On Dec. 10, Bristol-Myers Squibb made what it said was its final offer to acquire Celgene. But it turns out that wasn’t the case. It ended up scoring a better deal instead.
Just days before a Jan. 2 deadline Bristol-Myers itself had set for wrapping up an agreement, the New Jersey drugmaker pulled that proposal—$57 in cash and one BMS share for each Celgene share—citing Celgene’s sinking share price.
In its place, it traded some of the cash for a contingent value right, which would pay off only if three Celgene pipeline drugs made it to market. The revised per-share bid? $50, one BMS share and the CVR, tying future cash payments to regulatory approvals for MS candidate ozanimod and CAR-T prospects JCAR017 and bb2121.
Celgene took the bait. And that yielded the $74 billion buyout the two companies inked in the early hours of Jan. 3.
Conversations among the company’s executives, which began all the way back in early 2017, help illustrate why. 2018 wasn’t an easy year for the sector in general, but it was particularly unkind to both Bristol-Myers and Celgene. Investor worries over Opdivo’s lung cancer future and Revlimid’s patent cliff plagued the two players and their share prices.
And those “significant risks to both companies” prompted BMS CEO Giovanni Caforio and Celgene CEO Mark Alles to make haste, the recently released deal proxy (PDF) shows. Executives negotiated through December with a “strong desire to announce a transaction by January 2, 2019,” it says.
One thing that helped the timeline? A lack of other interested parties. Celgene reached out to just one other drugmaker it thought “would have a strategic fit with Celgene that was as strong as that between Celgene and Bristol-Myers Squibb, as well as the scale to enable it to present a proposal that could be competitive with Bristol-Myers Squibb’s,” the proxy said. And when that company said no, Celgene quit searching.
“Outreach to additional parties presented a significant unfavorable risk of a leak that would be damaging to Celgene and the prospects of a transaction with Bristol-Myers Squibb, and therefore would not be advisable,” its executive committee decided.
Now, Bristol-Myers and Celgene have a tie-up they say will make their combined company the field’s No. 1 oncology drugmaker, backed by Opdivo and Revlimid—and, they hope, a couple of CAR-T entrants. It’ll also put the combined company among the top five immunology and inflammation players, they contend.
Meanwhile, though, industry watchers still want answers on how the merger will drive sustained revenue and earnings growth down the line. Late last month, analysts pointed to lower-than-expected revenue growth guidance from Bristol-Myers and grilled the company’s management for answers.