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Analysis

Celgene Sells Otezla to Amgen for $13.4B, Bristol-Myers Squibb Announces

By Jack O'Brien  
   August 26, 2019

The announcement is the latest development as New York-based Bristol-Myers Squibb looks to close on its purchase of Celgene.

Celgene Corp. has agreed to sell Otezla, a psoriasis medication, to Amgen for $13.4 billion, according to a Bristol-Myers Squibb (BMS) press release Monday morning.

Amgen will acquire Otezla's exclusive intellectual property through 2028 for about $11.2 billion, in addition to $2.2 billion in anticipated future cash benefits. Otezla generated $1.6 billion for Celgene in 2018. 

The divestiture to a pharma rival comes as BMS strives to gain regulatory approval for its $74 billion purchase of Celgene, which was first announced in January.

"This agreement represents an important step toward completing our pending merger with Celgene. It also demonstrates the tremendous achievement of the Celgene team in establishing OTEZLA as an important medicine for patients with psoriasis, psoriatic arthritis and Behçet’s Disease," Giovanni Caforio, M.D., CEO of BMS said in a statement.

In light of Monday's announcement, BMS shares were up more than 4% in early morning trading while Amgen's stock bumped up north of 1%.

Related: Q4 Earnings Strong for Celgene Ahead of Bristol-Myers Squibb Deal

BMS has spent most of the spring and summer defending its decision to purchase Celgene, as two major investors publicly announced their opposition to the deal and the company announced a delay in closing the acquisition. The deal is now expected to close at the end of 2019 or beginning of 2020.

A Barron's article from mid-May suggested that BMS stock was falling in part because the Celgene merger "may not make sense."

On June 24, BMS announced that it would divest Otezla in order to bolster the Celgene deal and enter into a consent order with the Federal Trade Commission.

In accordance with the deal, BMS also announced that it is increasing its accelerated share repurchase program from $5 billion to $7 billion.

For its part, Amgen projects an average of "at least low double-digit" growth from Otezla over the next five years.

"The acquisition of Otezla offers a unique opportunity for Amgen to provide patients an innovative oral therapy for psoriasis and psoriatic arthritis that fits squarely within our portfolio and complements our Enbrel® and AMGEVITA® brands," Robert A. Bradway, CEO of Amgen, said in a statement.

Fitch Ratings stated that Amgen's BBB rating would not be affected by the Otezla acquisition, adding that the deal with "accelerate long-term growth" and increase the company's international business.

As noted in a Moody's industry report from June, pharma M&A activity is expected to rise this year thanks to high cash levels and moderate EBITDA.

Other factors driving consolidation among drugmakers is reduced pricing flexibility, regulatory challenges that could erode pricing, and patent cliffs within the next four to seven years.

Included in the report's list of high capacity drugmakers was Amgen while BMS was excluded due to the pending Celgene deal.

Related: Pharma M&A Activity Expected to Rise

Editor's note: This story has been updated to include a comment from Fitch Ratings.

Jack O'Brien is the finance editor at HealthLeaders, a Simplify Compliance brand.


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