Starboard's February 2019 letter to Bristol-Myers Squibb shareholders on the Celgene deal

About this letter

Jeffrey C. Smith, managing member of Starboard Value, signed this letter to the shareholders of Bristol-Myers Squibb on 28 February 2019. Bristol-Myers had announced its intention to acquire Celgene for approximately $91 billion in cash and stock, which Starboard calls one of the largest ever pharmaceutical mergers. Starboard said it would vote all its shares against the proposals at the special meeting scheduled for 12 April 2019, would solicit other shareholders to do the same, and had nominated a slate of directors for the 2019 annual meeting should the deal be voted down.

The letter opens with Bristol-Myers' share price record against its peers and the market, then argues its position under five headings: the product Celgene depends on, the pipeline expected to replace it, the diligence process, the company's presentation of the deal's value, and the alternatives open to an independent Bristol-Myers.

What to notice

1. 1

   The patent cliff is the centrepiece: Revlimid, a small molecule drug with about $9.7 billion of 2018 sales and over 60% of Celgene's revenue, faced generic competition from 2022, and Starboard shows small molecule sales falling far faster than biologics after exclusivity ends.

“Bristol-Myers is knowingly acquiring a massive patent cliff”