Bristol Myers will likely settle the $6.4B Celgene CVR lawsuit at a discount, analyst says. Here's why

Bristol Myers Squibb new sign outside
Bristol Myers Squibb could pay former Celgene shareholders $3 billion to $4 billion to settle a $6.4 billion lawsuit, Mizuho analyst Salim Syed said. (Bristol Myers Squibb)

Angry former Celgene shareholders have waged a $6.4 billion legal battle against Bristol Myers Squibb, accusing the Big Pharma company of dilly-dallying on the regulatory advancement of cell therapy Breyanzi. But one analyst suggests the two sides will likely settle the lawsuit at a discount.

Bristol Myers Squibb could settle the legal brawl with holders of the contingent value right (CVR) tied to the $74 billion Celgene buyout in two to three years at a price of around $3 billion to $4 billion, plus interest, Mizuho analyst Salim Syed said in a note Tuesday.

Syed reached that prediction by taking a page from Sanofi’s 2019 settlement with former Genzyme shareholders around multiple sclerosis drug Lemtrada. Wrapping up the case with a settlement would benefit both parties, Syed figures.

In the Sanofi CVR suit, plaintiffs alleged that the French pharma failed to do its best in getting a timely approval for Lemtrada and achieving certain sales milestones. By doing so, the company dodged its CVR payment obligations of $708 million, they alleged.

Sanofi settled the claims with a $315 million payout, or about 45% of the ask. Apply that ratio to the $6.4 billion figure in BMS's investor lawsuit and one could reach the $2.9 billion number for a potential settlement, Syed said.

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

Another reason why Syed thinks the Sanofi case is the relevant comparator? Gavin Wilkinson, a leader at UBM Bank and the trustee of the Bristol CVRs, was previously involved in the Sanofi settlement.

As part of the Celgene takeover, BMS pledged the $6.4 billion all-or-nothing CVR payment contingent on the company winning FDA approvals for three Celgene drugs by certain dates. But one of the drugs, CAR-T therapy Breyanzi, suffered several delays, including from manufacturing citations as part of preapproval inspections. It eventually missed the Dec. 31, 2020 approval deadline.

In a lawsuit earlier this month, UMB said Bristol failed to perform “diligent efforts” to make sure the drug crossed the regulatory finish line on time. It pointed to similar CD19-directed CAR-T therapies like Gilead Sciences’ Yescarta and Tecartus and Novartis’ Kymriah, noting that they used “substantially less time” to secure FDA go-aheads.

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

Shaking hands on a settlement would be a “win-win scenario,” Syed argued. Many investors likely spent less than $4.5 per share on the CVR, Syed said, versus its full value of $9 apiece. A settlement in the range of $3 billion to $4 billion would mean $4.2 to $5.6 per unit, which could help many investors at least break even.

From BMS’ viewpoint, that settlement amount is obviously not the full $6.4 billion price if it lost the case, meaning a smaller payment. Reaching a settlement could also help the company avoid turning its books to the court, Syed added.

What’s more, if BMS still wants to keep the CVR approach as a financial tool for any future M&A, “there is incentive here” to make sure the plaintiffs win something, he said.