By Charley Grant 

Bad news at Bristol-Myers Squibb comes with a significant silver lining.

Less than three months after beating back shareholder opposition to its proposed acquisition of Celgene, the pharmaceuticals giant faces another obstacle in closing the $74 billion deal: It said Monday that it plans to sell Celgene's psoriasis drug Otezla to satisfy concerns of antitrust regulators.

As a result, the company now expects the deal to close by the end of this year or early in 2020, several months behind the original schedule.

Bristol-Myers had forecast $45 billion in free cash flow for the combined company over the first three years after the deal closes. That forecast is now headed lower, since analysts expect annual Otezla sales to top $2 billion by 2020, according to FactSet.

To make matters worse, the company separately unveiled disappointing data for its lead cancer drug in the treatment of liver disease.

The company's shares fell 7% in morning trading.

That disappointment is a real one, but Bristol-Myers is still in position to bounce back. Otezla is a proven blockbuster drug in a growing market. It should continue to generate cash for a while, since Otezla's key patents don't expire until 2028. There will likely be significant interest from either rival drug companies or from private equity. Since industry growth rates are low and capital is abundant, it wouldn't be surprising for Otezla to fetch $10 billion or more in a sale.

Even after taxes on the sale, those proceeds will significantly reduce debt on Bristol-Myers' balance sheet, which was slated to top $50 billion when the deal closes.

And Bristol-Myers hasn't closed the door on this market altogether. The company is currently enrolling patients for late-stage trials of its own next-generation psoriasis drug.

Monday's share-price sickness shouldn't linger for long.

Write to Charley Grant at charles.grant@wsj.com

 

(END) Dow Jones Newswires

June 24, 2019 12:04 ET (16:04 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.
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