On March 25, 2019 Bristol-Myers Squibb Company’s (NYSE:BMY) Board of Directors today sent an open letter to the Company’s shareholders regarding the previously reported definitive merger agreement with Celgene Corporation (NASDAQ:CELG) (Press release, Bristol-Myers Squibb, MAR 25, 2019, View Source [SID1234534585]). In addition to its March 19 investor presentation, the Company today also made available on Bristol-Myers Squibb’s website at www.bestofbiopharma.com and later today will file with the Securities and Exchange Commission (SEC) an investor presentation providing an overview of Bristol-Myers Squibb’s ability to derive value from Celgene’s pipeline and a Fact Sheet providing additional detail on key benefits of the transaction.
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The full text of the letter from the Board of Directors to shareholders follows:
Dear Fellow Shareholder:
The Board of Directors of Bristol-Myers Squibb unanimously and strongly supports the proposed acquisition of Celgene. This transaction represents a unique opportunity to create a stronger Bristol-Myers Squibb and deliver significant value for all shareholders. The combined company will be stronger today, and better positioned for sustainable long-term growth. We disagree with those shareholders that have expressed concerns with some aspects of the transaction. Your Board has conducted a rigorous evaluation process, and is highly confident that this is the best strategic option for the Company at this time. We ask for your support, and recommend that you vote your shares "FOR" the proposed transaction with Celgene.
Bristol-Myers Squibb has long been one of the world’s leading global biopharmaceutical companies whose mission is to discover, develop and deliver innovative medicines that help patients prevail over serious diseases. We believe this transaction is the best option to advance that mission, and to continue to deliver innovative medicines to our patients as a means to create long-term value for our fellow shareholders.
Our strategy has involved creating some of the leading franchises in the world from both internally developed and externally acquired sources. Leveraging our strong commercialization capabilities, we have developed five products that each currently drive over a billion dollars in annual sales, including two of the 10 largest selling drugs in the pharma industry in 2018.
By successfully executing this strategy, we have delivered financial and operational outperformance, including consistent and peer-exceeding increases in revenue, earnings and margins over the last five years. Our acute focus on sustainable growth has resulted in Bristol-Myers Squibb generating 60% of 2018 sales from new products launched over the last five years. The acquisition of Celgene takes the Company to its next chapter in a way that is fully aligned with this strategic foundation.
Bristol-Myers Squibb has transformed its product portfolio more than once, by investing internally and externally with foresight focused on our long-term growth prospects. Our business development effort has been grounded in three main pillars: (1) strategic alignment with therapeutic areas we know well, (2) compelling science focused on transformational medicines and (3) financial discipline. We believe the Celgene acquisition fits very well with these three pillars, as outlined below.
Through our broad development program and best-in-industry commercial execution, Bristol-Myers Squibb has successfully built two strong growth franchises, Eliquis and Opdivo, that currently represent ~60% of our total sales and have significant opportunity for further growth. While we expect Eliquis and Opdivo to maintain their growth well into the next decade, we are conscious of the fact that in our industry science is always evolving, product development cycles are long and these products will face eventual losses of exclusivity (Eliquis in 2026 and Opdivo beginning in 2028). As stewards for our shareholders and our patients, the Board and management team understand that now is the time to ensure that we will continue to have a robust pipeline for future growth.
Accordingly, as part of our annual comprehensive strategic review process focused on sustaining long-term growth, Bristol-Myers Squibb evaluated a full range of business development opportunities. The process was overseen by a Board comprised of directors with substantial operating experience, financial acumen, scientific expertise and investor perspectives, 10 of whom are independent including five directors who have joined the Board in the past three years.
Having reviewed a full range of opportunities, from small collaborations to transformational combinations, we identified Celgene as by far the most compelling opportunity for Bristol-Myers Squibb and its shareholders, given its strategic fit in therapeutic areas we know well, attractive value, and its unique late-stage candidates and diversified but complementary Phase 1 and 2 pipeline. The timing of the transaction was also favorable both in the near-term, as we were able to secure a very favorable price, and for the long-term, as Bristol-Myers Squibb will be strengthened and diversified (focused within our chosen therapeutic areas of oncology and immunology) in an increasingly competitive environment.
