Rationale of the deal
The transaction will likely be approved as the companies’ portfolios are mostly complementary, though an overlap between Opdivo and Celgene/BeiGene’s pipeline PD-1 drug tislelizumab may raise concerns. The latter is expected to be returned to BeiGene. EU regulators have defined the market for pharmaceutical products very narrowly, so broad overlaps in immunology won’t raise concerns. Yet the EU’s increasing attention to future competition between pipeline products or even research projects suggest that other divestitures can’t be completely ruled out.
Minor divestitures needed, if at all.
Additionally, the companies may have a problem with the expected synergies from the deal. While savings and cuts are welcome by shareholders, regulators may have a different view. R&D cuts in pharma deals are usually seen negatively by EU regulators because they could curtail innovation, make fewer drugs available to consumers and at higher prices. EU regulators will analyze whether the estimated $875 million R&D cuts from overlapping resources and early-stage portfolio is an attempt to scrap research that could lead to new, potentially competing drugs just to reinforce a monopoly position. If regulators consider these cuts to be anticompetitive, the companies may be asked to sell these research assets to competitors that could develop the drugs.
Approvals likely in 2H
Bristol-Celgene is expected to get an antitrust approval first from the US Federal Trade Commission, after the parties refiled the deal on February 20. The US regulator could nod the deal in 2Q. The European Commission, the EU’s antitrust regulator, will likely approve the deal in 2Q or just before its summer break after a 25-working-day phase one review. If remedies are needed, this deadline will likely be extended 10 more working days. The parties haven’t filed yet the deal in Brussels, but they are still on track to get the approval in time for the expected 3Q closing. Bristol-Myers has likely engaged in pre-notification talks with EU regulators to clear the way for a speedy approval.
