{ "docId": "019dd923-622b-71dc-a6d9-f55770808ccc", "docSlug": "8d578da76618", "documentTitle": "Bristol-Myers Squibb Company (BMY)", "authorId": "03_Starboard_Value", "authorName": "Jeffrey C. Smith", "documentKindSlug": "shareholder-letter", "documentKindLabel": "Shareholder letter", "sourceTypeSlug": "activist_investor", "sourceTypeLabel": "Activist investor", "presentationDate": "2019-02-28 00:00:00", "orientation": "portrait", "aspectRatio": 0.77272725, "pageNumber": 10, "pageCount": 16, "prevPage": 9, "nextPage": 11, "slideType": "villain_critique", "function": "name_villain", "density": "overcrowded", "nDataPoints": 6, "notes": "This page is a text-heavy critique of a corporate acquisition, likely from an activist investor letter.", "elementsJson": [ "paragraph" ], "metadataConfidence": 0.9, "imagePath": null, "slideHref": "/slides/019dd923-622b-71dc-a6d9-f55770808ccc/10", "deckHref": "/decks/019dd923-622b-71dc-a6d9-f55770808ccc", "deckJsonHref": "/decks/019dd923-622b-71dc-a6d9-f55770808ccc.json", "deckAnchorHref": "/decks/019dd923-622b-71dc-a6d9-f55770808ccc#slide-10", "components": [ { "bbox": { "h": 0.03, "w": 0.8, "x": 0.1, "y": 0.7 }, "kind": "callout", "text": "We have serious concerns about the diligence process and motivations for the acquisition of Celgene.", "attrs": null, "subkind": "primary", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "b3632e19-2253-46bb-a716-6146da956f23", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.1, "w": 0.8, "x": 0.1, "y": 0.74 }, "kind": "paragraph", "text": "Given the transformative nature of this transaction, we would have expected Bristol-Myers to undertake an exhaustive due diligence process on Celgene, as well as a robust analysis of all available alternatives for Bristol-Myers shareholder value creation. Unfortunately, based on the timeline in the S-4, while the Company did exchange some preliminary diligence materials prior to December 2018, it appears that the Company only had two weeks of full data room access prior to announcing the proposed acquisition and no such exploration of alternatives was ever contemplated.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "6b979054-14b5-4895-a22f-09e1a2fd9ac5", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.15, "w": 0.8, "x": 0.1, "y": 0.16 }, "kind": "paragraph", "text": "For the early Celgene pipeline, details are limited. However, it is important to note that according to Bristol-Myers 10-K disclosures, 92% of Phase I studies fail to reach FDA approval. Assuming similar rates of approval going forward, this means that only 2-3 of Celgene’s early-stage assets will receive FDA approval. Given that we believe Bristol-Myers is assuming that approximately 40% of 2028 Celgene pipeline revenues, or approximately $7 billion, will be generated from pipelines assets outside of the five near-term product launch opportunities, it appears that they are assuming multiple blockbuster assets. Based on historical precedent, we would have serious questions on this assumption.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "ca40bf95-3f0b-47e7-b516-f62492d92466", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.18, "w": 0.8, "x": 0.1, "y": 0.51 }, "kind": "paragraph", "text": "Furthermore, the diligence timeline appears extremely troubling, especially as it relates to Bristol-Myers’ analysis of the Celgene pipeline. According to the Company’s S-4, full data room access was granted on December 16, 2018. Therefore, Bristol-Myers had only slightly more than two weeks of full access before announcing the transaction. We find it difficult to believe that the Company was able to thoroughly evaluate approximately 30 highly technical products with the required scrutiny on regulatory, commercial, manufacturing, intellectual property (“IP”), and legal considerations, among others, during this extremely tight timeframe. As a result, we have extreme doubts that Celgene’s pipeline can and will deliver the required results to fully rebuild the revenue base upon the LOE of REVLIMID.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "e310c809-7073-42ff-8070-39f12e4a62be", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.18, "w": 0.8, "x": 0.1, "y": 0.32 }, "kind": "paragraph", "text": "It is imperative to point out that in a downside scenario, we believe Celgene’s pipeline products could destroy significant shareholder value. Each product requires tremendous upfront investment, and if it does not perform in-line with expectations, the product can generate a negative net present value. For example, Celgene has not brought a new major drug to market since 2014. However, since that time, the Company has spent a cumulative $22 billion on R&D. So in approximately the past five years, Celgene has failed to bring a single new major drug to market. However, Bristol-Myers is now assuming that going forward, the Celgene pipeline will produce a number of new major drugs at a much faster rate than previously achieved.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "e9136a73-60bb-4561-8d5a-49f9bfa2cc61", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.05, "w": 0.8, "x": 0.1, "y": 0.85 }, "kind": "paragraph", "text": "As shown in the annotated stock chart below, it appears that after a failed clinical trial of a major drug that resulted in approximately $25 billion of lost market value, Bristol-Myers became the subject of not one, but two separate shareholder activists, who were, among other things, rumored", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "ed313207-e69e-4897-8b38-93e591ae281f", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.05, "w": 0.8, "x": 0.1, "y": 0.1 }, "kind": "paragraph", "text": "Based on the tepid uptake of current marketed CAR-T therapies, and the fact that Celgene’s CAR-T therapies will be much later to market than the current approved therapies, we believe their potential to be blockbuster drugs is far from certain.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "f8d1b15f-9f28-4fba-be27-b7c39eaf3995", "frameworkName": null, "frameworkSlug": null } ], "metrics": [], "tools": [ { "name": "Villain slide", "slug": "villain-slide", "agent": null, "layer": "slide", "matchId": "d05ece37-9ea3-46ad-8da4-50f64aa75a89", "evidence": "The slide title and content explicitly mention concerns about the acquisition of Celgene, indicating a villain critique.", "confidence": 0.9 } ], "frameworks": [], "arcBeats": [ { "to": 10, "from": 6, "beatId": "06791961-cb3d-4354-9b48-8a4565eb1b2c", "arcName": "Overcoming the Monster", "arcSlug": "overcoming-monster", "beatName": "The Struggle", "beatSlug": "overcoming-monster-the-struggle", "evidence": "Details concerns about the acquisition process and risks", "position": 1, "confidence": 0.8, "parentBeatName": "Development", "parentBeatSlug": "development" } ], "loops": [ { "to": 10, "from": 5, "name": "The Reveal", "slug": "05-the-reveal", "bestFor": "Product launches, strategic pivots, unexpected findings", "matchId": "e3db0dd8-f759-467f-a72a-df74be0fd51d", "evidence": "Exposes contradictions in management commentary", "position": 0, "objective": "Reveal concerns about the acquisition", "structure": "Setup the Question -> Build Suspense -> The Big Reveal", "confidence": 0.7, "description": "Build mystery and anticipation, then deliver a surprising or powerful conclusion" } ], "imagePathAlt": null, "thumbSrc": null, "thumbSrcAlt": null, "locked": true }