Bristol Myers Squibb (BMS) finds itself at the center of renewed legal storm as former Celgene shareholders have filed another lawsuit, alleging the pharmaceutical giant has artificially delayed regulatory processes to avoid substantial financial payouts. This latest legal move, which seeks $6.7 billion, highlights the contentious history surrounding BMS's acquisition of Celgene and the associated contingent value rights (CVRs) tied to the performance of certain drugs, particularly the CAR T therapy, Breyanzi.
This legal debacle isn't just another chapter for BMS; it’s part of the long-standing, heated dispute over the CVRs instituted during the $74 billion acquisition of Celgene back in 2019. Notably, the CVRs offered Celgene shareholders potential cash payments tied to specific regulatory achievements. At the heart of the current lawsuit, filed in the U.S. District Court for the Southern District of New York, is the claim from UMB Bank—acting on behalf of Celgene shareholders—that BMS delayed necessary filings for Breyanzi and two other therapies just to dodge making those expensive payments.
According to Reuters, the allegations state BMS intentionally postponed these regulatory submissions after taking control of Celgene, which included the development rights for Breyanzi (known scientifically as lisocabtagene maraleucel). This event caused what the plaintiffs argue is deliberate misconduct to avoid delivering on the commitments established by the CVR.
“Bristol-Myers breached the CVR Agreement, which requires Bristol-Myers to use 'Diligent Efforts' to secure approval from the Federal Drug Administration . . . by December 31, 2020,” read the lawsuit. The complaint alleges BMS’s actions have gravely impacted Celgene's former shareholders, who stand accused of losing out on potential payouts amounting to $6.4 billion due to these tactics.
This set of allegations is not the first of its kind. UMB Bank originally filed suit back in June 2021, claiming BMS’s attempts to drag its feet on Breyanzi's approval led to missing key regulatory deadlines.
Interestingly, last month, BMS managed to score another courtroom win when U.S. District Judge Jesse Furman dismissed one of the CVR lawsuits on the grounds of improper appointment. The court determined UMB Bank lacked standing since it had not been officially appointed as the trustee for affected shareholders. This ruling emphasized the complexity and, frankly, the fragility of the legal frameworks surrounding these types of corporate governance disputes.
“The court does not reach this conclusion lightly,” Furman remarked, alluding to the significant funds at play. Over the past year, BMS has experienced multiple wins related to previous CVR lawsuits, with New York and New Jersey courts dismissing several complaints, though appeals are pending.
This latest lawsuit, attributed to the financial fallout of BMS's alleged negligence, adds another layer of intricacy to the pharmaceutical company's already fraught legal engagements post-Celgene acquisition. Shareholder rights to these contingent payments hinge largely on the interpretation of what constitutes “diligent” efforts from BMS’s perspective, creating significant legal ambiguity.
The stakes are high not just for Bristol Myers Squibb but also for the ambitious shareholders representing Celgene, whose financial well-being could be adversely affected by the outcome of these proceedings. The potential verdict could also influence how pharmaceutical companies approach similar mergers and acquisitions moving forward—particularly where contingent payment structures are involved.
For investors and the pharmaceutical community alike, the outcome might dictate how strict requirements relating to regulatory timelines will be enforced against major pharma players. Current developments are being watched closely, as they embody the broader conversation around corporate governance, shareholder rights, and the commitment of companies to fulfill their financial obligations.
With BMS defending itself vigorously against this latest wave of accusations, it remains to be seen how this situation will evolve. What’s certain is the continual scrutiny on BMS and its operational practices as it navigates the commercial pressures and legal expectations of the market.