In short, the Board firmly believes that the Celgene acquisition is the right transaction at the right time for our shareholders.
A POWERFUL VALUE CREATION OPPORTUNITY FOR OUR SHAREHOLDERS
As described in greater detail in the Fact Sheet regarding this transaction, our March 19 investor presentation and our presentation regarding our ability to deliver value from Celgene’s pipeline,1 the Celgene transaction will deliver compelling value to all Bristol-Myers Squibb shareholders. The transaction will deliver:
Enhanced product leadership: The combined company will be #1 in oncology, #1 in cardiovascular and top 5 in immunology and inflammation, all of which are substantial growth areas
Diversification: Nine current products each with over $1 billion in annual sales, six near-term product launch candidates, a combined total of >50 Phase 1 and Phase 2 clinical programs and more "shots on goal"
Significantly reduced concentration of Bristol-Myers Squibb’s top 3 products in 2025 (from approximately 70% of sales on a standalone basis to approximately 45% of sales on a combined basis)
A strong late-stage pipeline: This combined pipeline includes six expected near-term product launches (including five from Celgene) representing more than $15 billion in non-risk adjusted revenue potential; of the six near-term product launches, three (ozanimod, luspatercept and fedratinib) are substantially de-risked with completed Phase 3 trials and completed or near-term submissions to the FDA for approval
Bristol-Myers Squibb’s projected total sales from Celgene’s "Big 5" (luspatercept, fedratinib, liso-cel (JCAR017), bb2121 and ozanimod) in 2025 are consistent with Street forecasts
Celgene’s "Big 5" are all first-in-class or potentially best-in-class, substantially de-risked assets with potential near-term approvals and expected to be launched in the next 12-24 months; three out of the "Big 5" have completed Phase 3/pivotal trials and two have been submitted for regulatory approval
Celgene contributes an enhanced and differentiated platform in the CAR-T space, which has significant long-term potential in oncology given the unprecedented efficacy demonstrated by this modality
The Celgene pipeline combined with Bristol-Myers Squibb’s proven and leading commercialization strength will drive tremendous value opportunities for our shareholders
A robust early-stage development pipeline: The combined pipeline includes 20 compounds in oncology IO / solid tumors, 11 in oncology/hematology, 9 in cardiovascular/fibrosis and 11 in immunology & inflammation
A conservative valuation of currently marketed products: Our valuation of Celgene’s marketed products was underpinned by conservative Revlimid forecasts. Recent positive US Patent and Trademark Office rulings make us even more confident about Revlimid
Specific, actionable synergies : The Company has done extensive due diligence to determine the $2.5 billion of sustainable, long-term synergies with identifiable sources from both current Bristol-Myers Squibb and Celgene operations. These synergies are durable given the long-term sustainability of the combined companies, included the strength of Celgene’s 5 late stage assets and broad early stage pipeline
Ideal timing : Trading ratio at two-year lows and Celgene P/E near an all-time low when deal was announced
Continued financial flexibility : Continued dividend increases and accelerated share repurchase of $5 billion expected to be executed subject to the closing of the transaction, market conditions and Board approval
A compelling value proposition : Greater than 40% accretion to Bristol-Myers Squibb standalone EPS in the first year and accretive each year thereafter through 2025, approximately 10% accretive on a discounted cash flow per share basis and IRR of 11% substantially above cost of capital. The transaction also delivers long-term strategic, operational and financial value – the combined company will have sales and earnings increases every year through 2025, and the robust pipeline provides us with many more "shots on goal" in areas that are directly aligned with our therapeutic strengths while continuing to provide financial flexibility to opportunistically source innovation externally
Before embarking on this important transaction, the Board of Directors thoroughly evaluated the acquisition against other alternatives for value creation. The nature of patent cycles in our industry means that companies like ours need to constantly rejuvenate themselves to stay ahead. Bristol-Myers Squibb has done this successfully over the past decade, and now we are focused on executing a program to supplement and eventually replace Opdivo and Eliquis – and sustaining our leadership for the future.
