Bristol-Myers Squibb Company BMY
Bristol-Myers' $91bn Celgene acquisition buys pharma's largest patent cliff; Starboard urges shareholders to vote it down and replace directors to pursue a standalone plan or sale.
Thesis
Starboard opposes Bristol-Myers Squibb's proposed $91 billion acquisition of Celgene, arguing that BMY — already underperforming peers by nearly 37% over three years under CEO Giovanni Caforio — is pursuing a 'bet the company' deal to acquire one of pharma's largest-ever patent cliffs. Celgene's REVLIMID generates 63% of revenues and faces generic competition beginning 2022, while BMY management's base case requires Celgene's unproven pipeline to replace over $17 billion of revenue by 2028 through optimistic CAR-T and ozanimod assumptions management itself has already walked back. With only two weeks of full data room access and no exploration of alternatives, the process appears defensive. Starboard will solicit votes against the share issuance at the April 12 Special Meeting and has nominated directors to hold the Board accountable and pursue a standalone path, tuck-ins, or a sale of BMY at a premium.
SCQA
Bristol-Myers Squibb is a leading immuno-oncology pharmaceutical company whose shares have underperformed S&P 500 peers by roughly 37% over three years under CEO Giovanni Caforio, amid repeated OPDIVO clinical-trial setbacks.
Rather than fixing its own strategy, BMY is pursuing a $91bn 'bet the company' acquisition of Celgene, inheriting a massive REVLIMID-driven patent cliff and banking on an unproven pipeline to replace over 60% of Celgene revenue.
Starboard will solicit shareholders to vote down the share issuance at the April 12 Special Meeting and has nominated a slate of directors for the 2019 Annual Meeting to hold the Board accountable and pursue alternatives.
A better path — margin expansion toward the 38% peer average, targeted tuck-ins, or a sale of BMY as a premier oncology asset at a strategic premium — could unlock substantial value versus the risk-laden Celgene deal.
The three reasons
- 1
BMY is buying pharma's largest-ever patent cliff: REVLIMID is 63% of Celgene revenue and faces generics from 2022
- 2
Celgene pipeline must replace >90% of revenue by 2028, relying on repeatedly-missed CAR-T and ozanimod assumptions
- 3
Two-week full data room rushed a 'bet the company' deal while no BMY sale process was ever explored
Primary demands
- Vote against the share issuance proposal for the Celgene acquisition at the April 12, 2019 Special Meeting
- Elect Starboard's nominated slate of director candidates at the 2019 Annual Meeting
- Explore all strategic alternatives including a standalone plan with margin improvement, targeted tuck-ins, or a sale of the Company at a premium
- Provide books and records under Delaware law regarding the diligence process leading to the Celgene deal
KPIs cited
Pattern membership
Slide gallery ·
Notes
16-page shareholder letter filed as proxy solicitation exhibit (EX1 to DFAN14A) opposing BMY's January 2019 agreement to acquire Celgene for ~$91bn. Hybrid format: letter prose with ~15 institutional charts and CEO-quote callout boxes interspersed — not a true deck but denser than a plain letter. Signed Feb 28, 2019 by Jeffrey C. Smith, Managing Member. Ahead of April 12, 2019 Special Meeting share-issuance vote. Standout rhetorical moves: (i) patent-cliff framing — REVLIMID at 63% of Celgene revenue is unprecedented vs peer blockbusters (11-33%); (ii) serial CEO-quote contradictions on GED-0301, ozanimod, and JCAR017 timelines (pp. 8-9); (iii) annotated stock chart (p.11) tying first-activist/second-activist involvement to the 'defensive' merger decision. Stake size not disclosed in this filing. No sum-of-parts; valuation argument is peer multiple discount (BMY now 2.7x below peers vs 19.8x premium in 2015). campaign_phase set to initial_thesis — this is the first public articulation of the thesis, though the letter simultaneously announces the proxy solicitation. Wellington Management publicly opposed the deal around the same time — Starboard positions itself alongside 'numerous other large, long-term shareholders'.