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AAfter months of horse trading, heated debate and heated debate, the $ 74 billion merger between Bristol-Myers Squibb and Celgene was finally approved by shareholders on Friday. "We are very excited about the new company," said Giovanni Caforio, President and CEO of Bristol, at the meeting.
Now what?
Like Dustin Hoffman and Katharine Ross in the last scene of "The Graduate," the two young biopharmaceutical grooms got what they wanted and now they will have to get used to the peculiarities of the other. This involves navigating a patent cliff, managing market dynamics and preventing key employees from updating their resumes.
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Here's an overview of some of the biggest problems Bristol-Myers and Celgene face after their long-awaited union.
Revlimid and the cliff of patents of hell
Congratulations, Bristol, you now have one of the biggest drug patent cliffs in the history of the pharmaceutical industry: $ 20 billion in Celgene product sales (estimated 2021) will disappear next nine years with the entry of generic competitors. increase in market share.
Sixty percent of this responsibility rests with Revlimid, Celgene's flagship treatment for multiple myeloma. The first generic version of Revlimid is expected to enter the market in March 2022, but only on a limited volume basis, as stipulated in an agreement with generic drug manufacturer Natco Pharma. The speed with which Revlimid's sales erode beyond 2022 remains unclear, as legal disputes continue between Celgene and generic drug manufacturers. This fight is now that of Bristol.
Celgene pipeline must not stumble
Bristol acquired Celgene with full knowledge of the facts. The management's work plan is to replace much of this revenue loss with new drugs from the Celgene pipeline.
Three of these Celgene drugs – fedratinib, ozanimod and luspatercept – have been submitted to the Food and Drug Administration. If all goes well, fedratinib will be approved for the treatment of myelofibrosis in September, followed by ozanimod (for multiple sclerosis) and luspatercept (for myelodysplastic syndrome and beta-thalassemia) in early 2020. Two CAR-T anticancer treatments called bb2121 and liso-cel remain in the final stages of clinical trials, but are also essential to the success of the Bristol-Celgene marriage. The margin of error in case of failure or delay is infinitely small.
The Bristol cash cow loses ground
Once upon a time Bristol was at the forefront of cancer immunotherapy. In 2016, Opdivo led the multi-billion dollar market and seemed poised to maintain its lead. Then comes a series of clinical trials that give Merck's Keytruda the look of the best product in its class, winning Opdivo's market share and pushing Bristol's therapy to second place.
This puts Bristol, which achieved about 30% of its turnover with Opdivo last year, in a difficult situation. Opdivo is expected to face biosimilar competition in the next seven to nine years, and its declining immuno-oncology status highlights how Bristol – like Celgene – needs next-generation cancer treatments.
Keep the headhunters at bay
Mergers are not just about products and profits. People matter a lot too. It is never easy to combine two large companies, but Bristol must be particularly careful not to let talented scientists and business people escape because of intra-corporate rivalries or field battles. Life-saving medicines do not develop on their own. Want an early reading on the success (or failure) of the Bristol-Celgene wedding? Check LinkedIn before the income statement.
Celgene's many friends might have questions
Celgene has long been recognized as a ready-to-use partner in the biotechnology industry and the company has spent years assembling a multitude of contracts that essentially gave it an option to buy every new idea in cancer treatment. Now, however, Celgene's many partners might wonder if the combined company is still valuing their relationships.
Some, like Bluebird Bio and Acceleron, do not have to worry, their collaborations having been verified by Bristol as the key to the value of Celgene. But others might not be so lucky, including BeiGene, a company whose Celgene licensed project turns out to be a competitor of Opdivo, Bristol 's property.
Biotechnology in general loses its most prolific player in business development
Nobody in the biotech sector has sold business dollars like Celgene. Since 2008, Celgene has spent $ 131 billion on acquisitions, partnerships and license agreements with small biotechnologies, according to DealForma. This is more than all the money invested in the same way by his large-cap biotech brethren.
With Celgene absorbed, will Bristol's pockets be so deep? If not, will the development of biotechnology companies suffer?
The journey is not over yet for Celgene shareholders
One of the less discussed aspects of the merger is as follows: Under the deal, each Celgene share is worth a Bristol stock, $ 50 in cash and a lottery ticket called CVR. In short, the CVR is a negotiable security that gives the right to a cash payment if certain futures contracts become reality. In the case of Celgene, the cash amount is $ 9 and the futures are as follows: Ozanimod and liso-cel must obtain FDA approval by the end of 2020 and bb2121 here at the end of 2021.
There is no partial credit, that is if one of these treatments is rejected – or approved even one day after the deadline – the CVR is worthless. This makes it a pretty ambitious proposition for Celgene shareholders. And, in particular, the two parties to the transaction have different expectations. As Mizuho analysts pointed out earlier this week, Celgene attributes a probability of success of about 69%, which gives the CVR a value of about $ 6, while Bristol estimates it has 45% chance to pay off, about $ 4.
The CVR will trade in the open market, so we will soon find out what the wisdom of the crowd has to say about the Celgene pipeline.
What's in a name?
Bristol-Myers Corp. and Squibb Corp. merged in 1989 to form Bristol-Myers Squibb. The Bristol executives did not suggest that another branding strategy would be considered. It's a shame, because seeing the name of Celgene, a long-time symbol of biotechnology, disappear, will be strange.
It's not just anyone asking for our opinion, but Bristol-Celgene Squibb sounds good. Or, what about Bristol-Myers Celgene? Not bad. Bristol-Myers Celgene Squibb is starting to look a bit too much like a law firm. Bristolgene-Myers Squibb-Cel? I beg you, no.
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