Bristol-Myers Squibb Poised for $74 Billion Takeover of Celgene

On Thursday, drug maker Bristol-Myers Squibb announced its plan to buy competitor Celgene in a billion-dollar deal. If they succeed, it will be one of the biggest mergers in the history of the pharmaceutical industry. 

This deal still needs approval from both shareholders and regulators, but after such approval, it will be paid out in a combination of cash and stocks.  Now, it should be noted that Bristol-Myers is already the result of a 1989 merger between two much older companies (whose roots actually trace all the way back to the 19thcentury), making it the eighth largest drug maker in the United States, who reported an annual revenue of $20.8 billion in 2017.  And to put this into perspective, Celgene is the ninth largest drug maker in the United States, with a reported annual revenue of roughly $13 billion.

While Bristol-Myers and Celgene are number 8 and 9, respectively, their merger will make them the fourth largest pharmaceutical company in the United States.  Between them, they own nine different drugs (at 6 and 3, respectively), with more than $1 billion in global sales, each.  Of all these drugs, Celgene’s multiple myeloma (bone marrow and white blood cell cancer) drug Revlimid leads the sales charge at $8.2 billion in sales. 

Perhaps more importantly, the two companies also say they have six other drugs currently under development, collectively.  These drugs could potentially come to market within the next 12 to 24 months, with at least $15 billion in potential annual revenue. Celgene, alone, has three drugs awaiting FDA approval that will generate another $9 per share of stock for each shareholder at the time of the merger.

On the other hand, Bristol-Myers and Celgene, again collectively, face two obstacles. The first is simple:  US President Donald Trump has vowed to take action on the industry in an attempt to lower drug prices.  

Secondly, though—and far more complicated—Revlimid is about to face patent expiration. This means that generic competitors could bring their version to the market within the next four years.  And since Celgene’s intention to purchase Juno Therapeutics for $9 billion, last year, did not quite pan out, shares of Celgene have dropped nearly 40 percent in the last year.  But Bristol-Myers has faced its own set of problems.  Most notably, the company saw shares tumble 6 percent because of delays from FDA pushback regarding its application for approval of Opdivo and Yervoy.