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Bristol-Myers' Shareholders Vote for Celgene Acquisition

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Bristol-Myers Squibb Company (BMY - Free Report) announced that its shareholders have given a green signal for the impending acquisition of Celgene Corp. (CELG - Free Report) .

More than 75% of the shareholders voted in favor of the merger agreement at the Special Meeting of Stockholders.

The transaction will close in the third quarter of 2019, subject to the satisfaction of customary closing conditions and regulatory approvals.

In January, Bristol-Myers announced that it will acquire Celgene for an equity value of approximately $74 billion to bolster its portfolio.

However, a few shareholders had earlier opposed the deal, expressing multiple concerns related to growth of the company following the acquisition. These shareholders believed that the acquisition will increase shareholders’ risk significantly without generating enough rewards. They were concerned that Celgene’s major revenue generator drug, Revlimid, will lose patent protection in 2026, which is likely to dent its sales. Lack of any other blockbuster drug in the the company’s portfolio was another major concern for the shareholders.

Nevertheless, Bristol-Myers expects the combined entity to generate more than $45 billion in cash flow over the first three full years post-closing and cost synergies of approximately $2.5 billion by 2022. Moreover, the company expects the acquisition to be 40% accretive to the bottom line on a standalone basis in the first full year after closing.

The company expects the merged entity to have a market leading oncology portfolio in both solid tumors and hematologic malignancies, led by Opdivo and Yervoy along with Revlimid and Pomalyst. The cardiovascular, immunology and inflammation franchises will be strengthened with the presence of Eliquis, Orencia and Otezla, respectively. Moreover, the entity will also have a deep pipeline, including six expected near-term product launches with potential sales of $15 billion.

Bristol-Myers’ shares have declined 8.2% so far this year against the industry’s growth of 4.9%.

 

The company was on the lookout for an acquisition for quite some time now to bolster its portfolio. Bristol-Myers’ top drug, Opdivo, competes with Merck’s (MRK - Free Report) Keytruda in the anti PD-1/PD-L1 category. Additionally, competition is rising in this category with the presence of Roche’s (RHHBY - Free Report) Tecentriq. Both Keytruda and Tecentriq are approved for first-line non-small cell lung cancer (“NSCLC”), which has the largest patient population among all cancer indications.

Meanwhile, the delay in Opdivo’s approval for the same indication is denting its prospects.

Zacks Rank

Bristol-Myers currently has Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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