- Bristol-Myers Squibb said Monday it will divest the psoriasis drug Otezla to address antitrust concerns raised by the Federal Trade Commission about its pending acquisition of Celgene.
- The combined company would have had two marketed drugs in the inflammatory diseases psoriasis and psoriatic arthritis, with a third one in Phase 3 development.
- Bristol-Myers says it expects to be able to close the acquisition in late 2019 or early 2020 thanks to its agreement to divest Otezla, which will be subject to the signing of a consent decree with the FTC. When the deal was announced, the company said it expected it to close in the third quarter of 2019.
Big acquisitions often require big divestitures. The mega-merger wave of 2009 that featured Pfizer buying Wyeth and Merck & Co. acquiring Schering-Plough required significant sell-offs of animal health units in both cases, for example.
In the case of the Bristol-Myers, it isn't a whole business unit, but rather a marketed drug that's going on the block. Otezla (apremilast) is Celgene's marketed oral drug for psoriasis and psoriatic arthritis that had sales of $1.6 billion in 2018, and Credit Suisse analyst Vamil Divan forecast that number rising to $2.5 billion in 2023.
Bristol-Myers already has in its stable Orencia (abatacept), an injectable biological agent that treats psoriatic arthritis and had sales of $2.7 billion in 2018. Orencia is losing market exclusivity in 2021 and could be subject to biosimilar competition.
The antitrust issues may not end there, however. Bristol-Myers also owns a Phase 3 psoriasis agent in BMS-986165, which it is testing in two head-to-head trials against Otezla. If that drug is successful, the FTC may believe that the combined company would have had too much market power in oral psoriasis drugs.
BMS-986165 is from a new class of drugs called tyrosine kinase 2 (TYK2) inhibitors. In Phase 2, up to 75% of patients taking BMS-986165 achieved a 75% or greater reduction in a measure of disease severity known as PASI. If these levels of skin clearance are confirmed in Phase 3 testing, BMS-986165 would demonstrate much greater efficacy that Otezla and would rival that of new biologics like Taltz (ixekizumab) or Ilumya (tildrakizumab).
Celgene, meanwhile, has a play in TYK2 inhibition through a collaboration with the private group Nimbus Therapeutics. That experimental agent has yet to be tested in humans, and thus may not have drawn the FTC's attention. Celgene has been canceling deals ahead of the Bristol-Myers closing, but so far it appears that Nimbus has escaped.
A remaining question is the price Celgene and Bristol-Myers can get for Otezla, given that they must sell, although Credit Suisse's Divan was optimistic for a good deal.
"We believe sellers are often at a disadvantage when potential buyers know they need to divest a given asset, but there are many companies with drugs in the dermatology space that may look to bid on the asset," he wrote in a June 24 note to clients. "In our coverage alone we believe AbbVie, [Johnson & Johnson], and Lilly may be interested, assuming they do not see any regulatory concerns with how Otezla would fit into their portfolios."