Bristol Myers Squibb has agreed to acquire cancer drug developer Mirati Therapeutics for $4.8 billion, and possibly more, in a deal that would strengthen its position as a dominant player in oncology.
The pharmaceutical company, which sells the blockbuster immunotherapy Opdivo, said Sunday it will pay $58 per Mirati share, slightly less than what Mirati’s stock cost at market close Friday but about one-third more than its price Wednesday. On Thursday, Bloomberg reported Sanofi was exploring a deal to buy Mirati, sending its shares higher.
The interest in Mirati is due to its lung cancer drug Krazati, which late last year became the second drug of its type to win a U.S. approval. Krazati targets tumors driven to growth by mutations in a cancer-linked gene called KRAS and competes with a similar drug from Amgen.
While Amgen has had pole position in the market, Mirati is making inroads. According to Bristol Myers, Krazati accounts for 40% of new prescriptions in the treatment setting where it and Amgen’s drug are now used. Both Amgen and Mirati aim to expand their respective drugs’ approvals into earlier treatment and in combination with other medicines.
Behind Krazati, Mirati has three other targeted cancer medicines in clinical testing. One, dubbed MRTX1719, is also being developed for lung cancer, as well as skin and bile duct tumors. Mirati claims it could be first in class and plans to start a Phase 2 study of it in the first half of next year.
Amgen, which hit a regulatory roadblock for its KRAS drug last week, is also developing a therapy akin to MRTX1719, which blocks an enzyme called PRMT5.
Bristol Myers has agreed to pay Mirati investors an additional $12 per share if MRTX1719 is successfully submitted to the Food and Drug Administration for approval within seven years after the merger’s closing.
Worth about $1 billion in total, this payment is structured via a financial instrument known as a contingent value right, or CVR. Essentially a type of security, CVRs are often used when buyers and sellers can’t agree on the valuation of a particular asset. They are relatively common in the life sciences and were used by Bristol Myers in its 2019 deal for Celgene, although the company somewhat controversially avoided a payout.
Bristol Myers said it will finance the acquisition via cash on hand and debt. The companies expect to close the deal by the first half of next year.
“With multiple targeted oncology assets including Krazati, Mirati is another important step forward in our efforts to grow our diversified oncology portfolio and further strengthen Bristol Myers Squibb’s pipeline for the latter half of the decade and beyond,” said Chris Boerner, Bristol Myers’ current chief operating officer and, by Nov. 1, its next CEO.
Two of Bristol Myers’ current top-sellers, Opdivo and the blood thinner Eliquis, are set to lose their patent protection in the second half of the decade, putting billions of dollars in revenue at risk. Eliquis was also one of the first 10 drugs targeted by the U.S. government for Medicare price negotiations, a new power granted by last year’s Inflation Reduction Act over the pharma industry’s fierce objections.
If the deal is completed, Krazati will join a group of newer drugs Bristol Myers is counting on to make up any shortfalls. Among them are its heart failure drug Camzyos and psoriasis treatment Sotyktu.
Oncology also remains a big part of Bristol Myers’ plans for growth. Last year the company spent $4.1 billion to buy Turning Point Therapeutics and a targeted cancer treatment that’s up for FDA approval in late November.