Bristol-Myers Squibb Co. agreed to buy cancer drug-maker Mirati Therapeutics Inc. for $4.8 billion on Sunday, a price that disappointed investors after reported interest from rival Sanofi.
(Bloomberg) — Bristol-Myers Squibb Co. agreed to buy cancer drug-maker Mirati Therapeutics Inc. for $4.8 billion on Sunday, a price that disappointed investors after reported interest from rival Sanofi.
Mirati stockholders will get $58 a share and will be eligible for $12-a-share payments based on future milestones. The stock had gained 45% on Thursday after Bloomberg News reported that Sanofi was exploring a potential acquisition, closing Friday at $60.20. The shares fell as much as 6% Monday as of noon in New York, the most intraday since late August.
Pharma companies remain fixated on cancer drugs — the sector had $196 billion in global sales last year, according to IQVIA — even as investors become more optimistic about innovative products like those used to treat obesity. However, Mirati’s purchase price illustrates a difficult operating environment for biotechnology companies, according to Mizuho analyst Jared Holz.
“A take-under really not what the biotech sector needed,” Holz said in the note. A bid above Bristol’s is unlikely as “the asset was probably in play and explored by others.”
The acquisition will give a boost to Bristol as patent expirations weigh on sales of its oncology drugs. The company slashed its revenue outlook this year after sales of blood cancer drug Revlimid, its third-largest revenue driver, withered in the face of generic rivals. Its top-selling blood thinner Eliquis and cancer immunotherapy blockbuster Opdivo are also scheduled to face competition from generics later this decade.
“We view the deal as a modest positive for Bristol,” BMO Capital analyst Evan David Seigerman said in a note, citing challenges seen in the early commercialization of Mirati’s cancer drug, Krazati.
Bristol shares lost as much as 1.7%. They had lost 21% this year through Friday’s close.
Chris Boerner, who will take over Giovanni Caforio’s role as Bristol’s chief executive officer Nov. 1, called the purchase another step forward in the drugmaker’s effort to broaden its range of oncology treatments and build out its pipeline for the second half of the decade. Bristol’s scale and resources will help Mirati get its drugs to more patients, said Charles Baum, the biotech’s interim CEO.
Bristol has turned to a raft of new products to make up the current and looming sales deficits, such as psoriasis treatment Sotyktu, but they will need time to generate demand. Meantime, Eliquis is one of the first 10 drugs to be subject to Medicare drug-price negotiations under the landmark Inflation Reduction Act.
Krazati is Mirati’s first product, and the Bristol announcement ended speculation about who would purchase the San Diego-based firm. The sale to Bristol will give Mirati resources to commercialize Krazati — a second-line therapy for a type of lung cancer in which a gene called KRAS gene has mutated — and to fund more studies. Mirati received accelerated US approval in December, while European regulators have so far withheld support.
The real value driver of the deal may be Mirati’s experimental drug that targets a gene that promotes cancer proliferation called PRMT5, Seigerman said, that’s in early trials.
“Cancer is and has been a hot space for many years,” said John Murphy, a Bloomberg Intelligence analyst. He pointed out that the company has been attracting interest for a while — at least since November, Bloomberg News reported — and that the recent departure of Mirati’s chief executive officer and chief financial officer may have made it easier to get the deal done.
The transaction was unanimously approved by both the Bristol and Mirati boards of directors. Evercore and Morgan Stanley are serving as financial advisers to Bristol on the deal. Centerview Partners is serving as financial adviser to Mirati.
(Updates with deal advisers in final section.)
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