It seems big Pharma is getting bigger, in an article in early January Michael Erman and Ankur Banerjee of Reuters reported two of the world’s largest cancer drug businesses want to merge – Bristol Myers Squibb to buy Celgene.
The companies believe they can save or find cost savings of $2.5 billion but analysts are skeptical because neither company is running on full. Over the past year both companies stock fell because of clinical setbacks. Big Pharma companies need to have blockbuster drugs and Bristol Myers’s drug Opdivo has lost market share to Merck’s Keytruda. Celgene big drug is Revlimid will be starting to phase out in 2022 but revenues from it would be enough to pay down debt and possibly buy another company. Revlimid generates about $10 billion in 2018 sales.
If Bristol Myers and Celgene are merging, will other Big Pharma company’s merge? Under the deal, Celgene shareholders would receive one share of Bristol Myers and $50 cash. Celgene shareholders would receive a rights payment of $9 a share if 3 treatments in the development phase become marketable drugs.
Linking to dividend paying stocks, as you look at the medical side of investments it is hard not to own Big Pharma stocks for the patents allow for blockbusters drugs and the cash that flows into the company. One hopes that you do not have to use the drugs but they do help people. With all Pharma companies, your research into what drugs are in the pipeline and the potential cash flow from them. After the patent, generic or cheaper drugs are demanded by all insurance companies.