Bristol-Myers to buy Celgene in industry-shaking $74B deal
- Bristol-Myers Squibb will acquire Celgene in a $74 billion cash-and-stock deal that would recast the top ranks of the pharmaceutical industry, creating a powerful company with leading positions in immuno-oncology and the treatment of blood cancers.
- Under the deal, shareholders in Celgene will receive one Bristol-Myers share plus $50 in cash, valuing Celgene stock at $102.43 based on the Jan. 2 closing price of Bristol-Myers stock. Once completed, Bristol-Myers shareholders would own 69% of the combined company, which would be led by Bristol-Myers CEO Giovanni Caforio.
- Uniting under one banner could help to answer investor doubts that emerged in recent years about Celgene's leadership, while greatly expanding Bristol-Myers' mid- and late-stage pipeline. Bristol-Myers would take on, however, risk tied to the timing of generic competition to Celgene's top-selling cancer drug Revlimid, which accounts for about 60% of the biotech's revenue.
Three days into 2019 and biotech may have received the boost it needs to shake months of falling share prices and gloomy investor sentiment.
Bristol-Myers' proposed acquisition of Celgene would rank among the industry's largest ever, surpassing Takeda's recent $62 billion bid for Shire. A buyout of Celgene would also fold one of biotech's top companies into a pharma, mirroring takeovers of Genentech, MedImmune and Genzyme by major pharmaceuticals firms in the late 2000s and early 2010s.
The combined company would boast nine drugs with greater than $1 billion in annual sales, headlined by Bristol-Myers' cancer immunotherapy Opdivo (nivolumab) and Celgene's Revlimid (lenalidomide).
Both companies are already known for their strength in oncology — Bristol-Myers for solid tumors and Celgene for blood cancers like multiple myeloma. Buying Celgene would also transform Bristol-Myers into a player in CAR-T cell therapy, which in theory could give the pharma a competitive advantage in exploring combination treatment in immuno-oncology.
Cancer drug sales would account for roughly $23 billion of the roughly $33 billion in combined yearly revenue the companies predict to earn.
For Bristol-Myers, Celgene comes relatively cheap. Over the last 14 months, Celgene's market capitalization has eroded by nearly $70 billion, pushed lower by investor worries over scaled back financial forecasts and clinical setbacks.
Shares in Celgene closed at $66.64 apiece on Jan. 2, down by more than half from the $146.52 the stock traded at in early October 2017.
Using the Jan. 2 price of a Bristol-Myers share, the pharma would be paying a 54% premium to Celgene's closing stock price that day.
Celgene shareholders could also receive additional value from the deal through a type of financial option known as contingent value rights (CVR). Per deal terms, each Celgene share would receive one tradeable CVR that would yield a $9 cash payment if three experimental Celgene drugs receive Food and Drug Administration approval by certain dates.
Those three medicines — a multiple sclerosis drug called ozanimod and the two CAR-T cell therpaies liso-cel and bb2121 — are expected to win regulatory OKs in the next several years.
Counting three other late-stage drugs, Bristol-Myers expects the deal to yield a pipeline with six near-term product launches, opportunities it predicts have the potential to add more than $15 billion in peak revenues.
Bristol-Myers' late-stage pipeline infusion from Celgene
|Drug candidate||Drug type||Disease indication||Next action||FDA approval deadline per CVR|
|Luspatercept||Erythroid maturation agent||Myelodysplastic syndromes, beta-thalassemia||U.S. and EU applications in first half of 2019||N/A|
|Liso-cel (JCAR017)||CAR-T||Chronic lymphocytic leukemia, aggressive B-cell non-Hodgkin lymphoma||Data expected mid-2019, approval targeted for first half 2020||Dec. 31, 2020|
|bb2121||CAR-T||Multiple myeloma||Data expected by end of 2019; approval targeted for second half 2020||March 31, 2021|
|Fedratinib||JAK2 inhibitor||Myelofibrosis, thrombocytosis||NDA filing expected soon||N/A|
|Ozanimod||S1P1 modulator||Multiple sclerosis, Crohn's disease, ulcerative colitis||U.S. and EU applications in Q1 2019||Dec. 31, 2020|
|TYK-2*||TYK2 inhibitor||Psoriasis, Crohn's disease, lupus and inflammatory bowel disease||Phase 3 readouts in 2020||N/A|
*From Bristol-Myers' pipeline
Celgene's CEO, Mark Alles, has long pointed to this slate of new drugs as the solution to expected revenue losses from future generic competition to Revlimid. Last year, the multiple myeloma treatment ranked as one of the world's best-selling drugs, with $8.2 billion in global revenue.
Sales grew in 2018 — rising 17% over 2017's figure — and represented about three-fifths of the company's revenue in the third quarter.
That torrid growth has an expiration date, however. In March 2022, Natco will launch a generic version with volume-limited sales through a 2015 settlement deal reached with Celgene. That deal expands on Jan. 31, 2026 to allow unfettered generic sales.
The critical calculus will be when other generics could enter market, which would drastically lower Revlimid revenues. That will most likely be determined by the courts, where patent litigation remains tied up.
Celgene has laid out the expectation for a trial decision as early as late 2019 and an appeal decision as early as 2021. Speaking on a conference call Thursday, Bristol-Myers' Caforio acknowledged the debate around the intellectual property status of Revlimid, and said Bristol-Myers agrees with Celgene's view on the drug's IP situation while adjusting their own revenue expectations.
"As we looked at Revlimid, we have taken a more conservative view on sales that is in consensus models," Caforio said. "As you expect, we evaluated a range of potential outcomes and we feel very good about the valuation."
Bristol-Myers will fund the deal through a combination of cash on hand and $32 billion in new debt.
Investors in the pharma did not appear enthusiastic about the proposed takeover, however. Shares in Bristol-Myers fell by more than 10% in Thursday morning trading, blunting the premium Celgene shareholders would earn through the deal if that slump persists.
Celgene shares traded up by more than 25%.
The companies expect the deal to close in the third quarter of 2019, pending shareholder approval and clearance of regulatory review.
If completed, the acquisition would have a competitive impact across the industry, particularly in oncology. Already, news of the deal has spurred stock market movements for a number of companies, lifting Gilead Sciences and Biogen while sending Merck & Co. shares lower.
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