Celgene is selling a blockbuster anti-inflammatory drug to Amgen for $13.4 billion cash, a deal needed to close the company’s pending $74 billion acquisition by Bristol-Myers Squibb.
Bristol-Myers (NYSE: [[ticker:BMY]]) is still working to complete the proposed acquisition of Celgene (NASDAQ: [[ticker:CELG]]) that was announced in January. In June, Bristol-Myers said that Celgene drug apremilast (Otezla) would be sold in order to allay the Federal Trade Commission’s anti-trust concerns. Closing the sale of the drug to Amgen (NASDAQ: [[ticker:AMGN]]) is contingent on Bristol-Myers and Celgene first reaching an agreement with the regulator regarding their mega merger.
Apremilast is a pill that won FDA approval in 2014 as a treatment for psoriatic arthritis. The drug was cleared for patients who don’t respond to methotrexate, a drug that’s used to treat inflammatory types of arthritis. It’s meant to be prescribed before patients are put on injectable biologic treatments such as AbbVie (NYSE: [[ticker:ABBV]]) drug adalimumab (Humira) or Amgen’s etanercept (Enbrel). Apremilast generated $1.6 billion in revenue in 2018, making it Celgene’s third-largest-selling product.
Amgen says apremilast complements its portfolio of psoriasis and inflammation therapies by offering an alternative to the Thousand Oaks, CA, company’s biologic products. In addition to psoriatic arthritis, the Celgene drug also has the FDA nod to treat moderate-to-severe plaque psoriasis, as well as oral ulcers associated with Behcet’s disease, a chronic inflammatory condition. The drug has approvals in more than 50 geographic markets, including the European Union and Japan. In the US, the drug has patent protection through 2028.
The deal calls for Amgen to acquire apremilast and all of the intellectual property associated with the drug. Celgene employees associated with the drug will also transfer to Amgen. With the announcement of the sale of the drug, Bristol-Myers says it now expects to close its Celgene acquisition by the end of this year. The company plans to use the proceeds from the sale of the drug to reduce its debt. Bristol-Myers is financing the Celgene acquisition by borrowing money.
In a research note, SVB Leerink analyst Geoffrey Porges wrote that it’s hard to understand how placing apremilast in Amgen’s portfolio is less anti-competitive than letting it join Bristol-Myers, since the deal trades the anti-competitive effects of one combined portfolio of autoimmune drugs for another. He added that the company announcements did not hint of any FTC hurdles for the proposed sale, which “suggests that the structure of the transaction, rather than the portfolio effects, is sufficient to avoid such regulatory review.”
The sale price for apremilast is higher than the $8 billion to $10 billion price that RBC Capital Markets had projected. RBC analyst Brian Abrahams wrote in a research note that the final price likely reflects a competitive bidding process. As long as the FTC review is smooth, Abrahams sees no major hurdles remaining for Bristol-Myers to acquire Celgene.
