Bristol Myers Squibb (BMS), a pharmaceutical company, has recently made headlines with its controversial agreement involving a contingent value right (CVR) tied to its acquisition of Celgene. The CVR agreement has sparked a lot of debate among investors and industry experts alike, with some seeing it as a necessary step for the drug maker, while others view it as a risky gamble.
What is a CVR agreement?
A contingent value right (CVR) is a financial security that allows investors to receive additional payouts in the future, based on the outcome of a specific event. In the case of Bristol Myers Squibb, the CVR agreement is based on the success of the drug maker`s acquisition of Celgene, which closed in November 2019.
The CVR pays out $9 per share if three drugs developed by Celgene meet certain regulatory milestones by specified dates. These drugs are liso-cel, bb2121, and ozanimod. If all three drugs meet their respective regulatory milestones, investors will receive the full $9 payout per share. If any of the drugs fail to meet their milestones, the payout per share will decrease. Investors will receive $6 per share if two of the drugs meet their milestones, $3 per share if only one of the drugs meets its milestone, and no payout if none of the drugs meet their milestones.
Why is the CVR agreement controversial?
The Bristol Myers Squibb CVR agreement has been met with mixed reactions from investors and industry experts. Some see it as a way for the drug maker to mitigate risk and protect itself against potential regulatory hurdles. Others view it as a risky gamble that could leave investors with little to no payout.
One of the main concerns about the CVR agreement is that it is based on the success of three drugs, all of which are still in development and have not yet been approved by regulators. If any of these drugs fail to meet their regulatory milestones, investors could see a significant drop in the value of their investment.
Another concern is that the CVR agreement gives Bristol Myers Squibb an incentive to delay the regulatory approval of the three drugs, in order to avoid paying out the full $9 per share to investors. This could harm patients who are waiting for access to these potentially life-saving medicines, as well as damage the reputations of both Bristol Myers Squibb and Celgene.
Despite these concerns, some experts believe that the Bristol Myers Squibb CVR agreement could be a sign of things to come in the pharmaceutical industry. As drug makers continue to face increasing pressure to produce innovative new medicines, they may turn to CVR agreements as a way to incentivize investors and mitigate risk.
In conclusion, the Bristol Myers Squibb CVR agreement is a controversial move that has sparked a lot of debate in the pharmaceutical industry. While some see it as a necessary step to protect the drug maker against potential regulatory hurdles, others view it as a risky gamble that could harm patients and investors alike. Regardless of which side of the debate you fall on, the Bristol Myers Squibb CVR agreement is a significant development in the pharmaceutical industry that is worth keeping an eye on.