Big Returns Expected for Bristol-Myers Squibb and Celgene Merger

Update (November 22, 2019): As of November 20, 2019, Bristol-Myers Squibb completed the acquisition of Celgene, wrapping up one of the most high-profile deals in pharma history. It was not always glamorous under the spotlight: the Federal Trade Commission recently ordered the two companies to hand over Otezla to Amgen, fearing the popular oral psoriasis medication combined with BMS’ pipeline product will squander any opportunities for competition. Celgene and BMS have managed to hold onto the blockbuster myeloma drug, Revlimid, after two generic drugmakers failed to overturn Celgene’s patent. The future still looks bright for the powerhouse company, now with the newly approved rare bone cancer drug (Inrebic) and beta-thalassemia agent (Reblozyl) ready for commercialization. Now, Celgene common stock has ceased trading and is replaced by new BMS shares and tradeable Contingent Value Rights (CVRs) on the New York Stock Exchange.

Originally published on January 8, 2019: 

Mergers and acquisitions are practically the norm in the pharmaceutical industry. 2018 saw the merger of Takeda and Shire, valued at $62 billion and more recently, the split of GlaxoSmithKline into separate R&D and consumer health-focused companies, the latter in conjunction with Pfizer.

To kick off the new year, Bristol-Myers Squibb struck a deal with Celgene worth $74 billion, making it one of the most expensive transactions in the pharma space. Bristol-Myers Squibb shareholders are expected to own 69 percent of the company.

“Together with Celgene, we are creating an innovative biopharma leader, with leading franchises and a deep and broad pipeline that will drive sustainable growth and deliver new options for patients across a range of serious diseases,” said Dr. Giovanni Caforio, Chairman and CEO of Bristol-Myers Squibb.

The combined company will be leaders in the oncology space, thanks to Bristol-Myers Squibb’s blockbuster immunotherapy drug Opdivo (nivolumab) for metastatic non-small cell lung cancer and Celgene’s highly successful Revlimid (lenalidomide) for multiple myeloma. Six other commercially available drugs give the combined company a competitive advantage in therapeutics for inflammatory, immunologic and cardiovascular diseases.

The deal could not be more perfectly timed as both companies have faced scrutiny for slow projected growth and setbacks in the R&D pipeline. Opdivo faces competition from Merck’s Keytruda (pembrolizumab) and Revlimid may soon be outcompeted by generics.

Investors began to question Celgene’s long-term growth after they lowered their 2020 net product sales projection from $1.8 billion to $700 million to $1.4 billion due to lower-than-expected sales of their psoriatic arthritis drug, Otezla (apremilast). The biotech’s CEO, Mark Alles, was open to the idea of a merger at the time.

“I’ve said it many times, wherever there’s great science, wherever innovation’s happening — whether it’s happening here at Celgene or through another startup or other company — we’re interested in following that science to build our company,” he said during an earnings call in October 2017.

With regards to the Bristol-Myers Squibb merger, he believes it will deliver “immediate and substantial value to Celgene shareholders.”

The promise of improved market position, enhanced early- and late-stage pipelines and many exceptional, innovative scientists under one roof speaks to why mergers are mutually beneficial. The united companies have six drugs under development, two in immunology and inflammation and four in hematology – these drugs are expected to generate revenues close to $15 billion. Moreover, Bristol-Myers Squibb analysts expect nearly $2.5 billion in cost cuts by 2022.

The deal is expected to close in the third quarter of 2019.