Bristol Myers Squibb Co was sued for $6.4 billion on Thursday for allegedly delaying its Breyanzi cancer drug to avoid payments to shareholders of the former Celgene Corp, which the drugmaker bought in 2019. Was it a wise move or incompetence?
According to a complaint in Manhattan federal court, Bristol Myers failed to use contractually required “diligent efforts” to win U.S. Food and Drug Administration approval for the non-Hodgkin lymphoma drug by a Dec. 31, 2020, deadline.
By missing the deadline, Bristol Myers was excused from owing an additional $9 in cash to Celgene shareholders for each share they held, enabling it to acquire Celgene at an “enormous discount” and enjoy a “windfall,” the complaint said.
Bristol Myers bought Celgene for $80.3 billion in cash and stock in November 2019 but will they ever recoup that money? According to the lawsuit Bristol Myers withheld or belatedly submitted critical information to the FDA for Breyanzi’s approval, and did not prepare its manufacturing plants for required inspections.
There is no doubt that the employees of Celgene were not happy with the BMS acquisition. It was a move, in their minds, from fast-moving biotech to a bureaucratic, slow-moving big pharma company. During the acquisition, it’s probably safe to say that Celgene employees would have been less than motivated to do their jobs. The culture between the two companies is hugely different. Most Celgene people bolted to other opportunities while power-hungry BMS managers consolidated their status.
During the planned acquisition of Celgene, top shareholders voiced their concerns about the ROI for such an enormous purchase. It seems their concerns were valid. It’s doubtful, given the sales of Celgene products, one of which is coming off-patent soon, have not lived up to their “sales pitch.”
So was the missed date a tactical move to avoid paying billions? My guess is probably no. It was a blunder caused the differences between two very different company cultures and a lawsuit by a financial institution that wants billions.
Big pharma will always be a culture that moves at the speed of a snail. Biotech company cultures are different because they have a culture of empowerment and getting it done. Most Celgene people have left BMS and are damn glad to get out. Most BMS people are still busy trying to integrate Celgene into the slow and antiquated processes that loc in jobs and positions.
This is a failure of leadership at the highest levels of BMS.