Activist Starboard wants to know if Bristol-Myers investors support Celgene buy

It was only a month after Bristol-Myers Squibb kicked off 2019 by announcing it would buy Celgene for $74 billion that rumors emerged about activist hedge fund Starboard Value taking an interest in the deal—and not necessarily a positive one. Now those murmurs are getting louder.

Starboard reportedly took an ownership stake in BMS in early February, and now it has hired a proxy solicitor to survey the level of support for the Celgene buy among shareholders, according to anonymous sources who spoke to Reuters. Starboard has not yet decided whether to oppose the deal, the sources said.

Starboard did not immediately reply to a request for comment from FiercePharma. A spokesperson for BMS declined to comment.

Starboard’s CEO, Jeff Smith, recently said in a CNBC interview that the firm is "certainly interested in the story at Bristol-Myers," though he declined to confirm his fund had taken a stake in the company. Shareholders will vote on the deal in April.

Ever since news of Starboard’s interest in the deal emerged, some analysts have suggested that the hedge fund’s managers might be interested in persuading another Big Pharma company to buy BMS. It’s not such a crazy idea: A string of bad news surrounding BMS’ immuno-oncology blockbuster Opdivo has depressed the company’s shares, potentially making it a takeout target.

Most recently, in conjunction with BMS’ fourth-quarter earnings report, the company said it had nixed plans to apply for FDA approval of a combination of Opdivo and another of its immuno-oncology drugs, Yervoy, to treat some previously untreated lung cancer patients. What’s more, BMS released a 2019 forecast of revenue growth in the mid-single digits, which fell below the consensus estimate of 7%. And that didn’t include any impact from the Celgene buy.

In a conference call following the report, one analyst asked flat-out whether BMS was buying Celgene to avoid being swallowed up by another company. CEO Giovanni Caforio, M.D., deflected the question, focusing instead on reiterating the deal’s benefits for shareholders, namely "complementary franchises of marketed products" and "an opportunity to launch six new products in the next 24 months, and doubling the size of our early pipeline in therapeutic areas we know well."

If Starboard is indeed interested in pressing for BMS to put itself up for sale rather than consummating the Celgene deal, that would bring up yet another question: Who might want BMS? AbbVie, Pfizer, Johnson & Johnson, Amgen and Novartis have all been mentioned as potential acquirers, but few on the Street see any of them as likely deal-busters in the Celgene transaction.

"We would be surprised if activists are successful in pushing for a larger change," said Credit Suisse’s Vamil Divan, M.D., in a note to clients after news of Starboard’s interest in BMS emerged.

That sentiment was echoed during a webinar presented by Mizuho Securities on Friday. Analyst Salim Syed said J&J was the most likely suitor but that it was "probably unlikely" a bid for BMS would come along to disrupt the Celgene takeover, even though the company's share price is almost at a five-year low, according to Investor's Business Daily.

Perhaps the biggest hint that there would likely be few potential buyers for BMS came in the proxy for the Celgene acquisition, which was released on Feb. 1. That document revealed that as Celgene was negotiating for a higher per-share price than what BMS initially offered, it started looking for other potential buyers. But it only found one, and that company turned down the opportunity to make a bid.

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