Bristol-myers Increases Novel Drugs In $2.4 Billion Medarex Bargain
Bristol-Myers will pay $16 a share, a 90 percent premium over yesterdays closing price of $8.40 a share for Princeton, New Jersey-based Medarex, the companies said in a statement. Medarex has about $300 million in cash and securities that reduces the price to about $2.1 billion, Bristol-Myers said. Both boards agreed to the deal, the statement said.
The New York-based drugmaker is acquiring companies and forming partnerships to find new products to offset losses from Plavix, its top-selling medicine, when the anti-clotting drug faces generic competition in 2012. The deal gives Bristol-Myers full ownership of the skin cancer drug ipilimumab, which it had been developing jointly with Medarex.
“This is a strategic buy for Bristol to strengthen the biotech business,” Mitsuo Ohmi, a Tokyo-based health-care analyst at Japan Advisory LLC, said today in a telephone interview. “The premium looks high but its a great deal for what Bristol is getting in the long run. It will take some time to see an earnings contribution from the takeover.”
Bristol-Myers said it will pay for the acquisition with cash, and the companies expect to close the deal in about 30 days. Bristol-Myers had about $9 billion in cash as of June 30, according to the company.
Medarex gained $6.75 to $15.15 at 7:45 p.m. New York time yesterday after extending trading resumed on the Nasdaq Stock Market.
Important Step
“Medarexs technology platform, people and pipeline provide a strong component to our companys biologics strategy, specifically immuno-oncology,” James M. Cornelius, Bristol- Myers chief executive officer, said in the statement. “This acquisition is another important step in our biopharma transformation.”
Cornelius also has been eliminating jobs and outsourcing research to meet a goal of reducing costs at Bristol-Myers by $2.5 billion in the next three years.
Ipilimumab, an experimental drug for metastatic melanoma, is in the final of three stages of testing typically required for U.S. Food and Drug Administration approval. The drug is also being studied in lung and prostate cancers.
Last month, Medarex shares jumped 13 percent after the Mayo Clinic said three prostate cancer patients who received ipilimumab are now cancer-free. Doctors reported the drug, in combination with other treatments, helped kill prostate cancer cells and shrink the tumors in the patients, allowing surgery.
Experimental Treatments
Corneliuss strategy contrasts with mergers carried out by some of Bristol-Myers rival drugmakers. New York-based Pfizer Inc. is purchasing Wyeth of Madison, New Jersey, in a deal valued at $66 billion. Merck & Co., based in Whitehouse Station, New Jersey, is taking over Schering-Plough Corp. of Kenilworth, New Jersey, for about $46 billion.
“When you look at a company like Medarex, it really ticks all of the boxes in what were looking for,” Brian Henry, a spokesman for Bristol-Myers, said in a telephone interview. It matches Corneliuss “string of pearls” of increasing the companys focus on biological drugs through strategic acquisitions in oncology and immunology, Henry said.
“The number of biologics in our pipeline almost doubled in this deal,” Henry said. The companies have been in discussions “for a few months,” he said.
Nicole Ochsner, a spokeswoman for Medarex, didnt immediately return a phone call for comment.
JPMorgan Chase is financial adviser for Bristol-Myers on the deal, and Cravath, Swaine & Moore LLP represents them. Medarex is advised by Goldman Sachs and represented by Covington & Burling LLP.