Bristol-Myers Squibb (BMS) plans to acquire Celgene for approximately $74 billion, the companies said today, in a blockbuster deal designed to create a powerhouse in immunology and inflammation, cardiovascular disease—and oncology, where both companies have encountered setbacks in recent months.

The BMS-Celgene combination would wed into a single company BMS’ Eliquis® (apixaban) cardiovascular franchise, which showed 35% year-over-year growth with $4.733 billion for the first nine months of 2018—plus an immunology and inflammation franchise led by BMS’ Orencia® (abatacept) and Celgene’s Otezla® (apremilast); and an oncology portfolio led by BMS’ immunotherapies Opdivo® (nivolumab) and Yervoy® (ipilimumab), as well as Celgene’s Revlimid® (lenalidomide) and Pomalyst® (pomalidomide).

Revlimid is Celgene’s best-selling cancer drug, generating $7.136 billion in net product sales during the first nine months of 2018, up 19% from $5.999 billion in January–September 2017. However, Revlimid faces generic competitors following patent expiration in 2023—or sooner, if rivals prevail in patent challenges against Celgene.

That helps explain why Celgene’s market cap fell by 35% ($27.203 billion) year-over-year despite moves such as acquiring Juno Therapeutics for $9 billion. Other reasons are setbacks that include an FDA “Refuse to File” letter for the relapsing multiple sclerosis candidate ozanimod.

Opdivo is a blockbuster, generating $4.931 billion in the first nine months of 2018, up 37% from a year earlier, while Yervoy revenues slipped 3% year-over-year to $946 million in Q1-Q3.

However, Opdivo lost its sales lead among cancer immunotherapies this year to Merck & Co.’s Keytruda® (pembrolizumab), which racked up $5.020 billion in product sales during the first nine months of 2018, double the $2.512 billion reported for January–September 2017.

“As a combined entity, we will enhance our leadership positions across our portfolio, including in cancer and immunology and inflammation,” Giovanni Caforio, MD, BMS chairman and CEO, said in a statement. “Together with Celgene, we are creating an innovative biopharma leader, with leading franchises and a deep and broad pipeline that will drive sustainable growth and deliver new options for patients across a range of serious diseases.”

Caforio will continue to serve as chairman and CEO of the combined company, while two members from Celgene’s board will be added to the board of BMS. The combined company said it will continue to have “a strong presence” throughout New Jersey.

Celgene is headquartered in Summit, NJ, with sites in Warren, NJ, and Berkeley Heights, NJ. And while BMS is headquartered in New York, it operates five facilities in the Garden State: A 433-acre campus in Hopewell, NJ; an office building in Nassau Park, NJ; an R&D facility in New Brunswick, NJ, where the company first bought land in 1905; an early discovery site in Lawrenceville, NJ; and a newly-constructed facility in Princeton Pike, NJ.

“Our new company will continue the strong patient focus that is core to both companies’ missions, creating a shared organization with a goal of discovering, developing, and delivering innovative medicines for patients with serious diseases,” Caforio added.

$15B projected from six candidates

As a combined company, BMS and Celgene said, they also expect to generate more than $15 billion annually from six later clinical-stage candidates in the companies’ pipelines that are expected to launch over the near term—including five Celgene candidates that the company’s chairman and CEO Mark Alles called “potential blockbusters” on October 25 in releasing third-quarter 2018 results.

Four of the five Celgene “potential blockbusters” are being developed for hematology indications:

  • Celgene’s lisocabtagene maraleucel (liso-cel; JCAR017), which generated an overall response rate of 81%, with 43% of patients showing complete response, according to initial Phase I/II data released December 2. Celgene inherited JCAR017 when it acquired Juno last year.
  • Celgene’s lustpatercept, which on December 1 was announced as having met its primary endpoint in the Phase III BELIEVE trial of erythroid response.
  • The anti-B-cell maturation antigen (BCMA) CAR T cell therapy bb2121, which Celgene is co-developing with bluebird bio. On December 2, the companies reported bb2121 generated an 83% ORR in 12 heavily pretreated multiple myeloma patients.
  • Celgene’s fedratinib, a highly selective JAK2 kinase inhibitor, Celgene added fedratinib to its pipeline by acquiring Impact Biomedicines for up to $2.35 billion last year.

One of the two immunology and inflammation late-stage candidates is Celgene’s ozanimod, an oral, selective sphingosine 1-phosphate 1 (S1P1) and 5 (S1P5) receptor modulator that in October showed positive results in patients with relapsing multiple sclerosis in the Phase III SUNBEAM trial.

The other is BMS’ oral, selective tyrosine kinase 2 (TYK2) inhibitor BMS-986165, for which the pharma in September trumpeted positive Phase II results in patients with moderate to severe plaque psoriasis, including ≥75% and 90% reduction in the Psoriasis Area and Severity Index (PASI 75 and PASI 90).

BMS-Celgene would also include nine marketed treatments with more than $1 billion in annual sales, and what the companies say is significant potential for growth in the core disease areas of oncology, immunology and inflammation, and cardiovascular disease.

“For more than 30 years, Celgene’s commitment to leading innovation has allowed us to deliver life-changing treatments to patients in areas of high unmet need,” Alles stated. “Combining with Bristol-Myers Squibb, we are delivering immediate and substantial value to Celgene shareholders and providing them meaningful participation in the long-term growth opportunities created by the combined company.”

$2.5B in “synergies”

Along with those growth opportunities, however, will come approximately $2.5 billion in cost cuts or “synergies,” the companies acknowledged.

BMS said the acquisition is expected to add to its earnings per share by more than 40% in the first full year following the close of the deal, while generating more than $45 billion of expected free cash flow over the first three full years post-closing.

The companies said Celgene shareholders will receive 1 BMS share and $50 cash for each share of Celgene—as well as one tradeable Contingent Value Right (CVR) for each share of Celgene, entitling the holder to receive payments tied to achieving regulatory milestones.

Celgene shareholders will receive $102.43 per Celgene share and one CVR at the closing of the transaction. That represents an approximately 51% premium to Celgene shareholders based on the 30-day volume weighted average closing stock price of Celgene prior to signing, and an approximately 54% premium to Celgene shareholders based on the closing stock price of Celgene yesterday of $66.64, the companies said. BMS stock closed yesterday at $52.43 per share.

In early trading today as of 10:20 am, shares of Celgene zoomed 27% to $84.56, while BMS shares fell 13% to $45.10.

The boards of both companies have approved the deal, which is set to close in the third quarter, subject to approval by BMS and Celgene shareholders, and satisfaction of customary closing conditions and regulatory approvals.

When completed, BMS shareholders are expected to own approximately 69% of the company, with the other approximately 31% to be owned by Celgene.