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Bristol-Myers CEO: Cash flow, cell therapy made $74B Celgene deal compelling

Celgene Corp.'s cash-generating cancer medicine Revlimid and its experimental cell therapy platform made a compelling case for a takeover of the biotechnology company, Bristol-Myers Squibb Co. Chairman and CEO Giovanni Caforio said.

Each company has a blockbuster cancer medicine that drives a significant share of its sales and is closely watched by investors. For Celgene, it is Revlimid for multiple myeloma, a type of blood cancer that affects the plasma cells. For Bristol-Myers, it is Opdivo, which is approved to treat a number of solid tumors including lung cancer, melanoma and liver cancer.

With competition for both medicines on the horizon, the companies have been seeking to fill their pipelines with promising experimental medicines. Celgene has added cancer-fighting cell therapies to its portfolio, while Bristol-Myers is exploring new uses for Opdivo.

"Together, we have an opportunity to build the number one franchise in oncology across solid tumors and hematologic malignancies," Caforio told investors and analysts at the annual J.P. Morgan Healthcare Conference in San Francisco on Jan. 7.

Caforio and Celgene Chairman and CEO Mark Alles kicked off the conference with a fireside chat on their pending $74 billion deal. The deal is valued at $95 billion including equity, assumed current liabilities and net of current assets, according to data from S&P Global Market Intelligence.

The takeover followed two megadeals last year: Japanese drugmaker Takeda Pharmaceutical Co. Ltd.'s $62 billion purchase of Shire PLC, which is set to close Jan. 8, and Cigna Holding Co.'s $67 billion purchase of pharmacy benefit manager Express Scripts Holding Co. Days after the Bristol-Myers bid for Celgene was revealed, Eli Lilly and Co. disclosed its planned $8 billion acquisition of Loxo Oncology Inc.

Bristol-Myers looked closely at different scenarios for generic competition to emerge for Revlimid and is comfortable with how those scenarios might play out, Caforio said during the fireside chat.

"It's a platform where we think we can maintain a leadership position in hematology for the long term," Caforio said. "And obviously, from our perspective, the cash flows for marketed products enable us to delever quite quickly."

In the next three years, Caforio sees about $45 billion in cash flow from the combined company, enabling it to pay down debt, which will be the priority in the short term.

"In the medium and in the long term, we will continue to be able to invest in science and innovation, and we're very comfortable with that," he said.

Among the experimental medicines, Caforio touted at the conference were cell therapies JCAR017, which Celgene acquired with its purchase of Juno Therapeutics last year, and bb2121, which Celgene licensed from bluebird bio Inc.

"With respect to the cell therapy platform, I'm actually really excited about that," Caforio. "I think it's the best platform in the industry."

The cell therapies would compete with Novartis AG's Kymriah and Gilead Sciences Inc.'s Yescarta, both of which won U.S. approval in 2017.

Caforio noted that many of the pricing and reimbursement policies around such innovative treatments have been worked out, which means coming to market later will be an advantage.

Beyond cancer

Outside of cancer, the combined company would also focus on autoimmune disorders such as psoriasis and cardiovascular disease. Celgene's Otezla medicine for psoriasis and Bristol-Myers' Eliquis blood thinner provide strong foundations in those areas, Caforio said.

"Celgene has done a great job establishing Otezla in the marketplace where we have been thinking about how we build an infrastructure commercially, medically from an access point of view as we think about the launch of TYK2," Caforio said, referring to a drug in development that he considers important for the company. "I'm thinking about the potential launch of TYK2 in psoriasis. I think the launch will be quantumly more successful because of the two companies working together."

When asked about early-stage medicines, aside from cell therapy, Caforio said he is excited about the potential of BCMA treatments in oncology. BCMA is found on malignant plasma cells and could prove to be an effective therapeutic target for multiple myeloma, which occurs when a group of plasma cells becomes cancerous and multiplies.

"This is an extremely exciting target that can continue to transform the treatment of multiple myeloma," Caforio said. "I believe that Celgene has the best and the broadest approach to BCMA with multiple shots on goal. I think that's something we're really, really excited about."

Caforio and Alles did not specify what kinds of cost savings the deal would yield, saying only that a deal of that size usually comes with overlap and a need for restructuring.

"The strategic vision of this deal is compelling," Alles said. "And I hope for most who cover this industry, it's pretty obvious even."

The annual J.P. Morgan Healthcare Conference in San Francisco brings together more than 9,000 investors, analysts and executives from more than 450 public and private companies.