Bristol-Myers Squibb Company (BMY - Free Report) announced that it has received an offer from an over-the-counter (OTC) drug company in Japan, Taisho Pharmaceutical Holdings Co., Ltd. to purchase the former’s consumer health business in France, UPSA for $1.6 billion.
Financial Terms of the Transaction
The potential sale is expected to be completed in the first half of 2019, subject to regulatory approvals and meeting of certain other customary closing conditions. Per the terms, the offer is subject to Bristol-Myers’ exercise of the put option.
Once the put option is exercised, Bristol-Myers and Taisho would execute a definitive stock and assets purchase agreement. Thereafter, Taisho would acquire all of the issued and outstanding shares of capital stock of UPSA SAS as well as Bristol-Myers’ assets and liabilities related to the UPSA product portfolio. Assuming completion, Bristol-Myers estimates the potential transaction to be dilutive to the bottom line by 4 cents in 2019.
Strategic Aspect of the Transaction
UPSA, a French pharmaceutical company and a brand owned by Bristol Myers, develops drugs and supplements for day to day ailments. Its portfolio covers a wide range of therapeutic areas like pain, cough & cold, vitamins and supplements, gastrointestinal and sleep.
However, the UPSA business no longer fits in Bristol-Myers' core focus area of drugs, and hence the company has decided to divest the same. The company has been looking for potential sale options for the business since June 2018.
Taisho had earlier purchased PT Squibb Indonesia from Bristol-Myers, and subsequently entered the OTC market in certain Asian countries.
Bristol-Myers is in the process of realigning its portfolio to focus better on drugs for patients facing serious diseases.
While its blockbuster drug, Opdivo continues to perform well and the label expansion of the same will further boost the top line, pricing concerns and stiff competition in the immuno-oncology space are major concerns. In particular, Merck’s (MRK - Free Report) Keytruda and Roche’s (RHHBY - Free Report) Tecentriq pose stiff competition.
Bristol-Myers’s stock has decreased 15.6% in the year so far, against the industry’s growth of 4.9%.
The company recently announced a multi-year research collaboration with Eisai Co., Ltd. and its U.S.-based precision medicine research & development subsidiary H3 Biomedicine, Inc. to focus on novel therapeutics generating from H3’s RNA splicing platform and evaluate if these can provide a more powerful response against cancer.
Moreover, Bristol-Myers announced a multi-year joint research study with Boston Medical Center to identify and analyze potential sensitivity and resistance markers in patients treated with standard-of-care checkpoint inhibitors. The study will primarily focus on uncovering mechanisms associated with lack of response to Immuno-Oncology (I-O) therapies.
Zacks Rank & Other Key Pick
Bristol-Myers currently carries a Zacks Rank #1 (Strong Buy). Another top-ranked stock from the same space is Gilead Sciences, Inc. (GILD - Free Report) , which carries the same rank as Bristol-Myers. You can see the complete list of today’s Zacks #1 Rank stocks here.
Gilead’s earnings per share estimates increased from $6.65 to $6.93 for 2018 over the past 60 days. Estimates for 2019 are also up by 19 cents.
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