How Bristol-Myers Squibb Went From Potential Mega-Acquirer to Vulnerable Mega-Target

January 27, 2017
By Alex Keown, BioSpace.com Breaking News Staff

NEW YORK – For pharma watchers, it’s no secret that Bristol-Myers Squibb has stumbled—quite a bit. Since Jan. 10, shares of BMS have lost about 15 percent and $50 billion in market cap. This week the company slashed its earnings projections for 2017.

As a result, Bloomberg noted that Bristol-Myers Squibb has gone from the fourth most valuable pharmaceutical company in the United States to the ninth. The troubles have once again fueled the idea that BMS could be an acquisition target for a large pharma company.

In October, BMS announced plans to undergo a reorganization of its research and development unit. The announcement came two months after BMS’ lead PD-1 inhibitor Opdivo failed to meet its endpoints of progression-free survival in patients expressing PD-L1 at 5 percent in a Phase III trial. That setback for Opdivo gave rival Merck the window it needed for its own PD-1 inhibitor, Keytruda, to grab some market share. And Keytruda could gain even greater market share as it appears to be poised to be approved as part of a combination treatment for cancers, ahead of a BMS Opdivo and Yervoy combination. Bloomberg noted that the Merck combination treatment looks to be cheaper and safer than the Opdivo combination – which is bad news for BMS. Merck is expecting the U.S. Food and Drug Administration to rule on the Keytruda combination as a first-line lung cancer treatment in May.

More potential bad news was the fact that as a result of Merck’s success, BMS was not planning to seek rapid Food and Drug Administration approval for the Opdivo combo, which Bloomberg said suggests “something scary in the data or commercial environment.”

Guggenheim analyst Tony Butler told Reuters that the decline in stock value for BMS is a sign the company could be questioning its own strategy, particularly as it relates to hinging revenue on cancer drug Opdivo. Despite Opdivo’s setbacks, the drug is still a strong revenue driver. In the fourth quarter of 2016, Opdivo generated $1.3 billion. At one point analysts predicted sales of Opdivo could hit nearly $13 billion, especially as it gained approval for use in treating different cancers; however those projections have since been cut, Bloomberg said. In addition to threats from Merck’s Keytruda, Opdivo is also being challenged by Genentech ’s Tecentriq in the treatment of lung cancer.

Last week, writers at The Street noted that a recent BMS stock purchase by activist investor Barry Rosenstein of Jana Partners may also indicate the company could become a target for acquisition. Writing in The Street, Ronald Orol said Jana Partners has “threatened proxy contests at nine companies, engaged in director-election battles at seven companies and launched 38 campaigns overall since 2001.” Orol said Rosenstein has not “initiated a new campaign” in several months. Although speculating, Orol said Rosenstein could press for some strategic options at BMS as the company looks to nominate dissident director candidates.

If BMS does become a target for acquisition, Jefferies analyst Jeffrey Holford predicted that companies like Sanofi , Johnson & Johnson , Pfizer Inc. and Novartis AG could be possible suitors. But, any company that made a play for BMS would likely have to be ready to pay upwards of $100 billion, Bloomberg said.