$74 Billion Big Pharma Merger Could Be A Power Surge for Bristol-Myers Squibb

Even if investors are still unsure how the Bristol-Myers Squibb (BMS) and Celgene merger might pan out, one thing is certain:  executives will get bigger salaries and the resulting Big Pharma company will likely get a surge of power.

With investors’ initial hesitance pushed aside, Bristol-Myers Squibb investors approved the company’s $74 billion acquisition of Celgene at the end of April. Investors were not thrilled at the prospect when BMS announced the deal at the beginning of the year. Key investor Starboard Value launched a campaign against the acquisition, arguing one of Celgene’s drugs is facing a “patent cliff” and will be replaced by generics in the future, and other drugs will require significant research and development investment in the future.

Though Starboard’s concerns surround its takeaway as an investor, it is not the only one questioning the rationale for the merger. The U.S. Federal Trade Commission launched an investigation into the merger shortly after its announcement because of the unfair advantage it might hold in psoriasis prescriptions. One of Celgene’s main products, Otezla – an immunology and inflammation drug used to treat psoriasis and psoriatic arthritis – brought in $301 million in sales in the U.S. alone. Coupled with BMS’s successful trials of a plaque psoriasis drug, FTC scrutinized the merger.

Celgene captured more than $5 million in gross product sales in its first quarter this year, an 18 percent increase from the same period last year. Its most popular drug – the multiple myeloma treatment Lenalidomide, branded Revlimid – grossed $1.6 billion in sales, though the insanely profitable drug is nearing an end to its patent, and facing multiple challenges for rights to market generics.

BMS already has its own slate of profitable drugs. According to their first quarter reports, revenue for blood clot prevention drug Eliquis grew by $419 million or 28 percent, while revenue for cancer treatment drug Opdivo grew by $290 million or 19 percent compared with the first quarter of 2018.

BMS investors may be satisfied, despite problems for now, with the prospect of the Celgene acquisition. Whether the acquisition accelerates profits for BMS or not, Celgene’s current CEO Mark Alles stands to prosper, with potential to gain $40 million by walking away from the company after the merger.

 

Both BMS and Celgene have gathered a fair share of legal disputes that makes one worry that this newly merged company may have a preference of money and power over respect for patients.

• In 2013, a pharmacist and lawyer filed a False Claims Act lawsuit against BMS for intentionally lowering its listed manufacturing prices to minimize payments to Medicare, while listing a higher price over the counter. The manufacturer tried to appeal the decision against them, but the federal court upheld the ruling last year.
• BMS has also been accused last month as a co-conspirator in a scheme to push HIV “cocktail” drugs, which are more expensive and connected to dangerous side effects, while keeping cheaper and safer alternatives off the market.
• Among the lawsuits it faces, BMS is also being scrutinized for its historical deceptions: a federal judge ruled at the beginning of the year that a $1 billion lawsuit against BMS as well as The Johns Hopkins University can proceed, alleging they infected hundreds of Guatemalans with syphilis during their 1940s trials of penicillin.  
• Meanwhile, Celgene last month settled a whistleblower lawsuit claiming the company committed fraud by promoting the cancer drug Thalomid for uses that had not been approved by the US Food and Drug Administration. The company shelled out $280 million, which is equivalent to about two weeks’ revenue from their blockbuster drug, Revlimid.

Correction: The original headline said that the merger was worth $74 million. That is incorrect – it is worth $74 billion. This was due to a typo. We regret the error.