Love it or hate it, Bristol-Myers Squibb’s purchase of Celgene set the tone for 2019, and promises to shake up the life sciences ecosystem for years to come.
Only AbbVie’s acquisition of Allergan rivaled the size of Bristol-Myers Squibb’s $74 billion buyout, and that deal centered more on financial engineering than a strong research focus. Other M&A moves, like Pfizer’s buy of Array Oncology or Eli Lilly’s take-out of Loxo Oncology, may share some of the R&D ambition but not the scope of Bristol-Myers’ gambit.
Whether or not the acquisition succeeds for Bristol-Myers, its impact on the biopharma industry will be wide-reaching by erasing Celgene, a storied biotech and one of the industry’s most active partners.
Over the past decade, Celgene has struck its own R&D and licensing deals with dozens of rising drugmakers. The list includes Acceleron, Agios, Bluebird bio, Epizyme, Jounce Therapeutics and Prothena.
One of those partnerships was with a small biotech called Sutro Biopharma. Led by CEO Bill Newell, Sutro first signed a deal with Celgene to discover and develop cancer therapies in 2014, later tailoring the deal to focus on four specific programs in 2017.
“Celgene really did establish itself in its heyday as the go-to partner for smaller and emerging biotechnology companies,” Newell said, highlighting Celgene’s appetite for creative deal terms, collaboration with smaller partners and penchant for placing bets on multiple, riskier projects.
“Anyone can play in the Phase 2 results or Phase 3 results game,” he added. “The earlier-stage deals require a lot more vision, flexibility and staying power.”
Sutro’s chief executive said he expects support to continue post-merger for his company’s lead drug, an experimental multiple myeloma therapy that fits with the cancer ambitions of Bristol-Myers and Celgene. But other biotechs may miss Celgene’s partnering presence in the future.
“Losing their aggressive and innovative deal-making approach is not a positive for the industry in general,” Newell said. “Whether Bristol-Myers continues to walk some of the Celgene talk as they move forward, it’s too early to say.”
While the deal removes a busy dealmaker from the playing field, others see opportunities from mergers of this scale.
The Bristol-Celgene deal strikes venture capitalist Kevin Kinsella as like “elks battling it out during the rut,” he said in an interview with BioPharma Dive.
In Kinsella’s analogy, the experimental drugs that fall outside the combined company’s post-merger strategic focus are like the elk horns shed on the forest floor.
“The horns are full of calcium, and so the little mites of the forest start nibbling on those,” said Kinsella, the founder of Avalon Ventures. “You’d be amazed how fast a massive rack of abandoned antlers will disappear on the forest floor.”
A process of a similar sort plays out in pharma boardrooms, said Kinsella, who views the deal as a net good for the life sciences industry.
“A lot of programs, as a result of these mergers, get cast off and get auctioned off at very cheap prices to, in many cases, clever, sharp-penciled private equity people specializing in this type of thing,” he said. “They can grab these assets at very cheap prices and they can run with them and turn them into products. That is precisely a result of this merger.”
Some of that started to happen before the deal even closed. In June, for instance, Celgene backed out of a deal with BeiGene for the Chinese biotech’s PD-1 drug tislelizumab, a type of immunotherapy that Bristol-Myers already has in its blockbuster Opdivo.
For Bristol-Myers CEO Giovanni Caforio, the $74 billion deal will be a defining gamble. In pursuing it, he is betting that combining the two companies’ products and pipelines in oncology will form an industry-leading cancer juggernaut.
The companies anticipate about 70% of their drug sales will come in oncology, accounting for about $23 billion of $33 billion in total yearly sales. Celgene’s late-stage pipeline is primed for several additional launches in cancer, too, including two CAR-T cell therapies.
Yet, it’s far from a sure bet, as both companies bring not just their assets but their struggles as well. Bristol-Myers’ immunotherapy Opdivo has lost significant ground to Merck & Co.’s rival Keytruda, while Celgene’s top-selling Revlimid is set to face generic competition beginning in 2022.
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