Introduction:
On October 5th, Bristol Myers Squibb announced a definitive agreement to acquire MyoKardia for $225 per share, totaling the deal value to approximately $13.1bn in cash. The transaction was unanimously approved by the Boards of Directors of both companies and was successfully completed on November 17th. With the completion of the acquisition, MyoKardia was delisted from the NASDAQ Global Select Market, thus becoming a wholly-owned subsidiary of BMS.
Companies’ Overview:
BMS
Bristol Myers Squibb is a global biopharmaceutical company headquartered in New York City engaged in discovering, developing and delivering innovative treatments to treat patients with serious diseases. In particular, the company’s pharmaceutical products include synthesized drugs or small molecules, as well as products achieved through biologics. BMS focuses on experimental therapies that address cancer, heart disease, HIV/AIDS, cardiovascular disease, diabetes, hepatitis, rheumatoid arthritis and psychiatric disorders.
In terms of specific therapeutic areas, the company focuses on oncology, hematology, immunoscience, cardiovascular and fibrosis. In particular, the oncology drugs portfolio is the most significant revenue driver as it represents its largest therapeutic area. The company’s blockbuster drugs include Eliquis for stroke prevention, Opdivo for cancer treatment and Orencia for rheumatoid arthritis treatment.
In the last fiscal year, the company has reported Q4 revenues of $11.1bn and full-year revenues of $42.5bn with an EBITDA of $4.9bn. In particular, such financial results reflect robust sales, strong operating performance and advancement of the company’s product pipeline. The United States accounted for c. 60% of the company’s sales. Moreover, BMS has global research facilities and manufacturing plants in Europe and the US. R&D expenses increased by 79% amounting to $3.8bn in the last quarter, primarily due to costs associated with the broader portfolio resulting from the Celgene acquisition. Overall, the company reported a net loss of c. $9bn mainly due to costs and expenses related to the MyoKardia acquisition.
Myokardia
Founded in 2012 and based in Brisbane (California), MyoKardia is a clinical-stage biopharmaceutical company pioneering a precision medicine approach to discover, develop and commercialize targeted therapies for the treatment of serious cardiovascular diseases. The Company’s mission is to change the world for people with cardiovascular problems through bold and innovative science.
MyoKardia is pioneering a precision medicine approach for their discovery and development efforts by:
- Understanding the biomechanical underpinnings of disease
- Targeting the proteins that modulate a given condition
- Identifying patient populations with shared disease characteristics
- Applying learnings from research and clinical studies to inform and guide pipeline growth and product advancement
The Company has used its precision medicine platform to discover two clinical-stage therapeutics, possibly useful for the chronic treatment of the two most prevalent forms of heritable cardiomyopathy, hypertrophic cardiomyopathy (HCM) and dilated cardiomyopathy (DCM). Mavacamten (formerly MYK-461), is an orally administered allosteric modulator of cardiac myosin being developed for the treatment of HCM, which is estimated to affect one in every 500 people worldwide. Danicamtiv (formerly MYK-491) is an orally administered small molecule designed to increase cardiac contractility without impairing diastolic filling in patients with systolic heart failure used for the treatment of patients affected by DCM.
In terms of performance, during the third quarter of 2020, the Company reported a net loss of $84.7 million, compared to the $141.8 million loss of the previous year. The negative result is mainly due to the huge amount of R&D expenses ($59 million) and SG&A expenses ($26 million), not compensated by the generation of revenues. In fact, the Company’s ability to generate revenues and achieve profitability depends on its ability to complete the development of and obtain the regulatory approvals necessary to commercialize the product candidates such as Mavacamten and Denicamtiv.
Industry Overview:
Despite being one of the largest industries (the global health industry was worth $8.45tn in 2018), the healthcare industry has been greatly impacted by the global pandemic. Great strain has been put on the industry’s workforce, infrastructure and especially supply chain. Despite this disruption, the healthcare industry is expected to grow 19% between 2020 and 2024, creating over 2.3 million new jobs. With global healthcare spending potentially reaching over $10tn by 2022, the US is by far the greatest consumer. COVID-19 has also accelerated the rate of digital adoption, which may prove to have long-term growth opportunities going forward such as the Internet of Things, which may lower the costs of operational and clinical inefficiencies by $100bn per year. Global healthcare sales are estimated at over $4tn per year. Sales are expected to continue rising in the near future due to demographic changes which increase global demand. The healthcare industry is commonly perceived as a counter-cyclical industry (or defensive sector).
