Bristol-Myers Squibb: Tempting Takeover?

03/10/2017 7:00 am EST


Todd Shaver

Founder and Editor-in-Chief,

Bristol-Myers Squibb (BMY) has been a bit of a turbulent ride so far. But hang in there, big time help has just arrived, asserts growth and income expert Todd Shaver, editor of

Bristol-Myers was itself once one of the drug industry's major acquirers, snapping up pipeline assets in what it referred to as its "string of pearls" strategy. "I think everybody is looking at Bristol," CEO Brent Saunders at Allergan (AGN) said in an interview.

JANA Partners has been pushing for more buybacks and board seats at BMY; while this has been helpful, the one and only Mr. Carl Icahn has now showed up.

Icahn has a history of taking positions in companies and then working to force a sale. Worth about $20 billion, Icahn primarily invests his own fortune.

Icahn was reported to see this drug-maker as potentially ripe for a takeover. Possible buyers could include Pfizer (PFE), Gilead Sciences (GILD) and Novartis (NVS), all of which have an interest in cancer drugs and have money to spend.

Those deals landed it the drug Opdivo, which uses the immune system to attack cancers and got remarkable results in once-fatal diseases like advanced melanoma.

More recently, though, it's lost ground to rivals like Merck (MRK), which has a similar drug, Keytruda, that has taken the lead in some oncology markets.

Bristol-Myers is still a tempting takeout target. If you believe in the immuno-oncology franchise, then it's obviously an attractive asset because there's not many ways to get into this space.

While Pfizer has a partnership in immune-system-based cancer drugs, it's well behind Bristol-Myers and Merck. Novartis, another player in oncology, could raise the cash to do a deal through asset sales and debt.

Meanwhile, Gilead has amassed billions of dollars from sales of its hepatitis C drugs and is looking for its next move.

Icahn has made a fortune for himself as well as the shareholders who have been there alongside him. As a Bristol just became one of the most interesting holdings in our portfolio.

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