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1 Year : From Feb 2019 to Feb 2020
By Jared S. Hopkins and Colin Kellaher
Bristol-Myers Squibb Co. cleared a major hurdle to complete its $74 billion acquisition of Celgene Corp., after the two companies found a buyer for a skin treatment they hope would address antitrust concerns from regulators.
Amgen Inc. agreed to buy Celgene's psoriasis treatment Otezla for $13.4 billion in cash. The decision comes after the U.S. Federal Trade Commission raised anticompetitive concerns related to anti-inflammatory drugs.
Bristol-Myers in January said it would acquire rival Celgene in a deal knitting together two leading sellers in the $123 billion world-wide market for cancer drugs. Shareholders signed off on the deal in April after an unsuccessful activist campaign to derail the merger.
New York-based Bristol pioneered the development of cancer drugs known as immunotherapies, which unleash the body's immune system on tumors. Summit, N.J.-based Celgene leads in the sale of treatments for multiple myeloma. The combined company was estimated at the time to have nearly $38 billion in annual sales.
Otezla sales totaled $1.6 billion last year. The drug is used to treat forms of psoriasis, a skin disease in which an overreaction by the immune system causes itchy rashes to form on the body. Bristol doesn't currently sell psoriasis medicines, but has an experimental drug for the disease in late-stage trials.
Shareholders were cool on the Bristol-Celgene deal when it was struck in January, and Bristol's stock is trading lower than year-ago levels. Through Friday's close, shares are down about 10% this year compared with the S&P 500's gain of about 14%. Shares of both Bristol and Celgene were up about 3% on Monday in midmorning trading. Amgen's stock was up 2.5%.
The deal was followed by a flurry of M&A activity in health care this year. In January, Eli Lilly & Co. said it would buy Loxo Oncology Inc. for about $8 billion. In June, AbbVie Inc. agreed to acquire Allergan PLC for about $63 billion. And in July, Pfizer Inc. announced its would merge its division of off-patent drugs with Mylan NV.
Bristol-Myers on Monday said the sale of Otezla to Amgen is contingent on a consent decree with the FTC and completion of the Celgene acquisition, which the company now expects to occur by the end of the year.
Bristol-Myers initially said the Celgene acquisition would close in the third quarter, but the U.S. regulators then raised anticompetitive concerns. In June, the companies said they would shed Otezla to satisfy the concerns.
The FTC concerns surprised analysts at the time, who said it could indicate the government was taking a stronger look at pharmaceutical-industry mergers. Earlier this year, Roche Holding AG has said the FTC had requested additional information regarding its planned takeover of Spark Therapeutics Inc.
Analysts at JP Morgan Chase said in a note to clients the Otezla deal was "a clear positive" for Bristol-Myers and that there aren't any additional FTC concerns on the horizon related to the merger with Celgene. They wrote the price tag exceeded their own estimate of $10 billion.
Still, challenges for the combined company lie ahead. Bristol faces heavy competition from Merck & Co. for immunotherapy sales, while Celgene's top-selling product, multiple myeloma treatment Revlimid, is expected to lose U.S. patent protection in the next several years.
Amgen, based in Thousand Oaks, Calif., said Otezla is a strong strategic fit with its psoriasis and inflammation portfolio and it expects at least low-double-digit sales growth for the drug, on average, over the next five years. Amgen said the deal is worth about $11.2 billion, net of anticipated future cash tax benefits.
Amgen, which has been pressured recently by the introduction of copycats to its white blood cell booster Neulasta and calcium reducer Sensipar, said Otezla has exclusivity through at least 2028 in the U.S.
Bristol-Myers said it would use proceeds from the Otezla sale to pare its debt load, adding that it plans to focus on deleveraging in the near term to maintain strong investment-grade credit ratings and a ratio of debt to earnings before interest, taxes, depreciation and amortization of below 1.5-times by 2023.
The New York drugmaker also raised an accelerated share-repurchase program, planned for after the Celgene deal closes, to $7 billion from $5 billion.
Write to Colin Kellaher at email@example.com
(END) Dow Jones Newswires
August 26, 2019 10:59 ET (14:59 GMT)
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