We don’t agree with recent suggestions to aggressively cut R&D and pursue leveraged share repurchases. Given that we operate in an industry that thrives on innovation, this approach is inconsistent with the creation of both sustainable revenue growth and long-term shareholder value. Similarly, in today’s competitive and often overpriced environment for business development, we determined that pursuing a ‘string-of-pearls’ approach to pipeline development would not deliver value or pipeline opportunities that are as compelling as acquiring Celgene.
To that end, Jim Cornelius, who initiated the ‘string-of -pearls’ strategy when he was Chairman and CEO of Bristol-Myers Squibb, agrees that the transaction with Celgene is the next natural step in Bristol-Myers Squibb’s evolution:
"The Celgene transaction enables Bristol-Myers Squibb to buy the "whole necklace" rather than stringing together individual assets. This path forward is a smart move for the long term as it eliminates paying potentially high individual premiums and minimizes certain risks associated with several smaller transactions. Bristol-Myers Squibb and Celgene are a strong strategic and cultural fit and I have already voted 100% of my Bristol-Myers Squibb shares in favor of the transaction. I have the utmost confidence the Bristol-Myers Squibb management team can deliver significant value through this deal and move the pipeline forward through commercial execution."
Bristol-Myers Squibb is a strong company today with our core franchises and internal pipeline. The Celgene transaction is a unique and compelling opportunity to diversify and further strengthen the Company, both strategically and financially, now and in the future.
For these reasons, the Bristol-Myers Squibb Board unanimously and strongly believes that the Celgene acquisition is the right transaction at the right time for Bristol-Myers Squibb shareholders – and recommends that you vote your shares "FOR" the proposed transaction with Celgene by signing, dating and returning the Company’s WHITE proxy card at your earliest convenience.
Thank you for your investment and continued support of the Company.
Sincerely,
The Bristol-Myers Squibb Board of Directors
/s/ Giovanni Caforio
Giovanni Caforio, M.D.,
Chairman and CEO
/s/ Robert J. Bertolini,
Robert J. Bertolini
/s/ Alan J. Lacy,
Alan J. Lacy
/s/ Gerald L. Storch,
Gerald L. Storch
/s/ Vicki L. Sato, Ph.D.
Vicki L. Sato, Ph.D.,
Lead Independent Director
/s/ Matthew W. Emmens,
Matthew W. Emmens
/s/ Dinesh C. Paliwal,
Dinesh C. Paliwal
/s/ Karen H. Vousden, Ph.D.,
Karen H. Vousden, Ph.D.
/s/ Peter J. Arduini,
Peter J. Arduini
/s/ Michael Grobstein,
Michael Grobstein
/s/ Theodore R. Samuels,
Theodore R. Samuels
The Bristol-Myers Squibb Board unanimously recommends that Bristol-Myers Squibb shareholders vote their shares "FOR" the approval of the issuance of shares of the Company’s common stock in connection with our proposed acquisition of Celgene prior to the Special Meeting, which will be held on April 12, 2019. All Bristol-Myers Squibb shareholders of record as of the close of business on March 1, 2019 will be entitled to vote their shares.
Bristol-Myers Squibb urges shareholders to discard any blue proxy cards and disregard any related solicitation materials sent to you by Starboard Value LP, which is soliciting proxies from Bristol-Myers Squibb shareholders against approving the merger. Irrespective of whether shareholders previously submitted a blue proxy card pertaining to the proposals contained in Bristol-Myers Squibb’s definitive proxy statement, the Company urges shareholders to cast their vote on the WHITE proxy card "FOR" the proposal to approve the transaction.