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Buying Celgene

Jan. 11, 2019 7:10 AM ETCelgene Corporation (CELG), BMY137 Comments
DoctoRx profile picture


  • Bristol-Myers Squibb has made a friendly offer to acquire Celgene.
  • Per share, Celgene shareholders will receive $50 in cash, 1 share of BMS stock, and 1 contingent value right worth either $9 or $0.
  • With Celgene at $87, I find the deal to have risks but also to have enough upside to like it and to have gone long the company.
  • I am not confident about the value to Bristol-Myers Squibb shareholders, however, and do not plan to initiate a position in the stock.


Sorry to be a little behind the curve on the Bristol-Myers Squibb (NYSE:BMY) deal to acquire Celgene (NASDAQ:CELG), but I've been on the road and needed some time to research a few points before contributing some comments on this mega-deal.

In its presentation, BMY projects a Q3 close. I am going to be a bit more conservative and project that in essence, the company will get the deal done in Q4. There are some overlapping areas in myeloma and in the pipeline that some regulator may wish to study, and any delay from one venue delays the entire deal, but I expect the deal to close.

The deal terms for CELG shareholders include three types of payments for each share of CELG:

  • $50 in cash
  • 1 share of BMY
  • 1 tradeable contingent value right, or CVR

What is this worth? Depending on the value of BMY, and excluding the CVR, it's a $70 billion valuation. The CVR affects the prospective return for buyers of CELG, so let's begin with that.

Valuing the CVR

From the press release:

Each [CELG] share also will receive one tradeable CVR, which will entitle its holder to receive a one-time potential payment of $9.00 in cash upon FDA approval of all three of ozanimod (by December 31, 2020), liso-cel (JCAR017) (by December 31, 2020) and bb2121 (by March 31, 2021), in each case for a specified indication.

I assume that the ozanimod indication is for the delayed MS indication, and liso-cel (Juno CAR-T product) and bb2121 (bluebird bio (BLUE) myeloma CAR-T product) are clear. What are the odds of all three approvals coming timely? No one knows, and no one knows the timing of the last approval, either. An arbitrary 80% of approval within the above time limits for each drug implies a 0.8

ChartBMY data by YCharts

This article was written by

DoctoRx profile picture
Over 40 years of investing in individual stocks. Retired physician (cardiologist). Also retired from various roles in the US pharmaceutical industry. Main focus is on growth stocks, mostly biotech and tech, but with fundamental value considerations. Secondary focus on macro trends driving asset allocation.

Analyst’s Disclosure: I am/we are long CELG, ABBV. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Not investment advice. I am not an investment adviser.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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