Celgene's positive drug data strengthens Bristol-Myers deal

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Celgene

Fellow (ticker: CELG) is up Wednesday, based on positive data on the drug, and as at least one analyst thinks that the absence of an obvious suitor for
Bristol-Myers Squibb

(BMY) pleads for the merger of the two companies.

The story back. Earlier this year, Celgene and Bristol-Myers announced the merger of a $ 74 billion contract, almost a year after Celgene's acquisition of Juno Therapeutics. Investors were not pleased on the day of the announcement, which resulted in a drop in Bristol, but most of the time, it seemed like the last in a long series of major mergers in the pharmaceutical industry. However, last month, an activist investor Starboard value announced that he had taken a stake in Bristol-Myers and in a rare move, Wellington ManagementThe largest institutional shareholder in Bristol-Myers, is publicly voiced against the merger, a position that Starboard has echoed. Many investors are worried about the bankruptcy of the deal, even though analysts remain optimistic.

What's up. Celgene said Tuesday night that the Food and Drug Administration has given drugs to Abraxane and Tecentriq, speeding up the approval of some breast cancer patients. Canaccord GenuityS John Newman Celgene writes that the news is a small victory, but points out that the possible takeover of Bristol-Myers means that investors do not pay much attention to fundamentals.

The FDA news was announced the same day as Bristol-Myers President and CEO, Giovanni Caforio, spoke at an industry conference, apparently dispelling the Idea that the company had other offers. "It's not a defensive agreement. We did not do it because there was an offer on the table … ", said Caforio, who went on to explain that there were also no recent advanced negotiations on a take control. "The few discussions and conversations that I have had in the past have all been conducted at a very high level. There was no mention of economic terms. There was no offer and I like to add others. There has been no discussion since 2017. "

Look to the front. Giovanni's comment is a blow to those who oppose the Celgene agreement. Part of the thesis against the combination is that an autonomous Bristol-Myers could be more attractive as an acquisition target itself, getting a higher price for shareholders. However, the question remains to know who would buy Bristol-Myers, and the CEO seems to say that the company has no one knocking on the door.

Robert W. BairdS Brian Skorney reiterated Celgene's Surperform rating with a price target of $ 101, noting that Caforio's statements "should help refocus investors' expectations on the other options that Bristol-Myers could explore if the contract with Celgene was to fail "the [deal should] pay attention to what they wish, "especially since he thinks it could be said that Bristol-Myers was a more attractive target in 2017 than it is now.

In the end, he writes that "none of these companies [is] a coveted price, but both are better together than separately. "The idea that Bristol Myers sells a lot to Celgene's purchase does not seem to be grounded in reality," he writes, "and if the deal fails, things could be more messy than shareholders do not would like it. "You can not like one or the other option, but do you choose the big black emptiness simply because the option on the table is not what you would you do if you directed things? "

Celgene is up 1.3% to $ 86.75 recently, while Bristol-Myers is up 0.8% to $ 50.79.

Write to Teresa Rivas at [email protected]