Bristol-Myers to buy Celgene for $74bn

March 2019 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

March 2019 Issue

In January, Bristol-Myers Squibb announced it had agreed to acquire Celgene Corporation in a cash and stock transaction valued at $74bn.

The deal, one of the biggest mergers in the history of the pharmaceuticals industry, will see Celgene shareholders receive one Bristol-Myers Squibb share and $50 in cash for each Celgene share held, or $102.43 per share, a premium of 53.7 percent to Celgene’s closing price on the day before the deal was announced.

The transaction, which is subject to the approval of the shareholders of both companies and the satisfaction of customary closing conditions and regulatory approvals, is expected to complete in the third quarter of 2019. Under the terms of the deal, Celgene’s shareholders will also receive a contingent value right payment of $9 if three treatments the company has in development – ozanimod, liso-cel and bb2121 – achieve timely approvals.

Including debt, the deal is worth $95bn. Once completed, Bristol-Myers Squibb shareholders are expected to own approximately 69 percent of the company; Celgene’s shareholders will hold the remaining 31 percent.

The companies expect the merger to create $2.5bn in cost savings by 2022. Fifty-five percent of the savings are expected to come from cuts in sales, general and administrative expenses, 35 percent through reduction in research and development spending and 10 percent from manufacturing.

The merger will see the combination of two of the largest US drugmakers. Bristol-Myers is the eighth largest manufacturer in the country, with annual revenue of $20.8bn in 2017. Celgene is the ninth largest with revenue of $13bn. Upon completion of the merger, the companies would create the fourth largest pharmaceutical firm in the US with nine different drugs – six from Bristol-Myers and three from Celgene – which generate global sales of more than $1bn each. The combined company would also have a number of products in development which would be expected to generate considerable additional sales in the oncology, immunology and inflammation and cardiovascular disease fields.

“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 Giovanni Caforio, chairman and chief executive of Bristol-Myers Squibb. “As a combined entity, we will enhance our leadership positions across our portfolio, including in cancer and immunology and inflammation. We will also benefit from an expanded early- and late-stage pipeline that includes six expected near-term product launches. Together, our pipeline holds significant promise for patients, allowing us to accelerate new options through a broader range of cutting-edge technologies and discovery platforms.”

“For more than 30 years, Celgene’s commitment to leading innovation has allowed us to deliver life-changing treatments to patients in areas of high unmet need. 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,” said Mark Alles, chairman and chief executive of Celgene. “Our employees should be incredibly proud of what we have accomplished together and excited for the opportunities ahead of us as we join with Bristol-Myers Squibb, where we can further advance our mission for patients. We look forward to working with the Bristol-Myers Squibb team as we bring our two companies together.” Mr Alles has committed to remaining at Celgene through the merger, however there is some speculation that he may leave the company once the deal has completed.

The merger could prove a boon for Bristol-Myers and Celgene which, through increased competition for main cancer treatments and a number of clinical failures, saw their shares lose 15 percent and 40 percent of their value, respectively, in 2018.

The combined company may face a number of challenges in 2019 and beyond, however. The fast approaching patent expiry of Celgene’s cancer therapy Revlimid will expose the company to generic competitors over the next four years. Equally, in October, the US Food and Drug Administration (FDA) delayed a decision on its application for approval of two of Bristol-Myers’ drugs – Opdivo and Yervoy.

Richard Summerfield