52.43 on January 2, the cash and stock consideration to be received by Celgene shareholders at closing is valued at $102.43 per share and one CVR. The transaction has been approved by the boards of directors of both companies, with Bristol-Myers Squibb shareholders expected to own approximately 69 percent of the merged entity, with Celgene shareholders owning the remaining 31 percent.
"Combining with Bristol-Myers Squibb, we are delivering immediate and substantial value to Celgene shareholders and providing them meaningful participation in the long-term growth opportunities created by the combined company," remarked Mark Alles, CEO of Celgene. The offer price represents a 54-percent premium to Celgene's closing stock price on January 2, with the company shares jumping more than 30 percent on the news. However, shares in Bristol-Myers Squibb fell more than 16 percent on news of the purchase.
As part of the transaction, Bristol-Myers Squibb will gain rights to Celgene's cancer therapy Revlimid (lenalidomide), as well as the latter's CAR-T portfolio, which was gained via the $9-billion takeover of Juno Therapeutics last year. Caforio stressed that the acquisition "is not about Revlimid," adding "there are concrete, short-term growth opportunities that this will deliver."
Specifically, the combined company expects to have nine products with more than $1 billion in annual sales, as well as significant potential for growth in oncology, immunology and inflammation and cardiovascular disease. The CVR will permit holders to receive a cash payment of $9 upon FDA approval of three investigational therapies, specifically ozanimod and liso-cel by December 31, 2020 and bb2121 by March 31, 2021, in specified indications.
Bristol-Myers Squibb indicated that the deal, which is expected to close in the third quarter, will boost its per-share earnings by more than 40 percent on a standalone basis in the first full year after closing while permitting cost savings of approximately $2.5 billion by 2022. The drugmaker also plans to accelerate its share buyback programme valued at as much as $5 billion.
Commenting on the news, Leerink Partners analysts stated "the deal generates tremendous immediate-term value that we believe would have taken years for Celgene to achieve." The analysts, who additionally called the deal "an exit agreement for Celgene shareholders," described the transaction as a "best case scenario for value realisation."
For related analysis, see ViewPoints: The hunted goes hunting – for liberty and a late-stage pipeline. Read also, ViewPoints: Celgene, Bristol-Myers Squibb put the squeeze on smaller players.
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