Bristol Myers Squibb (BMY)

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Bristol-Myers: Activist Investor Overload

Feb. 26, 2017 6:14 AM ET|21 comments| About: Bristol-Myers Squibb Company (BMY)

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Summary

BMY not only has two activist investors, but two.

JANA Partners has shaken up the board, but Carl Icahn is looking for something more aggressive.

BMY might finally be on the auction block.

Bristol-Myers Squibb (NYSE:BMY) has quickly become one of the hottest names in pharma after attracting two big name activist investors. To start, Barry Rosenstein's JANA Partners settled with BMY this week to add three independent members to the board. BMY also rolled out a $2 billion accelerated buyback plan, also a result of the discussions with JANA.

Now, Carl Icahn has revealed a stake in the drug company, suggesting it might be a buyout target. And with the newly positioned board, that could be sooner than later. The major theses lie in either getting BMY bought out, or convincing BMY to make strategic acquisitions or investing in its business to diversify operations beyond its blockbuster cancer drug Opdivo.

The company is heavily concentrated, which might be appealing to an acquirer looking to get an immediate stronghold in the immuno-oncology space. This also comes as BMY shares are relatively cheap, haven fallen 25% from the $75 a share price tag we saw just last year.

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Possible buyers?

The likes of Pfizer (NYSE:PFE), which has been on the hunt for a major buyout for a number of years after failing to snag Allergan (NYSE:AGN) last year, could be the prime buyer. But even if the $200 billion market cap drug company PFE doesn't step up, there's the opportunity for Novartis (NYSE:NVS), Johnson & Johnson (NYSE:JNJ) or Merck (NYSE:MRK) to step in and make an offer for BMY.

BMY dominates the immunotherapies space, which includes drugs that use the body's own immune system to fight cancer. And as I've said before, BMY remains an undervalued play in immuno-oncology. BMY still has a valuable drug portfolio, one that's likely attractive to other drug companies. This is a big activist target, with a $90 billion market cap.

But even without a buyout, BMY is an interesting standalone company, with a relatively strong portfolio that includes phase 2/3 clinical trials. And the other benefit of oncology is that it tends to demand higher prices / higher margins.

Icahn is no stranger to the pharma space. However, he has taken BMY by surprise, with a stake that's unclear. JANA owns less than 1% and has been pushing for management oversight changes, which includes board change. Change that it's gotten. Icahn, on the other hand, is a fan of mergers and acquisitions. In the end, the M&A in pharma slowed down a bit in 2017, but oncology is still bustling and, at the same time, consolidating. But the oncology sector has remained a hot area for consolidation. BMY has plenty of suitors, and two activists - one with the ear of the board - that will likely help get a deal done sooner rather than later.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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http://seekingalpha.com/article/4049769-bristol-myers-buyout-bound#alt1

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