By Jared S. Hopkins
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 (January 13, 2020).
Bristol-Myers Squibb Co., fresh off completing one of the
largest drug-industry mergers ever, is counting on the acquisition
to pay off quickly with new products and ease Wall Street
concerns.
Bristol waited nearly 11 months for its controversial $74
billion deal for Celgene to close, in November. During that span,
U.S. regulators approved two cancer drugs from Celgene, and a
third, for treating multiple sclerosis, could get the go-ahead by
March and eventually provide what analysts see as $3 billion in
annual sales.
The product additions are timely for the combined company, which
is facing patent expirations on some of its big-selling
therapies.
"I feel better today than I felt even the day we closed,"
Bristol Chief Executive Giovanni Caforio said in an interview. "The
power of the innovation engine of the new company is becoming very
clear."
The merger aimed to create a cancer-drug powerhouse with eight
products on the market, each generating more than $1 billion in
annual sales. Yet investors had their doubts. Bristol shares fell
14% the day of the announcement, and an activist-investor campaign
led by hedge fund Starboard Value LP ensued to upend the deal. A
handful of other shareholders also expressed displeasure, including
the fifth-largest shareholder, Dodge & Cox, The Wall Street
Journal reported.
Among Wall Street's concerns: The two drugmakers'
biggest-selling products faced the prospect of falling sales.
Bristol's Opdivo cancer therapy was losing ground to Merck &
Co.'s Keytruda, while Celgene's Revlimid multiple-myeloma treatment
is expected to confront copies in 2022.
In addition, antitrust regulators required that Bristol slough
off Celgene's lucrative psoriasis therapy Otezla, which ultimately
went to Amgen Inc. for $13.4 billion.
Now, after initial skepticism, investors appear to be coming
around. Bristol shares rose more than 26% in the last three months
of 2019, compared with an 11% gain for the NYSE Arca Pharmaceutical
Index and an 8.5% uptick for the S&P 500.
"Every single decision, commercially and in the pipeline, looks
like it broke in Celgene's favor," said Ronny Gal, an analyst at
Sanford C. Bernstein & Co.
But analysts also warn that it isn't all clear sailing for the
expanded company. They cite weaker Opdivo sales, intense
competition in the cancer-drug market and the challenge to Bristol
management of digesting a company as large as Celgene while
shepherding drug candidates to approval.
There also are questions about growth several years out, said
Tim Anderson, an analyst at Wolfe Research.
"Where is that solution going to come from?" Dr. Anderson said.
"It has to be more than what we're seeing today in the phase-three
pipeline. Are there interesting assets on the earlier side of the
Celgene pipeline?"
Bristol plans to launch six new drugs over the next two years,
said Dr. Caforio, who became CEO in 2015.
He said the company is prepared for the decline in Revlimid
sales, which he described as "more of a slope than a cliff." He
also said Opdivo revenue should resume growth in 2021 if the drug
wins additional approvals.
In the near term, Dr. Caforio said, the New York-based company
will draw growth from legacy products. Those could include
Revlimid, which notched $8.1 billion in sales through the first
nine months last year, and the blood-thinner Eliquis, which
generated $5.9 billion during the same period.
Dr. Caforio said Bristol will look to do smaller acquisitions
but probably hold off on larger deals for a couple of years until
it has trimmed the $39 billion debt incurred in acquiring
Celgene.
Bristol pioneered the development of cancer agents known as
immunotherapies, which unleash the body's immune system on tumors.
It now sells two such drugs, Opdivo and Yervoy, which treat cancers
including skin and lung.
But the company lost its advantage in the lucrative lung-cancer
market to rival Merck, a setback that diminished sales prospects
and sent its shares falling.
Meantime, Celgene has transformed the treatment of multiple
myeloma starting with the repurposing of the Thalidomide sleeping
pill -- known for its history of causing birth defects -- into
Revlimid.
The recent pipeline progress is helping the combined company
move past its merger travails. An anemia drug from Celgene called
Reblozyl, which U.S. regulators approved last year, is projected by
JPMorgan Chase to exceed $1 billion in annual sales.
The Food and Drug Administration has said it would make a
decision by March on ozanimod, a multiple-sclerosis therapy that
analysts expect to be a multibillion-dollar seller. Bristol is also
testing the drug in patients with ulcerative colitis.
Also up for approval is a cellular therapy targeting leukemia
that analysts say could surpass $1 billion in yearly sales.
Approval of the so-called CAR-T drug, known as liso-cel, would help
Bristol remain a big player in the blood-cancer market after
Revlimid copies become available.
The company said last month that another CAR-T treatment, in
development with Bluebird Bio Inc., was shown to be effective and
safe in multiple myeloma patients. A regulatory approval filing is
expected this year, Bristol has said.
Write to Jared S. Hopkins at jared.hopkins@wsj.com
(END) Dow Jones Newswires
January 13, 2020 02:47 ET (07:47 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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