Going forward, several challenges lay ahead of the healthcare industry. Firstly, the increased digitalization will require large amounts of consumer data to be recorded and stored, which requires reliability and transparency when handling such sensitive data. Furthermore, there is great inequality in the amount of healthcare that low-income families and minorities receive, which needs to be addressed for a healthy global population. The increased digitalization will also create the need for data interoperability.
The cardiovascular healthcare sub-industry is characterized by:
- increased demand for value
- rising uptake of innovative treatment technologies
- growing digital solutions adoption
- everchanging MedTech competitive landscape
Cardiovascular diseases are the leading cause of global deaths, representing roughly 30% of all deaths globally, and current treatments remain very expensive. There is therefore both a human and economic incentive to improve the technology and effectiveness of cardiovascular disease treatments.
Deal Rationale:
The transaction would grant Bristol access to Mavacamten, a drug that treats obstructive hypertrophic cardiomyopathy(“HCM”), a chronic heart disease with high morbidity and patient impact. According to Bristol Myers Squibb, this medicine, once approved by the FDA, is expected to be the first available option on the market. Therefore, it is likely that Mavacamten will have significant commercial potential and drive mid-term and long-term growth as there is a high unmet medical need in obstructive HCM. The transaction would grant Bristol Myers Squibb full ownership of Mavacamtem and grant access to MyoKardia’s talent and capabilities. In addition, Bristol Myers Squibb could develop two novel MyoKardia’s compounds: Danicamtiv (formerly MYK-491) and MyoKardia (MYK-224). The latter clinical stage therapeutics would further expand Bristol’s current cardiovascular portfolio which currently comprises Eliquis, a top-selling anticoagulant. Therefore, the acquisition would strengthen Bristol’s pipeline and scientific capabilities in the cardiovascular franchise.
This transaction is also critical for Bristol Myers as the company will soon lose the US patent on its three top drugs – Revlimid, Eliquis, Opdivo – which currently represent two-thirds of its revenue stream. Remlivid will likely lose the US market in 2022, Eliquis in 2026 and Opdivo later this decade.
The deal is also expected to deliver shareholders’ value and significant financial benefits. The commercial potential of Mavacamten and other compounds in MyoKardia’s pipeline will result in incremental value to shareholders. By leveraging Bristol Myers Squibb’s commercial distribution capabilities, Mavacamten is likely to achieve market penetration and result in revenue growth. The deal will be slightly dilutive to Bristol Myers Squibb’s non-GAAP earnings per share (EPS) in 2021and 2022, but accretive to non-GAAP EPS and revenues starting from 2023.
Deal Structure:
On 5/10/2020 Bristol-Myers Squibb Company entered an agreement to express its intention to acquire a 100% stake of MyoKardia Inc. through a tender offer. The acquisition involved 53 million outstanding shares for which Bristol offered $225 in cash per share, representing an $11.9 billion equity deal value. In addition, the transaction included also the acquisition of options, warrants and restricted share units, for an overall deal value of $13.1 billion. The acquisition price of $225 per share represented a 61% premium from the closing price of $139.6 from 02/10/2020, the last trading day before the deal announcement. The transaction was subject to the tender of a majority of the outstanding shares of MyoKardia’s common stock and was expected to close during the fourth quarter of 2020.
On 17/11/2020 Bristol’s tender offer had expired and about $42.18 million of MyoKardia shares were acquired for about 79% of the total stake. The tender offer met the condition of acquiring at least 50% of the target’s shares and MyoKardia became a Bristol-Meyers’ subsidiary delisting from Nasdaq Stock Market. Following the successful closing of the tender offer, Bristol acquired the remaining non-tendered shares through a second-step merger at the same condition of $225 per share.
Bristol financed the transaction with the combination of existing cash and debt. Centerview Partners and Guggenheim Securities acted as financial advisors for MyoKardia, while Gordon Dyal & Company advised Bristol-Myers Squibb.
References: FactSet, Zephyr, Bloomberg, yahoo finance, Sec.gov, bms.com, investors.myokardia.com, forbes.com, deloitte.com, dicardiology.com, businesswire.com, hbmhealthcare.com
To contact the authors:
Bocconi Students M&A Circle 
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