BMY Bristol Myers Squibb Co

By Jared S. Hopkins and Colin Kellaher 

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 (August 27, 2019).

Bristol-Myers Squibb Co. took a major step toward completing its $74 billion acquisition of Celgene Corp., as the two pharmaceutical companies found a buyer for a skin treatment whose sale they hope will address antitrust concerns.

Amgen Inc. agreed on Monday to buy Celgene's psoriasis medicine 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, of which Otezla is an example.

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 two companies were estimated at the time to have nearly $38 billion in combined 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.

Analysts were surprised by the FTC's concerns about competition because Bristol doesn't currently sell psoriasis medicines, though it does have 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 were down about 10% this year compared with a gain of about 14% for the S&P 500. Shares of both Bristol and Celgene were up about 3% on Monday in midmorning trading. Amgen's stock was up 2.5%.

There has been a flurry of mergers and acquisitions 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 it 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 then U.S. regulators raised anticompetitive concerns. In June, the companies said they would shed Otezla to satisfy the concerns.

Analysts said at the time that the FTC action could indicate the government was taking a stronger look at pharmaceutical-industry mergers. Earlier this year, Roche Holding AG has said the FTC 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 lie ahead for the combined company. 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, adding that it plans to focus near term on maintaining strong investment-grade credit ratings and a ratio of debt to earnings before interest, taxes, depreciation and amortization of less than 1.5 by 2023.

The New York drugmaker also boosted an accelerated share-repurchase program, planned for after the Celgene deal closes, to $7 billion from $5 billion.

Write to Jared Hopkins at jared.hopkins@wsj.com and Colin Kellaher at colin.kellaher@wsj.com

(END) Dow Jones Newswires

August 27, 2019 02:47 ET (06:47 GMT)

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