Celgene’s latest application with the U.S. Food and Drug Administration for its multiple sclerosis drug is a good sign for the proposed merger of Celgene and Bristol-Myers Squibb, according to Canaccord Genuity.
The company on Monday submitted an application for FDA approval for its multiple sclerosis drug ozanimod. The company hit a major roadblock last year when the FDA rejected its application for the treatment.
The back story. Celgene (ticker: CELG) stock is up about 39% so far this year. In January, Bristol-Myers Squibb (BMY) said it was purchasing the biotech drugmaker for $90 billion dollars, including net debt. Bristol shares, meanwhile, are down 7.4% year-to-date.
The deal has faced opposition from Bristol shareholders such as Starboard Value and Wellington Management. (Starboard has said Bristol would be overpaying for Celgene’s drug development pipeline.) The shareholder meeting regarding the proposed deal will take place April 12.
What’s new. Celgene’s ozanimod application proves its commitment “to a punctual schedule of key pipeline approvals,” Canaccord Genuity analyst John Newman told clients in a note Tuesday. That, he wrote, is “a small incremental positive” for the potential merger.
Bristol investors “may see slightly less risk in the acquisition,” he wrote. Celgene investors, meanwhile, “could see slightly less risk in obtaining the Contingent Value Right.” CVRs are common M&A components, which allow for shareholders to get additional benefits if certain goals are met. Celgene shareholders’ CVR will pay off if federal regulators approve certain drugs in Celgene’s pipeline, with a potential payoff of $9 a share.
Celgene stock was up 1.1% to $88.86 Tuesday afternoon. Bristol shares were up 1.2% to $48.07.
Moving forward. Newman reiterated a Hold rating on Celgene. His price target of $102 reflects Bristol’s offer, he noted.
“Approval in Multiple Sclerosis and additional development in Inflammatory Bowel Disease will be key for full revenue realization for Ozanimod,” he noted.
Looking fundamentally at Celgene, Newman doesn’t expect Bristol shareholders to reject the deal, “even with the recent rise of dissenting voices.”
As Barron’s Andrew Bary wrote in February, Celgene stock could be a good bet on the transaction getting done.