Bristol-Myers Squibb to buy Celgene for around $74 billion

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.

BMO Capital Markets analyst Alex Arfaei, who said the deal was opportunistic but expensive, indicated that the transaction will permit Bristol-Myers Squibb to diversify from immunotherapy, where it currently markets Yervoy (ipilimumab) and Opdivo (nivolumab). However, the analyst cautioned "this proposed deal does not send a confident signal about [Bristol-Myers Squibb's] independent growth prospects."

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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