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Bristol-Myers Announces Sale of Celgene's Otezla to Amgen

Zacks Equity Research

Bristol-Myers Squibb Company BMY announced that Celgene Corporation CELG has inked an agreement to sell its plaque psoriasis and psoriatic arthritis drug, Otezla, to Amgen AMGN. The deal is in connection with Celgene and Bristol-Myers’ merger.

Amgen would pay $13.4 billion in cash for the same. The closing of the divestiture is contingent on Bristol-Myers Squibb and Celgene entering a consent decree with the Federal Trade Commission (FTC) in connection with their pending merger.

Bristol-Myers decided to divest Otezla to close the Celgene acquisition on a timely basis in light of concerns expressed by the FTC.

We remind investors that Bristol-Myers has tyrosine kinase 2 (TYK2) inhibitor, BMS-986165, in its pipeline, which is being evaluated in several autoimmune diseases, including psoriasis. The regulatory agency was concerned about a possible overlap between Otezla and BMS-986165 in the pipeline. Hence, Bristol-Myers decided to sell Otezla.

Otezla raked in more than $1.6 billion of sales in 2018 and was one of the key growth drivers for Celgene, while BMS-986165 is still in development. Sales of the drug are expected to come in around $1.9 billion in 2019.

Bristol-Myers now expects the pending acquisition with Celgene to close by the end of 2019.

In January 2019, Bristol-Myers announced that it will acquire Celgene for $74 billion to boost its oncology portfolio, given the stiff competition for Opdivo from the likes Merck’s MRK Keytruda. However, the acquisition earlier hit a few roadblocks, with a few large shareholders of Bristol-Myers opposing the merger. The shareholders thought it to be risky and may add significant debt to the balance sheet. Moreover, Celgene’s growth-driving oncology drug, Revlimid, is expected to lose patent protection soon. The acquisition was finally given a green signal in April 2019.

Bristol-Myers plans to prioritize the use of proceeds from the divestiture to reduce debt.

Shares of the company have lost 7.4% in the year so far compared with the industry’s decline of 2.1%.

 

Concurrently, the company announced an increase to its previously-planned $5-billion accelerated share repurchase to $7 billion.

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

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Bristol-Myers Squibb Company (BMY) : Free Stock Analysis Report
 
Merck & Co., Inc. (MRK) : Free Stock Analysis Report
 
Celgene Corporation (CELG) : Free Stock Analysis Report
 
Amgen Inc. (AMGN) : Free Stock Analysis Report
 
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