Bristol-Myers To Acquire Celgene, Puts Healthcare ETFs In Focus

The healthcare space is witnessing a wave of mergers and acquisitions, which could change the landscape of the healthcare business. After a series of consolidation between health insurers and pharmacy benefits managers last year, biotech companies have been taking over the pharmaceutical sector as they have become attractive targets for big firms after their valuations declined in the recent months.

This is especially true as Bristol-Myers Squibb (BMY - Free Report) agreed to acquire Celgene Corp (CELG - Free Report) for $74 billion in cash and stock deal. The proposed deal came as both the companies are struggling in a crowded $123 billion cancer market (now one of the biggest pharmaceutical sectors) for innovative treatments.

Bristol Myers-Squibb's immuno-oncology drug — Opdivo — which accounts for roughly a quarter of its sales, has struggled to keep up with Merck's Keytruda. Meanwhile, Celgene has endured high-profile clinical failures and is looking for a follow-up for its blockbuster blood-cancer therapy —  Revlimid —  which will start being phased out in 2022.

Inside the Deal

Per the terms of the deal, Celgene investors would receive one Bristol-Myers share and $50 in cash for each Celgene holding, as well as a contingent value right of $9 if three treatments in development achieve timely approvals. These are the high-profile multiple sclerosis drug ozanimod, lymphoma treatment liso-cel by Dec. 31, 2020, and a CAR-T therapy for multiple myeloma known as bb2121 from a partnership with bluebird bio (BLUE - Free Report) by March 31, 2021.

The deal values Celgene at $102.43 each, a 53.7% premium to Jan 2 closing price and would combine two of the world's largest cancer drug businesses in the biggest pharmaceutical deal ever. The combined company will be 69% owned by Bristol-Myers and will create a specialty biopharma company focused on treatments for cancer, inflammatory and immunologic diseases as well as cardiovascular disease. It will have a portfolio of nine drugs with more than $1 billion in annual sales.

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