Top Stories
Top Stories
Markets

Celgene pops after top proxy advisors recommend Bristol-Myers investors approve buyout

Key Points
  • Institutional Shareholder Services and Glass Lewis recommend Bristol-Myers Squibb shareholders vote in favor of its bid to buy Celgene.
  • The recommendation from ISS comes weeks before Bristol-Myers investors will vote on whether to approve the company's $74 billion buyout plan.
  • Recommendations from proxy advisors like ISS do not dictate how investors vote, but large passive fund managers like Vanguard often weigh their advice.
Bristol-Myers Squibb R&D headquarters.
John Greim | LightRocket | Getty Images

Top proxy advisors Institutional Shareholder Services and Glass Lewis on Friday recommended Bristol-Myers Squibb shareholders vote in favor of its bid to buy peer biotechnology company Celgene, according to CNBC's David Faber.

The recommendation from ISS and Glass Lewis comes just weeks before Bristol-Myers investors will vote on whether to approve the company's $74 billion bid for Summit, New Jersey-based Celgene.

"The transaction also significantly enhances BMY's pipeline, raising the number of late-stage drugs from one to six," ISS said, according to a Bristol-Myers press release Friday. "Both companies' current products and their pipelines are focused on drugs that fight cancer and blood disorders. As such, the merger appears logical strategically, and likely to generate more synergies than one involving disparate pharmacological areas of focus."

Though recommendations from proxy advisors like ISS do not dictate how investors vote, large passive fund managers like Vanguard and BlackRock often weigh their advice when deciding how to vote their shares. Celgene shares rose more than 7 percent, while Bristol-Myers dipped 0.2 percent in choppy trading.

"In particular, the merger represents an attractive, risk-adjusted opportunity to enhance Bristol- Myers' product portfolio by leveraging Celgene's current 'Big Five' late-stage, near-term product launches," Glass Lewis said, according to the same Bristol press release.

However, not everyone is happy with the big-ticket biotech deal.

Investment firm Wellington Management, one of Bristol-Myers largest investors, said last month that it is opposed to the tie-up.

In a rare public comment, Wellington said it "does not believe that the Celgene transaction is an attractive path towards" a business that "secures differentiated science and broadens the future revenue base."

Shortly thereafter, activist investor Starboard Value added that it will leverage its smaller stake in Bristol-Myers to oppose the the deal at a shareholder meeting on April 12. Starboard believes that the deal is not the best path forward for Bristol because Celgene will face headwinds once the patent for its cancer treatment, Revlimid, expires.

"Bristol-Myers is deeply undervalued and the recent announcement of the Company's proposed acquisition of Celgene Corporation is poorly conceived and ill-advised," Starboard CEO Jeffrey Smith wrote in a letter. "There is a better path forward for Bristol-Myers, either as a more profitable standalone company with a more focused, lower-risk strategy, or in a potential sale of the whole Company."

A spokesperson for Wellington Management declined to comment for this story. Starboard Value did not respond to CNBC's request for comment.