After a very strong third quarter where we reported on 10 new deals announced in a single week, merger activity decreased last week with four new deals announced, three active deals completed and one deal terminated.
Less than a year after acquiring Celgene Corporation in the largest pharmaceutical deal valued at $94 billion (including debt), Bristol-Myers Squibb Company (BMY) is back at it again. BMY announced last week that it is acquiring MyoKardia (MYOK) for $13.1 billion to strengthen its portfolio. We wrote about the merger arbitrage opportunity with the Celgene deal and the associated contingent value right (CVR) that was part of that deal in a premium post in March 2019.
I have participated in several deals with CVRs and in some instances, like the acquisition of Tobira Therapeutics by Allergan (AGN) that I discussed here, the CVRs did pay out handsomely. CVRs are usually not transferable and are rarely publicly traded but the Celgene CVRs are an exception. The Celgene CVR (BMY.RT), unlike the Tobira CVR, requires all three milestones to be hit for a $9 per CVR payout. The first milestone, approval of Ozanimod to treat Multiple Sclerosis, was achieved in March 2020. The deadline for the next milestone, approval of the CAR T-cell therapy Liso-cel to treat lymphoma, is December 31, 2020 and the deadline for the last milestone is March 31, 2021.
For a low down on how this CVR is structured, I would highly recommend this podcast by Andrew Walker that discusses the various milestones associated with the Celgene CVR. The CVR moved up significantly last week based on rumors related to a FDA inspection that pertains to the approval of Liso-cel. Considering all three milestones have to be hit for the $9 per CVR payout, the probability of this CVR paying out is low and the market was pricing the CVR as such until last week. I find the situation interesting but not enough to add to my existing position.
Just like BMY, Morgan Stanley (MS) is back at it again and announced the acquisition of Eaton Vance (EV) in a multi-billion deal within a week of completing the acquisition of E*TRADE Financial Corporation (ETFC).