Bristol Myers Squibb (BMS), a major U.S. pharmaceutical company, is facing a hefty 6.7 billion USD lawsuit from former Celgene shareholders. A federal court has ruled that the trial must proceed, addressing allegations that BMS deliberately delayed drug approvals to avoid payouts to shareholders.
On Friday, reports emerged that Judge Jesse Furman of the U.S. District Court for the Southern District of New York partially denied BMS’s motion to dismiss on Monday. The judge allowed the plaintiffs to continue their case on key issues. This decision means UMB Bank will press forward with the lawsuit against BMS, representing former Celgene shareholders.
The legal battle stems from BMS’s 2019 acquisition of Celgene, a 80.3 billion USD deal. As part of the purchase, BMS offered existing Celgene shareholders Contingent Value Rights (CVRs) – a performance-based bonus. Each CVR promised an additional 9 USD in cash if three Celgene-developed drugs received Food and Drug Administration (FDA) approval by specified deadlines.
The drugs in question are Breyanzi for lymphoma, Ozanimod for multiple sclerosis, and Abecma for multiple myeloma. Timely approvals for these drugs could have resulted in a collective payout of approximately 6.7 billion USD to shareholders.
Notably, Breyanzi received FDA approval on February 5, 2021 – five weeks after the contractual CVR deadline. This delay rendered the CVRs void, leaving shareholders empty-handed.
UMB Bank alleges that BMS failed to make diligent efforts as contractually obligated. They claim the company intentionally slowed the approval process to miss deadlines and prematurely delisted the CVRs from the New York Stock Exchange, hindering holders from exercising their rights. BMS maintains that delays were due to regulatory and procedural factors, asserting they upheld their end of the bargain.
In a 24-page ruling, Judge Furman recognized UMB’s standing to sue on behalf of CVR holders. He dismissed BMS’s argument that insufficient effort doesn’t constitute a significant contract breach.
Furman also determined that a jury should decide whether the Breyanzi approval delay and CVR delisting breach the contract and violate good faith obligations. BMS has been given three weeks to file an official response.
This ruling leaves BMS grappling with a 6.7 billion USD legal uncertainty for the foreseeable future. The lawsuit’s outcome could result in substantial damages or settlement costs for the company, potentially reshaping how CVRs are structured and managed in future mergers and acquisitions.