New York-based pharmaceutical giant Bristol-Myers Squibb Co on Thursday announced that it would buy US biotech firm Celgene Corp in a US$74 billion cash-and-stock deal, creating a rival to the world’s largest drugmakers.
The merger plans underscored the companies’ efforts to diversify in the field of cancer treatments, with investors over the past few months questioning their growth prospects.
In the deal, Bristol-Myers Squibb gains Celgene’s blockbuster Revlimid treatment for multiple myeloma.
Photo: EPA-EFE
The companies said that the new entity would also offer nine products with more than US$1 billion in annual sales.
The combined companies would also enjoy “a deep and broad pipeline that will drive sustainable growth,” Bristol-Myers Squibb chairman and CEO Giovanni Caforio said in a statement.
The firms also pointed to oncology, immunology, inflammation and cardiovascular diseases as important growth areas.
Photo: EPA-EFE
“We will also benefit from an expanded early and late-stage pipeline that includes six expected near-term product launches,” Caforio said in the statement.
Other advantages of the deal include a number of new product launches expected in the next 12 months and extensive cost savings.
Executives said that the firms’ assets are “complementary” and have the potential to create “the pre-eminent global bio-pharmaceutical company,” according to a conference call with analysts.
Bristol-Myers’ global top two selling drugs last year were Opdivo and blood clot drug Eliquis, which together accounted for nearly half the company’s 2017 revenues of US$20.8 billion.
Bristol-Myers had 23,700 employees at the end of last year, while Celgene had 7,647.
Caforio is to remain in his chief roles, while two members of Celgene’s board are to hold spots on Bristol-Myers Squibb’s board of directors.
Under the deal, Bristol-Myers shareholders are to own about 69 percent of the new pharmaceutical giant, while Celgene shareholders are to receive one Bristol-Myers share and US$50 per share of Celgene.
The companies expect to close the deal in the third quarter, with earnings per share at Bristol-Myers Squibb swelling by 40 percent in the first full year.
Shares in New Jersey-based Celgene surged 20.7 percent to US$80.43, while Bristol-Myers Squibb fell 13.3 percent to US$45.12.
Morningstar said in a note that the purchase was “very logical buildout” for the larger company.
However, a note from Cowen Inc said that the effect of the deal was “mixed.”
The transaction bolsters Bristol-Myers’ near-term outlook somewhat, but Celgene “adds patent expiration concerns to those Bristol-Myers Squibb already faces,” the note said.
Standard & Poor’s has placed Bristol-Myers debt ratings under review with negative implications, while saying that the acquisition of Celgene is positive.
“Despite more debt, we believe the business has strengthened as a result of the transaction and expect the combined entity to generate substantial cash flow,” the ratings agency said.
The agency expects to lower Bristol-Myer’s overall rating to “A” with a stable outlook, while the short-term rating would be lowered to “A-1,” it said.
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