Shareholders may no longer assume the upside in either Bristol-Myers (NYSE:BMY) and Celgene (NASDAQ:CELG) ahead of the buyout. On June 24, the U.S. Federal Trade Commission said BMY must divest a Celgene crown jewel: Otezla. This condition is a setback. The market reacted by pulling back from the $45-50 down to ~$45.
BMY re-affirmed the $2.5 billion in cost savings through synergies post-merger but that gave little comfort to investors. Otezla sales topped $448 million in Q4/2018 or nearly $2 billion annualized. Unless Otezla fetches a good purchase price, the Celgene buyout is less attractive for CELG and BMW shareholders.
In the near-term, the timeline for closing the deal will lengthen and add unnecessary uncertainties. Conversely, Otezla is a good product line whose patent expiry is in 2024 in the U.S. and 2028 in the European Union. Still, it filed for extended patent protection in the U.S. through 2028.
Celgene has a TYK2 inhibitor within its immunology pipeline. It has the potential to treat a number of autoimmune diseases, including psoriasis. BMY is developing drugs in the immunology space.
BMY stock may bounce back from the multiple bottoms at $45. With a dividend yielding 3.6%, growth in EBITDA in the next five years would suggest a fair value that is at least 20% higher.
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