Bristol Myers Squibb to Acquire MyoKardia for $13 Billion; Target Price $69

A U.S. based pharmaceutical company Bristol Myers Squibb said on Monday that it will acquire MyoKardia for about $13 billion, or $225.00 per share in cash to develop its portfolio of heart disease treatments, sending shares of MyoKardia up about 60% in pre-market trading.

Under the terms of the merger agreement, a subsidiary of Bristol Myers Squibb will promptly commence a tender offer to acquire all of the outstanding shares of MyoKardia’s common stock for $225.00 per share in cash. MyoKardia’s Board of Directors unanimously recommends that MyoKardia shareholders tender their shares in the tender offer.

The deal is anticipated to close during the fourth quarter of 2020.

The transaction is expected to add a significant growth driver during the medium- to long-term. It is expected to be minimally dilutive to Bristol Myers Squibb’s non-GAAP earnings per share (EPS) in 2021 and 2022 and accretive beginning in 2023. Bristol Myers Squibb reaffirms its existing 2021 non-GAAP EPS guidance range.

Bristol Myers’ shares closed flat at $58.72 on Friday; the stock is also down over 8% so far this year. However, the MyoKardia’s shares jumped 60% to $220.15 in pre-market trading.

Bristol Myers forecast

Eight analysts forecast the average price in 12 months at $69.60 with a high forecast of $74.00 and a low forecast of $64.00. The average price target represents an 18.53% increase from the last price of $58.72. From those eight, seven analysts rated ‘Buy’, one analyst rated ‘Hold’ and none rated ‘Sell’, according to Tipranks.

Morgan Stanley target price is $67 with a high of $83 under a bull scenario and $48 under the worst-case scenario. Bristol-Myers Squibb had its price target increased by Raymond James to $78 from $75. The firm presently has an “outperform” rating on the biopharmaceutical company’s stock. Berenberg initiates with buy, $73 target price.

Several other analysts also recently issued reports on the company. Cantor Fitzgerald boosted their price objective on Bristol-Myers Squibb to $88 from $68. ValuEngine downgraded Bristol-Myers Squibb from a “sell” rating to a “strong sell” rating. Cfra reiterated a “buy” rating and issued a $70.00 target price. At last, Seaport Global Securities issued an “outperform” rating and a $75.00 target price on the stock.

Analyst comment

“We see a positively skewed risk-reward due to attractive valuation and pipeline optionality. We see compelling potential for ozanimod and BMY’s broader pipeline despite COVID-19 related delays. We believe the market is discounting erosion to key franchises mid-late decade,” said David Risinger, equity analyst at Morgan Stanley.

“We project 3-year (2020e-2023e) revenue CAGR of 4% and EPS CAGR of 10%. Positive/negative pipeline developments could drive longer-term projections higher/lower than we model. Bristol could pursue external transactions to add future growth drivers,” he added.

Upside and Downside Risks

Upside: Risks are financial results above expectations, synergy upside, positive pipeline newsflow, competitor disappointments, and external strategic action, highlighted by Morgan Stanley.

Downside: risks are financial shortfalls, product launch/trial delay, merger integration issues, disappointing pipeline data, litigation/regulatory risks, and disappointing strategic action.