Is anyone really shopping for Bristol-Myers?
Bristol-Myers Squibb is on the auction block – maybe.
While there has been plenty of speculation over the last two days indicating that the big pharma could be a takeout target for some of its larger peers — including Pfizer, Johnson & Johnson, Sanofi and Novartis – a lot of that talk is based on two ideas: that Bristol-Myers is in dire straits and that activist investors are unhappy about it.
All of this buzz began when a report from Street Insider and several reports from analysts named a few potential buyers despite Bristol-Myers never indicating an interest to sell and said buyers expressing little interest to buy.
Adding to the rumors was news out of Bristol-Myers that it has been in discussions with an activist investor, which owns less than 1% of the company, and decided to add new board members and buy back some stock.
Further compounding the excitement of the rumor mill, was a report from The Wall Street Journal indicating Carl Icahn has taken a stake in the company. The billionaire is well known for his hostile activities within the biotech community.
Icahn was the engineer behind Biogen bringing in George Scangos as CEO (a move that has since been reversed due to his ineffectiveness), was the impetus behind Bristol-Myers and AstraZeneca forking over $7 billion for Amylin (now seen as an overpriced mistake), and Eli Lilly's purchase of ImClone Systems (a deal that was supposed to make Lilly "a true oncology powerhouse").
A good buy?
Aside from the allure of gossip, Bristol-Myers would make a poor acquisition for just about anyone. While the failure of Opdivo (nivolumab) — its cash cow — was a devastating hit to the company, it didn't exactly cripple the company, or the drug.
Opdivo brought in sales of $3.8 billion in 2016. Meanwhile, it's closest competitor, Merck & Co's Keytruda (pembrolizumab) only hit $1.4 billion.
Admittedly, first-line lung cancer is a huge market and Opdivo was expected to get about $4 billion in revenue annually just from that. But not having the indication — or not having it yet — isn't going to keep the PD-1 inhibitor from growing. Bristol-Myers CEO Giovanni Cafario has made it clear that the pharma is still driving full speed ahead with its development program for Opdivo, alone and in combination with other therapies, including its other blockbuster Yervoy (ipilimumab).
Beyond that, Cafario insists the company's oncology pipeline is brimming with possibilities. He also recently pointed to Bristol-Myers’ assets in fibrotic indications as the next exciting space to watch, with three Phase 2 assets and another three speeding through early stages.
Maybe not the industry superstar it was a year ago, Bristol-Myers is far from a failing company, and buyers would have to pay handsomely.
But who wants it?
Even after the company's market cap took a $30 billion hit due to the failed trial results in first-line lung cancer last summer, the pharma is still worth upwards of $90 billion. Acquiring Bristol-Myers would mean paying a hefty pricetag, which is why only the largest pharmas were suggested as possibly being interested.
Yet, all of the above have expressed that they are not interested, either in large deals, or Bristol-Myers. Sanofi and Novartis have been clear about not doing megamergers — ala the likes of Pfizer's Wyeth acquisition or Merck & Co's Schering-Plough buyout. And while many pharma companies tend to have a short memory, it's still debated whether either of those mega-mergers were worth the hassle. Recent wisdom has most of big pharma sticking to bolt-on deals, or even asset swaps, that require far fewer divestitures and result in fewer layoffs.
Pfizer (God willing) has learned its lesson about mega-mergers as well. After failed attempts to acquire AstraZeneca and Allergan, the New York behemoth has turned its focus to more strategic deals that have helped flesh out its areas of interest and build up its pipeline.
J&J, on the other hand, just sunk $30 billion into Actelion. Even though the company has plenty of cash, it's unlikely to follow that deal with an even bigger one.
While it may be fun to speculate, big pharma is sitting this one out.
- BioPhrma Dive How biomarkers cost Bristol-Myers the lung cancer market
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