BMY Bristol Myers Squibb Co

By Joseph Walker 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (June 25, 2019).

Bristol-Myers Squibb Co. said its $74 billion merger with Celgene Corp. would be delayed as the company works to allay concerns of federal regulators by selling off Otezla, Celgene's anti-inflammatory drug that had global sales of $1.6 billion last year.

Bristol-Myers now expects to complete the deal at the end of this year or early 2020, the company said Monday. It had previously expected the merger to close in the third quarter of this year.

The company hopes the planned divestiture of Otezla will resolve the U.S. Federal Trade Commission's anticompetitive concerns about clearing the merger.

The divestiture came as a surprise to analysts, who said it was the latest signal that regulators are taking a tougher stance in their scrutiny of pharmaceutical industry mergers.

The delay appeared to create uncertainty among investors about the merger being completed, analysts said. Celgene's stock fell 5.5% to $93.47 Monday; shares of Bristol-Myers declined 7.4% to $45.68.

Brian Skorney, an R.W. Baird analyst, said Bristol-Myers's plan to divest itself of Otezla signaled the company had found a way to resolve the FTC's concerns and increased the probability of the deal closing.

"It's feedback on what the FTC wants, and it seems like this is the major thing to come from the FTC discussions," Mr. Skorney said in an interview.

Otezla 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.

Historically, antitrust regulators would only raise concerns about drugs in overlapping disease areas if both products were already on the market, Mr. Skorney said. That now appears to be changing.

Earlier this month, Roche Holding AG said the FTC had requested additional information regarding its planned takeover of Spark Therapeutics Inc.

Analysts speculated that the FTC's concerns were related to overlap between Roche's hemophilia treatment Hemlibra and an experimental gene therapy for the disease being developed by Spark.

"Both of these deals have gotten more scrutiny than people expected," said Mr. Skorney. "How does that impact how pharma acquirers look at deals going forward?"

Otezla was Celgene's third-largest drug by sales last year and represented about 10.6% of the company's total revenue.

It is uncertain how long the drug will retain market exclusivity; R.W. Baird estimates that it could lose patent protection after 2023. Otezla could fetch $6 billion to $10 billion in a sale, Mr. Skorney said.

Separately, New York-based Bristol Myers said Monday that its late-stage study of cancer immunotherapy Opdivo didn't meet the main goals in a study probing its use in a common liver cancer but showed an improvement in the overall survival of patients treated with the drug compared with Bayer AG's Nexavar, which is the current standard of treatment.

Kimberly Chin and Dave Sebastian contributed to this article.

Write to Joseph Walker at joseph.walker@wsj.com

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June 25, 2019 02:47 ET (06:47 GMT)

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