Amgen to Buy Celgene's Otezla for $13.4 Billion--Update
August 26 2019 - 11:14AM
Dow Jones News
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 colin.kellaher@wsj.com
(END) Dow Jones Newswires
August 26, 2019 10:59 ET (14:59 GMT)
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