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Bristol Myers Squibb

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.

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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.

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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.

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