The pharmaceutical industry giant Bristol-Myers Squibb is struggling to get support for its $ 74 billion contract to buy competitor Celgene.
The Starboard Value activist hedge fund is the latest to call on Bristol-Myers, saying it was hastily proposing the mega-merger to cancel the prospect of being acquired. CEO Jeff Smith noted that despite pressure from two activists in early 2017, Bristol-Myers showed no evidence that he had done his own internal analysis of strategic options.
"It therefore seems appropriate to conclude that Bristol-Myers continued this transaction for defensive purposes," Smith wrote in a 16-page letter to investors in Bristol-Myers on Thursday.
Smith's letter comes one day after Wellington Management, the largest shareholder in Bristol-Myers, said the proposed deal required shareholders to "accept too many risks".
The $ 1 trillion asset manager, which owns 8% of Bristol-Myers shares, echoed Smith's view of a possible Bristol-Myers sale, noting that "alternative ways to create value for [Bristol-Myers] the shareholders could be more attractive. "
Smith also announced that he was planning to vote against the Celgene agreement and that he had proposed a list of directors at the annual shareholders meeting of Bristol-Myers, on the 12th April, to ensure that the board is held accountable for finding the best alternatives for the company.
Among the risks cited by Smith in the Bristol-Myers-Celgene agreement is the "massive cliff of Celgene patents". He notes that Celgene's key product, Revlimid, used to treat blood cancers, will face generic brand competition in three years. Revlimid accounts for 60% of Celgene's revenue, Smith said, and the company does not seem to have enough pipeline to replace the lost revenue.
"In the last five years or so, Celgene has not been able to market one major new drug," Smith wrote.
"However, Bristol-Myers now assumes that the Celgene pipeline will produce a number of new major drugs at a much faster rate than previously achieved," he added.
Representatives from Bristol-Myers and Celgene did not immediately respond to requests for comment.