It had to happen: Ex-Celgene shareholders sue Bristol Myers Squibb for $6.4B in lost CVR cash, claiming 'blatant misconduct'

Bristol Myers Squibb
In failing to meet a milestone FDA approval date tied to its 2019 purchase of Celgene, Bristol Myers Squibb saved $6.4 billion in contingency payments. On Thursday, the investors it would have owed retaliated with a lawsuit.

It wasn’t so much a question of whether Bristol Myers Squibb would be taken to court by former Celgene shareholders. It was more a question of when.

The answer came Thursday in U.S. District Court-Southern New York with the filing of Case 1:21-cv-04897. 

In it, Bristol is accused of “blatant misconduct”—allegedly delaying development of a cancer drug to avoid making a $6.4 billion milestone payment tied to its approval.

According to a Contingent Value Rights (CVR) agreement tied to BMS’s $74 billion purchase of Celgene in November 2019, the New York pharmaceutical giant would have owed former Celgene shareholders $6.4 billion if it had won FDA approval for three new drugs at the center of that deal, each with a particular deadline.

When one of them—liso-cel, a new CAR-T drug to treat non-Hodgkin lymphoma—didn't make it past the FDA finish line by December 31, the payment vanished into thin air.

RELATED: Bristol Myers CVR down the drain as CAR-T drug’s FDA manufacturing inspection spots problem

That CAR-T treatment, now commercially known as Breyanzi, won approval February 5, but only after a series of delays pushed the FDA’s target date for review well past its original target of August 2020.   

The suit was brought by Kansas City-based UMB Bank NA, acting as a trustee for Celgene’s former shareholders. In it, UMB contends that Bristol breached the CVR agreement by failing to apply “diligent efforts” to secure the approval.

Bristol Myers refused comment on the legal filing. "We are not commenting on pending litigation," a company spokesman said.

UMB claims that BMS made a “highly atypical decision to exclude critical and mandatory information in its initial filing,” and that the company took an extra two months to “belatedly” submit a “major amendment” to the initial FDA application, which “automatically extended” the target date to November 17, 2020.

RELATED: Bristol Myers Squibb's regulatory missteps on Breyanzi can't all be blamed on COVID: analyst

Additionally, UMB maintains that Bristol failed to “take steps necessary to prepare” two manufacturing facilities for FDA inspections. One of the inspections, of a Lonza viral vector plant in Houston slated to help produce Breyanzi, was conducted by the FDA between December 3-10. 

But the plant failed the inspection for “numerous, egregious” deviations from FDA regulations, according to the suit. Among the violations, the suit says, were inadequate controls to prevent microbial contamination, failure to inspect raw materials, poorly maintained freezer bins and failure to discard expired material.

In addition, UMB alleges that Bristol refused to comply with a request to review its records on the matter, violating terms of the CVR agreement.

The CVR agreement payoff also was contingent on two other former Celgene drugs gaining approval by a specified date: Zeposia for multiple sclerosis and Abecma for multiple myeloma. Both achieved their respective milestone targets, winning FDA nods in March of 2020 and March of this year.  

Early this year, a Bristol spokesman told Fierce Pharma that the company would have met the milestone for Breyanzi were it not for “COVID-related inspection delays.” 

RELATED: Bristol Myers hematology chief Ahmed's out the door amid CAR-T missteps

Two weeks after missing the deadline, BMS saw the departure of its chief of hematology, Nadim Ahmed, who had arrived with the purchase of Celgene.

In the suit, UMB argued that “other cellular therapies based on similar technology have received FDA approval without the issues and ineptitude that plagued Bristol Myers, and in substantially less time.”

Those lymphoma drugs, Kymriah from Novartis and Yescarta from Gilead, received their FDA nods within seven weeks of each other in 2017, more than two years before Bristol's acquisition of Celgene and its three promising treatments.