By Michael Erman and Svea Herbst-Bayliss
(Reuters) – Wellington Management, the largest shareholder of Bristol-Myers Squibb Co, said on Wednesday it would not support the US $ 74 billion contract from the US drug maker to buy biotech Celgene Corp.
The announcement reinforces the position of the Starboard Value LP hedge fund, which filed a list of nominees to challenge the Bristol-Myers board of directors last week, and solicits its shareholders to oppose the deal.
Wellington Management, based in Boston, rarely makes its views public. His dissatisfaction with the agreement could encourage other shareholders to come forward.
This development has fueled investor uncertainty about the prospects for the cash transaction. Celgene shares fell 8.5% after Wellington's statements, while Bristol-Myers shares rose 3%. The gap between Celgene's stock price and Bristol's supply value has almost doubled to around 20%.
Wellington Management, which owns about 8% of Bristol-Myers shares, said the deal with Celgene was too risky and too expensive. He added that other options for creating value for shareholders "could be more attractive".
Dodge & Cox, Bristol-Myers' fifth largest shareholder, is also unhappy with the deal, sources told Reuters.
Bristol-Myers said in a statement that its board and management had had "many conversations and meetings" with investors, including Wellington, since the announcement of the deal with Celgene. "We believe we are buying Celgene at an attractive price and that this transaction represents a unique and important opportunity to create sustainable value," said Bristol-Myers.
Celgene and Starboard declined to comment. Dodge & Cox sources did not immediately respond to requests for comment.
Unlike Wellington, many Bristol-Myers shareholders also have significant holdings in Celgene. This overlap could strengthen support for the transaction, as Bristol-Myers shareholders will be less concerned about the company's overpayment if the acquisition target, Celgene, is also owned by them.
"We continue to think that the agreement makes sense for Bristol-Myers and that it will eventually succeed, despite this new risk, but we must recognize that Wellington occupies a much more dominant position than anyone else. is opposed to the agreement so far. "Baird Research analysts said in a note.
Bristol-Myers is expected to issue a significant number of new shares in order to pay Celgene. Therefore, Bristol-Myers investors are entitled to a vote on the transaction. Bristol-Myers is expected to pay Celgene a $ 2.2 billion disintegration compensation.
In January, Bristol-Myers announced plans to purchase Celgene, a New Jersey-based company that brings together two of the world's largest cancer treatment companies. Both companies face significant challenges in the development and commercialization of their drug portfolios.
Should the deal fail, Bristol-Myers chief executive Giovanni Caforio would suffer a major setback at a time when Opdivo, the company's main engine in the field of cancer immunotherapy and growth, had fallen behind in terms of sales and development compared to Keytruda. drug from Merck & Co.
Celgene had his own clinical setbacks, losing more than half of his market value between October 2017 and last month, when the announcement was announced. An expensive experimental drug, against Crohn's disease, billed as a multi-billion dollar future product, has failed and Celgene's expected approval for the ozanimod, a high-quality drug for multiple sclerosis , has been delayed.
In addition, revenues from Celgene's flagship drug for multiple myeloma, Revlimid, which brought in nearly $ 10 billion last year, are expected to start falling in 2022 after the loss of its US exclusivity.
(Report by Michael Erman and Svea Herbst-Bayliss in New York, additional report by Ankur Banerjee in Bengaluru, edition of Sriraj Kalluvila, Bill Berkrot and Richard Chang)