Question

1. Which strategic outcomes did Bristol-Myers Squibb pursue through its “string-of-pearls” acquisition strategy?

2. Why did Bristol-Myers Squibb choose to pursue an acquisition strategy that was different from its industry competitors?

3. How did increasing the horizontal scope of Bristol-Myers Squibb through acquisitions strengthen its competitive position and profitability?

Answer 1

String-of-pearls” acquisition strategy:

The Acquisition Strategy is the Program Managers guiding document for program execution across the entire program life cycle. ... The Acquisition Strategy defines the relationship between the acquisition phases and work efforts, and key program events such as decision points and reviews

A string of pearls strategy is a strategic move that involves establishing a series of nodes of military and economic power throughout a region. Each node is a “pearl” in the string, enhancing the overall power of the parent nation.

BMS strategic outcomes:

• Increases Third Quarter Revenues 6% to $6.0 Billion
• Posts Third Quarter GAAP EPS of $0.83 and Non-GAAP EPS of $1.17
• Announces CheckMate -9LA Meets Primary Endpoint of Overall Survival
• Presents Important New Data on Immuno-Oncology Portfolio at ESMO
• Continues to Advance Planned Acquisition of Celgene and Transaction Closing
• Updates 2019 GAAP and Non-GAAP EPS Guidance

The company reported non-GAAP net earnings attributable to Bristol-Myers Squibb of $1.9 billion, or $1.17 per share, in the third quarter, compared to net earnings of $1.8 billion, or $1.09 per share, for the same period a year ago

FOR THE:

• Highly Complementary Portfolios with Leading Franchises in Oncology, Immunology and Inflammation and Cardiovascular Disease
• Significantly Expands Phase III Assets with Six Expected Near-Term Product Launches, Representing Greater Than $15 Billion in Revenue Potential
• Registrational Trial Opportunities and Early-Stage Pipeline Position Combined Company for Sustained Leadership Underpinned by Cutting-Edge Technologies and Discovery Platforms
• Strong Combined Cash Flows, Enhanced Margins and EPS Accretion of Greater Than 40% in First Full Year
• Approximately $2.5 Billion of Expected Run-Rate Cost Synergies to Be Achieved by 2022

• BMS strategy is centered on combining the innovation and agility of biotech with the reach and resources of a major pharma company to help patients in their fight against serious disease • The combined company will have a more diversified marketed portfolio and pipeline – The late-stage pipeline will have 6 potential near-term product launches over the next 12 to 24 months, representing more than $15Bn in non-risk adjusted revenue potential – The robust early-stage pipeline provides multiple “shots on goal”, which are underpinned by cutting-edge technologies and discovery platforms that will enable us to accelerate new medicines for patients in our core therapeutic areas • This is the right time to diversify the BMS portfolio to ensure long-term and sustainable growth and value creation. This transaction will leverage the power of the combined assets, people and technologies to position the company for long-term, sustainable growth, focused in key therapeutic areas with unmet medical need • Transaction will create the #1 oncology franchise, with leading positions in both solid and liquid tumors – The transaction also creates a top 5 immunology and inflammation franchise to complement the existing #1 cardiovascular franchise.

Following the announcement of the deal on the 3^rd of January, Celgene’s share price rose 22% to $81.28. Meanwhile, Bristol Myer Squibb’s share price, which closed the day before at $52.43, fell 14% to $44.53. The drop in Bristol’s share price may indicate investor doubts in the costly acquisition. Celgene, while once a great biotech star, is pinned by industry analysts as a company particularly threatened by upcoming patent cliffs. Despite Bristol’s attempts to emphasis how this merger will expand their pipeline, investor doubts are understandable.

• The process was led by a Board with substantial operating expertise, which includes 10 independent directors, 5 new directors added in the last 3 years and an average tenure well below the S&P average • Significant M&A experience as C-Level executives and / or as public company directors – Have overseen over $170Bn in transactions (transactions greater than $5Bn), as C-Level executives and / or directors • The Board is singularly focused on driving value for BMS shareholders