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Why Are Bristol-Myers & Turning Point Made for Each Other?

Story Highlights

Bristol-Myers and Turning Point merger will create a solid player in the oncology field. The combination will eventually help cancer patients get better treatment and care.

Bristol-Myers Squibb Company (NYSE: BMY) is all set to merge Turning Point Therapeutics, Inc. (NASDAQ: TPTX), an oncology company, into its portfolio. A definitive merger agreement has been signed between the parties.

While shares of Bristol-Myers rose slightly to close at $75.17 on Friday, Turning Point stock jumped 118.4% and closed at $74.59.

Details of the Deal

As noted, Bristol-Myers will acquire shares of Turning Point through a tender offer and pay cash of $76 for each TPTX share. Bristol-Myers intends to use its available cash to fund this $4.1-billion transaction.

The parties forecast the merger to conclude in the third quarter of 2022.

Further, Bristol-Myers anticipates the transaction to dilute its earnings by $0.08 per share in 2022 and be accretive to earnings starting in 2025.

Bristol-Myers’ portfolio is also expected to get a boost from Turning Point’s repotrectinib, which is likely to get approval from the U.S. Food and Drug Administration in the second half of 2023.

According to the company, repotrectinib is an “orally administered TKI (tyrosine kinase inhibitor) for both TKI-naïve and TKI-pretreated patients with ROS1+ advanced non-small cell lung cancer (NSCLC) and NTRK+ advanced solid tumors.”

Official Comments

Bristol-Myers’ M.D., Board Chair, and CEO, Giovanni Caforio, said that the TPTX acquisition will enhance its “oncology franchise by adding a best-in-class, late-stage precision oncology asset.”

Meanwhile, Turning Point’s M.D., President and CEO, Athena Countouriotis, said, “With Bristol Myers Squibb’s leadership in oncology, strong commercial capabilities and manufacturing footprint, we will be able to further accelerate the pace at which we can bring our novel medicines to benefit people diagnosed with cancer around the world.”

Analysts’ Take

Three days ago, Andrew Baum of Citigroup maintained a Buy rating on BMY with a price target of $90 (19.73% upside potential).

Meanwhile, David Nierengarten of Wedbush lowered the rating on TPTX to Hold from Buy and increased the price target to $76 (1.89% upside potential) from $61.

Overall, the Street has a Moderate Buy consensus rating on BMY based on seven Buys, three Holds, and two Sells. BMY’s price target of $78 suggests 3.76% upside potential from current levels. Over the past year, shares of BMY have grown 16.1%.

Also, TPTX has a Moderate Buy consensus rating based on four Buys and five Holds. Turning Point’s average price target of $81.80 suggests 9.67% upside potential from current levels. Shares of TPTX have inched up 2.8% in the past year.

Bloggers’ Opinion

As per TipRanks, financial bloggers are 94% Bullish on BMY, compared with the sector average of 70%.

Similarly, financial bloggers on TipRanks are 100% Bullish on TPTX.

Conclusion

The merger is expected to be a win-win for both Bristol-Myers and Turning Point in the years ahead. While Bristol-Myers will strengthen its oncology portfolio, Turning Point will have better resources and manufacturing capabilities for its operations.

However, the move may put earnings pressure on Bristol-Myers and expose both parties to integration risks in the near term.

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