First came the news that activist investor Starboard Value had bought up shares of Bristol-Myers Squibb with the intention of scuttling its planned $74 billion buyout of Celgene. Then, last week, BMS’ largest institutional shareholder, Wellington Management, spoke out against the deal, prompting Starboard CEO Jeffrey Smith to dash off a letter to BMS shareholders calling the merger "poorly conceived and ill-advised."

Now Starboard is ratcheting up its effort to sway BMS shareholders to vote "no" on April 12, when the Celgene buyout comes up for a vote. And BMS is responding to the attack by reiterating the reasons its executives have cited before as rationale for the deal—this time in a 46-page investor presentation filed to the SEC and posted online at the URL bestofbiopharma.com.

Starboard announced early Wednesday that it had mailed a letter to BMS shareholders and filed proxy materials to solicit votes against the Celgene acquisition. The letter, which Starboard also posted on a website devoted to opposing the deal, points to Wellington’s public rebuke of the Celgene acquisition and urges shareholders to use the blue proxy card that will be coming by mail to vote down the deal.

Starboard goes on to list five main reasons the firm believes the deal is not in the best interest of shareholders. They include the "massive patent cliff" facing Celgene, primarily from its multiple myeloma blockbuster Revlimid, and the possibility that if BMS were to remain independent, it would potentially be more valuable to shareholders because it could be acquired at a "substantial premium to the current stock price."

BMS did not mention Starboard or Wellington by name in its letter to shareholders, but it did provide its own set of five reasons shareholders should sign off on the merger. Topping the list was its contention that the combined company would be the No. 1 player in the cardiovascular market, as well as a leading player in immuno-oncology and immunology.

"Vote the WHITE proxy card ‘FOR’ a better company, with greater potential to create value," BMS said in the letter.

Starboard’s stepped-up assault on BMS makes sense, considering the steep hill it will have to climb to get a majority of shareholders on its side. Several Wall Street analysts dug into the numbers after Wellington came out against the deal and concluded the opposition wouldn’t be able to garner enough "no" votes, even with Starboard and other high-profile institutional investors, including Dodge & Cox, opposing the transaction.

And virtually no one on Wall Street can envision a scenario in which another Big Pharma company would come in and take out BMS at a value that would be beneficial to shareholders.

"Beyond the lack of alternatives that could provide a similar level of upside to the proposed deal (we note that the opposing shareholders have not come forward with any sort of concrete Plan B, with no over-the-top bidders in sight), we think the financial terms of the deal are very favorable," Barclays analysts wrote in a Wednesday note to investors. 

Starboard’s opposition to the deal is largely centered on the company's $9.7-billion-a-year drug Revlimid. Starboard figures the eventual patent loss on the product will force Celgene to "replace over 60% of its total revenue in the next 7 years."

But Celgene has seen some good news of late on that front. In February, the U.S. Patent and Trademark Office threw out a bid by Dr. Reddy’s to invalidate three Revlimid patents and get a generic on the market before 2023. Fears that the product would lose its patent protection earlier than expected represented a definite overhang on the BMS-Celgene deal, and that patent win was considered vital for relieving some of that concern.

In the investor presentation it filed Wednesday, BMS said it conducted "extensive due diligence" on Revlimid’s intellectual property, evaluating a range of scenarios including early introductions of generic versions of the product. In the end, the value that BMS placed on Celgene’s currently marketed products, including Revlimid, was "more conservative than those of sell-side analysts," according to the presentation.

All told, BMS concluded that the Celgene merger would result in a company with a value of $55 billion from marketed products and more than $20 billion from "synergies," including $2.5 billion of "actionable run-rate cost synergies by 2022," the letter says. BMS said much of that value would come from what it has dubbed the Big 5, which are Celgene’s late-stage pipeline assets: cancer treatments liso-cel and bb2121, hematology drugs luspatercept and fedratinib, and multiple sclerosis candidate ozanimod. 

"Given the scarcity of attractive biotech opportunities, high premiums paid in bolt-on acquisitions, a longer timeline and the likelihood of competitive auctions that reduce the probability of prevailing, Bristol-Myers Squibb determined that acquiring Celgene’s Big-5 late-stage pipeline, plus its 22 Phase 1 and 2 clinical programs, would represent a bundled ‘string-of-pearls’ that in totality offers a greater value creation opportunity than other strategic alternatives," the company concluded in its letter to shareholders.

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