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Bristol-Myers: More attractive takeover target?

May 1, 2017

Strong sales from three drugs propelled Bristol-Myers Squibb (BMY) to a stronger-than-expected first quarter, which may have whet the appetites of companies considering making a move to acquire the pharma giant.

In a release Thursday, BMS said revenue streams were driven by sales of cancer drugs Opdivo and Yervoy as well as the blood thinner Eliquis. The three drugs saw increased sales growth of 60 percent, 25 percent and 50 percent respectively, according to BMS figures. Revenues during the first quarter increased by 8 percent to $2.7 billion in the United States and even stronger numbers were seen globally with a 20 percent increase in revenues. In total, BMS reported a profit of $1.57 billion during the first quarter. As a result of the strong performance, BMS said it was increasing its 2017 earnings, which is a reverse of what the company originally anticipated.

Strong sales for Opdivo were a welcome shot in the arm for BMS. BMS’ Opdivo (nivolumab) is Bristol-Myers PD-1 immune checkpoint inhibitor. It was the first PD-1 inhibitor to receive regulatory approval, but over the past year has run into some trouble, including a failed Phase III trial as a monotherapy for a “broad patient population” in patients with previously untreated advanced non-small cell lung cancer. Opdivo is expected to face increased competition from Merck (MRK)’s its anti-PD-1 therapy Keytruda. Merck is seeking approval of Keytruda as a front-line treatment for lung cancer.

The strong first quarter report increases the company’s attractiveness as a takeover target, particularly as share prices have declined since July of 2016. Writing in Seeking Alpha Jonathan Weber said the positive results coupled with an “inexpensive valuation” could make BMS an even more attractive acquisition target than it already was. Several companies have been rumored to be interested in snapping up Bristol-Myers, including Roche (RHHBY) , Novartis (NVS), Gilead Sciences (GILD) and Pfizer (PFE).

Next week, the company will host its next shareholder meeting, which could bring to light how investors feel about a possible acquisition. In February, BMS temporarily increased the size of its board of directors by three, which was pushed for by activist investors Jana Partners. Jana owns about 3.9 million shares, but Reuters said the investors continue to increase their stake in the company, which is currently at about 1 percent.

Following that restructuring, serial investor Carl Icahn snapped up a large block of BMS shares, largely because he saw the company as a valid takeover target, according to reports at the time.

BMS has gone from the fourth most valuable pharmaceutical company in the United States to the ninth, according to a recent report by Bloomberg. Much of that has to do with a major setback the company had last year with its lead PD-1 inhibitor Opdivo.

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