BMY - Bristol-Myers Placed A Big Bet On Celgene's Pipeline. Will It Pay Off For Investors?
On Nov. 20, Bristol-Myers Squibb (NYSE: BMY) announced the completion of its $74 billion acquisition of Celgene (NASDAQ: CELG). Bristol-Myers' strategy centers on merging an innovative, agile biotechnology company with the reach and resources of a major pharmaceutical company. Without question, Celgene brings an exciting pipeline, however, it also brings a large drug, Revlimid, that is set to lose its patent protection and face generic competition in the not-so-distant future.
In the two years prior to Bristol-Myers' acquisition of Celgene, Celgene's stock price declined from $119 per share to $67 per share -- a decline of more than 40%. Perhaps even more remarkable is that Celgene traded for just 6.7x forward 12-month earnings, at that point. Thus, Bristol-Myers essentially paid zero premium to acquire Celgene based on its early 2017 valuation.
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