March 2019

"AS OTHERS HAVE MERGED INTO MEGACOMPANIES, WE ARE BECOMING MORE STREAMLINED AND FOCUSED. AS OTHERS HAVE BROADENED THEIR PORTFOLIOS, WE ARE FOCUSING ON SELECT AREAS OF MEDICAL NEED."

- JIM CORNELIUS, FORMER BRISTOL-MYERS CHAIRMAN & CEO

AND CREATOR OF THE "STRING OF PEARLS" STRATEGY

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TABLE OF CONTENTS

I.

Executive Summary

4

II.

Overview of Bristol-Myers

33

III.

Overview of Celgene

60

IV.

We Believe the Math Underlying Bristol-Myers' Assumptions Is Flawed

70

V.

We Do Not Believe Celgene's Pipeline Will Generate Bristol-Myers Base Case Projections

82

VI.

We Believe the Celgene Deal Carries A Lot of Risk and Will Destroy Value for Bristol-Myers Shareholders

120

VII.

The Timing of the Transaction Raises Many Questions

139

VIII.

There Is A Better Path Forward For Bristol-Myers

151

IX.

Conclusion

188

I. Executive Summary

We Believe the Proposed Acquisition of Celgene Is Ill-Advised and Could Destroy Substantial Value for Bristol-Myers Shareholders

As we will explain, the proposed acquisition of Celgene Corporation ("Celgene") by Bristol-Myers Squibb Company ("Bristol-Myers" or the "Company") adds substantial risk for shareholders, is based on aggressive assumptions around Celgene's pipeline, and may have been done for defensive purposes.

  • We approached this situation, as we do all of our investments, with an open mind and objectively listened to management's rationale for the transaction.

  • As we will discuss throughout the presentation, we strongly believe that Bristol-Myers' proposed acquisition of Celgene has the potential to destroy significant shareholder value.

    • - Bristol-Myers management has decided to bet the future of the Company on their highly questionable view of Celgene's pipeline, which carries substantial risk.

    • - Bristol-Myers is paying ~$30 billion for the pipeline, approximately twice as much as the Company has implied.

    • - Bristol-Myers' base case assumptions on the pipeline are aggressive, well-above consensus estimates, and not in-line with Celgene's historical pipeline success (which produced 3 blockbusters in 15 years vs. Bristol-Myers' assumption of 10 blockbusters, on average, in 8 years), which adds significant risk for shareholders.

    • - Even if Bristol-Myers achieves its base case assumptions, the deal will only generate a 3% IRR above WACC. In what we believe are more likely scenarios, this deal will destroy shareholder value.

    • - The deal process appears to have been rushed, spurred, we believe, by Bristol-Myers' desire to announce the acquisition by an arbitrary near-term deadline.

    • - We also believe the deal may have been negotiated with the wrong intentions, as a defensive measure designed to protect Bristol-Myers from becoming an acquisition target itself.

  • A management team that has struggled to create value on a standalone basis is now asking shareholders to trust them to execute one of the largest pharmaceutical transactions of all time.

  • As we will demonstrate, this transaction will require near-perfect execution for Bristol-Myers shareholders to have a chance to realize any value.

  • We believe that the proposed acquisition of Celgene is a bad deal for shareholders and that there is a better path forward for Bristol-Myers.

Bristol-Myers' proposed acquisition of Celgene is fraught with risks and may destroy shareholder value

Source: Public company filings, Starboard estimates.

Note: When referring to pharmaceutical products in this presentation, we define "blockbuster" to mean peak revenue generating potential of greater than $1 billion.

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Bristol-Myers Squibb Company published this content on 18 March 2019 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 18 March 2019 21:49:04 UTC