It’s was a wild day for big pharma after Celgene Corp (CELG) slid at least 8% on early Thursday trade after one of the major shareholders of Bristol-Myers Squibb Co (BMY), Wellington Management, came out in opposition of the proposed $74-billion merger deal.

This has cast a shadow on what was touted as one of the biggest takeover deals of the pharmaceutical world.

In a letter that went public earlier on Thursday, Bristol-Myers Squibb Co said it was disappointed at the opposition of the institutional investor. But the company insisted it would try to move ahead as planned.

Wellington Management earns almost 8% of the BMY stock. The investor voiced concerns about the risk and expenses surrounding the deal.

Despite the fact that other investors could follow suit, Wall Street estimates that the deal would go through.

In its letter, BMY also stressed that the merger was the ideal path forward.

 

THE MAMMOTH DEAL

In the first week of 2019, Bristol-Myers announced the acquisition of its peer Celgene in a $74-billion cash-and-stock deal — where Celgene shareholders will receive 1 BMY share and $50 in cash for each share of Celgene. Shares of Celgene then jumped after the announcement, while Bristol-Myers Squibb stock plunged.

If the deal goes through, BMS shareholders will have 69% of the ownership and Celgene shareholders will have the rest 31%.

Celgene shareholders would also receive one tradeable Contingent Value Right (CVR) for each share of Celgene. This will entitle them to receive a payment if future regulatory milestones are achieved. The combined mammoth firm is said to have six expected near-term product launches.

The deal is expected to be more than 40% accretive to Bristol-Myers Squibb’s EPS on a standalone basis in the first full year following the close of the transaction. Bristol-Myers Squibb then said it looks to realize run-rate cost synergies of approximately $2.5 billion by 2022. It also added that more than $45 billion of free cash flow is expected to be generated over the first three full years after the deal is closed.

 

CELGENE, UPS AND DOWN

A month ago, Celgene posted its fourth-quarter results, where it swung to a profit from last year’s loss. This was mainly due to lower research and development costs as well as a fall in acquisition-related charges and restructuring.

Celgene fourth quarter 2018 earnings snapshot
Celgene Q4 2018 Earnings Infographic

While the results beat estimates, it also gave a healthy FY2019 outlook that came above the market consensus. Adjusted earnings grew 20% in the quarter, while total revenue jumped 16%.

Celgene had then said that it sees FY2019 total revenue between $17 billion and $17.2 billion, while the expected earningswere at $8.40-9.08 per share. Adjusted earnings was then touted to be $10.60-10.80 per share.

 

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