So our big biopharma news this morning is Bristol-Myers Squibb buying Celgene, for $74 billion. I don’t think anyone saw this particular combination coming, so congratulations to those involved for running a tight ship. It looks at first glance like Celgene shareholders are getting a pretty good deal out of the offer, and I would expect no particular problems having it go through. If I were holding Celgene stock I’d probably jump at the chance – it was at nearly $150/share in the fall of 2017, and closed yesterday at $66. They’ve had some oddly painful (and quite possibly avoidable) failures, and Bristol-Myers Squibb has picked a good time to pick up their assets. This will produce a rather large oncology portfolio, which is surely why BMS has suddenly decided to do a big deal after years of eschewing them.
Wikipedia helpfully has a page on the largest M&A deals in pharma over the years, with the nominal values and the inflation-adjusted ones. So this deal is a big one, a bit smaller than Pfizer/Wyeth and a bit larger than Bayer/Monsanto and Takeda/Shire. In case you’re wondering, the 1999 Pfizer/Warner-Lambert deal is still at the top of the inflation-adjusted standings, followed by the 2000 Glaxo-Wellcome/SmithKline merger. 1999-2009 was, in retrospect, perhaps the heroic age of pharma mergers, but that’s mostly due to Pfizer (who have three of the five more expensive deals on the list, all during that period). The BMS/Celgene takeover will be the largest of its kind since that period, actually.
As usual, I don’t have a lot of good things to say about these moves. I understand that they can be necessary (or at least seem necessary) from a business and strategic standpoint. But both Bristol-Myers Squibb and Celgene have a lot of interesting things going on, even with some of Celgene’s apparent boneheadedness, and this deal is just going to slow all of them down for some time to come. There never was a pharma M&A deal that didn’t dump a bucket of sand into the gears. And looking at the details of the proposed takeover, Lisa Jarvis notes that there’s $2.5 billion of “synergy” in the deal – that is, stuff that will be cut – and 35% of that is listed under R&D. If there’s anyone at Celgene who’s wondering, wonder no more: the majority of those savings are surely going to be extracted from your organization. I cannot recall a pharma takeover where this has not been the case. The stick always has a short end, and the organization being bought always gets it. Counterexamples welcome, but are there any? Update: see the comments!
Given that BMS is locked in immuno-oncology competition with Merck, there’s some useful history to look at. When Merck bought Schering-Plough (longtime cynical observers will recall that the deal was structured to make it look like it was the other way around), the antibody program that became Keytruda was hardly even mentioned. Schering-Plough had picked it up when they bought Organon, and it was no priority in that deal, either. It was, in fact, results from Bristol-Myers Squibb (and what became Opdivo) that seems to have prompted Merck to revive the program, which was (as that last link mentions) on the “see if anyone wants to buy this stuff” list. But look at what happened to Schering-Plough, particularly their R&D organization. Several rounds of cuts, in about 80/20 ratios of S-P/Merck people let go, cleared most everyone out. And that’s how it generally goes.
So, Celgene shareholders: happy (or they should be). Bristol-Myers Squibb shareholders: remains to be seen, but I’m sure they’ll go along. BMS scientists: rather unhappy (disruptions and general turmoil for some time to come). Celgene scientists: quite unhappy indeed, I would think, for the reasons given above. And you know who else is unhappy? Lots of small biopharma outfits and the the people who are funding them. Celgene has been an active dealmaker over the last few years, and would seem to have spent a good deal more money than they should have for what they’ve gotten. That trait will be missed, frankly, by the people on whom such money gets showered, and who could blame them?