Bristol-Myers Squibb's (NYSE:BMY) acquisition of the biopharmaceutical company Celgene -- one of the most expensive acquisitions in the history of the pharmaceutical industry -- didn't exactly go smoothly. First, the cash and stock transaction valued at $74 billion encountered some opposition from unhappy Bristol-Myers shareholders. In particular, the company's largest institutional shareholder -- Wellington Management -- expressed its discontent with the transaction. Wellington Management argued that although Bristol-Myers should be "active in business development," the acquisition of Celgene put added (and unnecessary) risk on Bristol-Myers' investors.
Second, to make the approval process go a bit easier with the U.S. Federal Trade Commission (FTC), which had reservations about the merger due to antitrust concerns, Bristol-Myers announced it would be selling Celgene's psoriasis drug Otezla. At the time, the company thought this development would push the closing of the acquisition to the first quarter of 2020, instead of it closing in the third quarter of the current fiscal year.
However, the FTC cleared the merger on Nov. 15 and Bristol-Myers officially closed the acquisition on Nov. 20. Although the closing of the deal was a bit delayed, the delay wasn't as bad as originally announced. Bristol-Myers' stock has been volatile throughout this process. The company's stock sank when the acquisition was first announced, and dropped again when Bristol-Myers announced it would be selling Celgene's Otezla. Now that the dust has settled, though, those who own shares of this newly formed entity have much to look forward to.
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A strong lineup
One of Bristol-Myers' top-selling products is cancer drug Opdivo, and although the medicine still generates well over $1 billion in sales every quarter, it has been losing steam lately due to stiff competition from Merck's Keytruda. During the third quarter, sales of Opdivo were about $1.8 billion, representing a measly 1% increase compared to the year-ago period. Still, Opdivo is being evaluated for many other conditions, and the research firm EvaluatePharma projected it would be one of the five best-selling drugs in the world by 2024.
Bristol-Myers' current top-selling medicine, Eliquis, is also on track to become one of the best selling drugs in the world by 2024. During the third quarter, sales of Eliquis -- which is used to treat blood clots -- was $1.9 billion and improved by 22% year over year. However, Bristol-Myers markets Eliquis with Pfizer, so the company will have to share the spoils from this product. In addition to Eliquis and Opdivo, the pharma company has other products to rely on. For instance, Bristol-Myers markets Orencia, a drug that reduces the symptoms of moderate to severe rheumatoid arthritis (RA). During the third quarter, sales of Orencia were $767 million, representing a 14% year over year increase.
Furthermore, Orencia recently received a new designation from the U.S. Food and Drug Administration (FDA) for the prevention of moderate to severe acute graft-versus-host disease, a condition that sometimes arises as a result of stem cell transplants for the treatment of certain illnesses. This life-threatening condition -- which affects up to 40% of patients who receive stem cell transplants for the treatment of diseases such as leukemia -- does not have any approved therapies. In short, Orencia's market just got broader, which is good news for Bristol-Myers and its shareholders.
Lastly, through its acquisition of Celgene, Bristol-Myers will have access to Revlimid, a medicine for the treatment of multiple myeloma and also one of the world's best-selling drugs. Sales of Revlimid during the third quarter were $2.8 billion, up 13% compared to the prior-year period, but the drug will likely encounter competition starting in 2022. That being said, Bristol-Myers' lineup looks strong overall.
A promising pipeline and a solid dividend
Bristol-Myers also boasts a strong pipeline, and some of its most promising products were acquired in the Celgene takeover. These include liso-cel, a potential treatment for lymphoma that the company hopes to submit for approval by the end of 2020. There's also ozanimod, a medicine set to treat multiple sclerosis that is currently being reviewed by the FDA. According to the pharma company, its late-stage pipeline could generate more than $15 billion in revenue.
If that prediction is even remotely accurate, Bristol-Myers has a lot to look forward to, and its shareholders will reap the benefits as well. Let's not forget about Bristol-Myers' dividend. The drugmaker currently boasts a 2.6% dividend yield, and although it has raised its quarterly dividend payout by only 10% over the past five years, Bristol-Myers' payout ratio is only 47.4%, so there's likely more dividend growth where that came from. Lastly, at $63 per share, Bristol-Myers is currently near its 52-week high, but the company is trading at just 10.42 times future earnings. At this price, Bristol-Myers' shareholders would do well to purchase more shares of the company.
