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Bristol-Myers Squibb (BMY) May Be on the Market, But Pfizer (PFE) Probably Won't Bite

2/16/2017 6:18:03 AM

Bristol-Myers Squibb May Be on the Market, But Pfizer Probably Won't Bite February 16, 2017
By Alex Keown, Breaking News Staff

NEW YORK – If pharma giant Bristol-Myers Squibb (BMY) is “in play” to be acquired, as has been rumored for some time now, one company that has the means will not likely make a bidPfizer (PFE).

A blog post on investment site Barron’s highlights some of the reasons why Pfizer is not likely to bite. Citing Deutsche Bank’s Gregg Gilbert and Esther Rajavel’s comments to Street Insider, the blog indicates Pfizer will not make a bid because such an acquisition “would represent a very large and concentrated opportunity/risk ($90 billion market cap + a premium) on immuno-oncology, an area fraught with near-term uncertainty, and one in which PFE already has at least a partial strategy in place.” The two analysts said if Pfizer were to make such a large investment in acquiring a large-cap company, they would prefer to see “a more diverse set of value drivers” along with a “cost rationalization story.”

Earlier this week BioSpace reported on rumors there were at least four large market cap companies that could make a move to acquire BMS, which includes Pfizer. However, if Pfizer is out, that could still leave Gilead (GILD), Novartis AG (NVS) and Roche (RHHBY) as potential suitors.

Since Jan. 10, shares of BMS have lost more than 15 percent and $50 billion in market cap. Earlier this month the company slashed its earnings projections for 2017. Despite the loss of market share, BMS would command a high price. While the Deutsche Bank analysts suggested $90 million, some analysts have predicted the company could sell for as much as $120 million.
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While discussion of rumors is interesting, there is no word if Bristol-Myers’ board of directors is willing to entertain any offer.

BMS has gone from the fourth most valuable pharmaceutical company in the United States to the ninth, according to a recent report by Bloomberg. Much of that has to do with a major setback the company had last year with its lead PD-1 inhibitor Opdivo. In August 2016, BMS announced Phase III data showing Opdivo failed to meet its endpoints of progression-free survival in lung cancer patients expressing PD-L1 at 5 percent. That failure allowed rival drugmaker Merck (MRK) to gain market share with its PD-1 inhibitor, Keytruda. The company is concerned that Keytruda could gain approval as a first-line treatment for lung cancer. As a result of Merck’s success, BMS was not planning to seek rapid Food and Drug Administration approval for the Opdivo combo, which some analysts have suggested means there is a problem with the data.

Not only is Keytruda a threat to Opdivo market share, but Roche’s Tecentriq took 10 percent of market share away from Opdivo in the fourth quarter of 2016.

Shares of BMS are trading at $54.10, down from its opening price of $55.08.

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