BMS has to divest blockbuster to complete Celgene acquisition

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The share price of BMS sank by over 7% after it stated that it would need to divest Celgene’s Otezla, a blockbuster treatment for psoriasis and psoriatic arthritis.

The road to completing Bristol-Myers Squibb’s acquisition of Celgene has hit a few bumps along the way and the company has announced an additional obstacle to navigate, the divestiture of Otezla (apremilast).

BMS provided an update that stated it planned to divest Otezla to ease concerns expressed by the US Federal Trade Commission (FTC) over the merged company’s assets in psoriasis.

In addition to Otezla, the final company would also have tyrosine kinase 2 (TYK2) inhibitor, BMS-986165, which is being developed as an oral treatment for psoriasis and psoriatic arthritis – the same conditions for which Otezla is currently approved.

The FTC has the ability to block any deals where it considered that the final company could ‘substantially lessen competition’ in a given market.

The problem for BMS arrives as Otezla is currently a blockbuster treatment, reaping global sales of $1.6bn (€1.41bn) in full-year 2018 results, which represents an increase, year-on-year, of 26%. According to Evaluate, the drug could reach annual sales of $2.4bn by 2024.

To divest Otezla would mean losing a strong asset as part of the final deal, and BMS’ share price reflected investor disappointment on the news, as it has fallen by 7.46%, at the time of writing.

BMS released a statement to accompany the news, “[The company] reaffirms the significant value creation opportunity of the acquisition of Celgene. Together with $2.5 billion of cost synergies, a compelling pipeline and a strong portfolio of marketed products, the company continues to expect growth in sales and earnings through 2025.”

As a result of needing to sell the asset, the company stated that the expected closure of the deal would be pushed back to “the end of 2019 or the beginning of 2020."

When the $74bn deal was announced, the company stated that it expected the transaction to complete during the third quarter of 2019.