As Bristol-Myers satisfies one activist investor, a new one
pushes for change
By David Benoit and Jonathan D. Rockoff
The same day Bristol-Myers Squibb Co. shook up its board to
satisfy one activist investor, the drugmaker was faced with
another: Carl Icahn, whose interest is fueling speculation the
company could soon be put on the auction block.
The appearance of Mr. Icahn, an investor with a history of
pushing for deals among pharmaceutical companies, surprised
Bristol-Myers executives, who had just avoided a potential fight
with activist hedge fund Jana Partners LLC and are still reeling
from a costly stumble in the company's effort to develop the next
big cancer treatment.
It isn't clear how big a stake Mr. Icahn has bought, but the
investor sees a valuable drug portfolio that could attract a
takeover, according to people familiar with the matter. Still, the
shares rose 0.4%, reversing earlier declines, after the purchase
was reported by The Wall Street Journal. The report came just hours
after Bristol-Myers announced it would add three directors to its
board and repurchase $2 billion in stock, moves it negotiated with
Jana Partners.
Should Mr. Icahn help spur a sale of the company, the purchase
would reshape the landscape among a group of companies racing to
develop new science for attacking cancer, a market that could be
worth billions. It's far from guaranteed there will be any sale of
Bristol-Myers; the potential obstacles are formidable. For one
thing, it isn't clear whether Bristol-Myers is a willing seller,
and there's only a small handful of companies that could afford a
price tag likely to exceed $100 billion. Bristol-Myers currently
has a market value of more than $90 billion.
Bristol-Myers pioneered the development of so-called
immunotherapies, which use the body's immune system to fight
cancers, and it dominates the lucrative category. Rivals, including
Roche Holding AG, Pfizer Inc. and Merck & Co., have been trying
to catch up, since analysts estimate the treatments could ring up
$20 billion in yearly sales.
But Bristol-Myers has lost $37 billion in stock-market value,
dropping from its all-time highs, since results of an important
clinical study for its lung-cancer immunotherapy Opdivo were
announced in August. Opdivo failed to outperform chemotherapy in a
trial involving newly diagnosed patients, an unexpected result that
analysts say gives the advantage to a competing drug from Merck in
the lucrative market. That was followed by a delay in the expected
approval of the treatment and reduced earnings forecasts for
Bristol-Myers.
Bristol-Myers management has said that its treatments, including
Opdivo, have a bright future. Yet the company also has been trying
to build other franchises, treating different diseases, so that it
doesn't rely too heavily on the cancer treatments.
Jana started building a stake last year that is now valued at
between $500 million and $1 billion, according to a person familiar
with the matter. The hedge fund began pushing for board changes to
improve management oversight after Bristol-Myers announced in
January it wasn't seeking, as had been expected, a faster approval
process for Opdivo, the person said.
Mr. Icahn has a history of successfully pushing for deals among
pharmaceutical companies, and his presence on Bristol-Myers's
shareholder register will likely add to recent speculation that a
bidder could swoop in following the company's struggles. Such a
possibility has helped boost Bristol-Myers shares since
January.
Any deal for Bristol-Myers could help reignite merger activity
in an industry famous for it. After breaking records in 2015 with
more than half a trillion in announced deals, health-care merger
activity dipped in 2016 amid heightened scrutiny from regulators.
There were $298 billion in announced health-care deals globally
last year, according to Dealogic. And unlike 2015, which had a
number of deals in the $10-billion-plus range, there were only two
last year, the largest being a $24 billion deal by Abbott
Laboratories to buy medical-products maker St. Jude Medical
Inc.
But the oncology sector has remained a hot area for
consolidation.
Mr. Icahn, who just turned 81 years old, has a history with
Bristol-Myers. In 2008, he was a large shareholder in ImClone
Systems Inc. and helped rebuff Bristol-Myers's attempt to buy the
company, its partner on an important cancer drug.
In 2012, Mr. Icahn took a stake in Amylin Pharmaceuticals Inc.
and called on the company to explore a sale after it had rebuffed a
bid from Bristol-Myers. After the diabetes-treatment maker ran a
sales process, it agreed to a higher bid from Bristol-Myers worth
$5.3 billion.
In Jana's pact with Bristol-Myers, the company recruited former
senior executives from Bausch & Lomb and Vertex Pharmaceuticals
Inc. -- Robert Bertolini and Matthew Emmens, respectively -- along
with Theodore Samuels, who currently sits on the boards of Perrigo
Co. and Stamps.com.
The Bristol-Myers board will be temporarily expanded to 14
seats, but only 11 directors will stand for election at the
company's annual meeting in May.
Mr. Icahn and other big activists had a relatively quiet 2016
after years of campaigning at the biggest companies with increasing
regularity. This year's activist moves have been off to a faster
start and show the investors aren't retreating from challenging
megacap companies.
But even for Mr. Icahn, a $90 billion company is big:
Bristol-Myers would rank as the second-largest he has ever publicly
targeted after Apple Inc., the world's most valuable public
company, according to FactSet.
Last week, Trian Fund Management LP disclosed a new bet on
Procter & Gamble Co., which is worth more than $230 billion,
and activists are trying to place new chief executives into
railroad company CSX Corp. and aerospace parts company Arconic
Inc., the former Alcoa Inc.
On Tuesday, Jana was part of another settlement with Tiffany
& Co., helping shaking up the jeweler's board.
--Imani Moise contributed to this article.
Write to David Benoit at david.benoit@wsj.com and Jonathan D.
Rockoff at Jonathan.Rockoff@wsj.com
(END) Dow Jones Newswires
February 22, 2017 02:47 ET (07:47 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
Bristol Myers Squibb (NYSE:BMY)
Historical Stock Chart
From Mar 2024 to Apr 2024
Bristol Myers Squibb (NYSE:BMY)
Historical Stock Chart
From Apr 2023 to Apr 2024