BMS trades blows with investor on Celgene deal merits

Bristol-Myers Squibb has issued a defence of its proposed $74bn merger, with Celgene as an activist fund steps up its attempts to rouse resistance to the deal.

Rebel investment group Starboard Value, which was the first to break ranks and voice its opposition to the acquisition late last month, said yesterday it had sent a letter to BMS stockholders reiterating its concerns and had filed ‘blue proxy’ materials to urge them to vote against it at or before a 12 April shareholder meeting.

BMS isn’t standing idle, and published a 46-page presentation detailing the “clear strategic rationale” and “compelling value proposition” for the merger on a new bestofbiopharma.com website, as well as filing its own ‘white proxy’ card to allow investors to back it.

Starboard has around a 1% share in BMS but saw its position strengthened a few days ago when larger investor Wellington Management – which owns around 7.7% of the company’s stock – joined the cause. Wellington said the deal undervalues BMS, is risky to execute, and ignores alternative options to create value for shareholders.

The activist investors claim that BMS is buying a company with a massive patent cliff – principally blood cancer blockbuster Revlimid (lenalidomide) – which they say will requite Celgene to replace 60% of its revenue in the next seven years.

They also claim Celgene’s R&D pipeline is “extremely risky”, overvalued and will require significant funding to bring to fruition, and that the entire transaction has been cobbled together hastily, possibly to avert the threat of a takeover of BMS itself. They see more value in BMS continuing as an independent company or in a potential sale, although there seems little sense among analysts that the latter eventuality is realistic.

BMS has its own list of reasons why the Celgene combination makes sense, topped by the claim the merger will create a company that is number one in oncology and cardiovascular and in the top five in immunology and inflammation – with nine products with more than $1bn in annual sales.

The Celgene pipeline “includes five differentiated late-stage assets with low clinical risk, expected near-term approvals and incremental value creation,” along with more than 20 earlier-stage candidates and an immediate presence in cell therapy for cancer, it asserts.

The acquisition of Celgene provides advantages with less risk compared to other strategic alternatives, including a strategy of pursuing several smaller transactions or staying independent, continues BMS.

“We believe the choice for shareholders is clear. Vote the WHITE proxy card “FOR” a better company, with greater potential to create value,” says the company in its own letter to shareholders.