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You've probably heard the expression, "It ain't over until the fat lady sings." For Celgene (NASDAQ: CELG), the fat lady is on stage ready to belt out her solo.
Although there was some uncertainty along the way with Bristol-Myers Squibb's (NYSE: BMY) plan announced in January to acquire Celgene, the deal is pretty much a sure thing now. Shareholders of both companies have approved the transaction. The only real hurdle remaining is to obtain regulatory approvals for the acquisition, which shouldn't be a problem.
Within the next three months or so, Celgene's shares will no longer trade on the Nasdaq stock exchange. The biotech will be absorbed into Bristol-Myers Squibb (BMS). But is it already too late to buy Celgene stock?
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Opportunity for big gains is gone
Technically, of course, you could buy shares of Celgene right up to the point that the acquisition by BMS closes. However, the reality is that the opportunity for big gains is probably gone.
Investors who own Celgene stock stand to receive $50 in cash and one BMS share for each share of Celgene when the deal is finalized. BMS trades at a little over $47 per share. Adding the cash to be received to that amount is roughly $1 above Celgene's current share price. That gap will almost certainly shrink the closer we get to the closing date for the acquisition.
There is one potential scenario, though, that could translate to solid gains by buying Celgene right now. If Bristol-Myers Squibb stock soared, it would push Celgene's shares higher as well.
BMS does have a couple of potential catalysts on the way. The big drugmaker reports its second-quarter results on July 25. CEO Giovanni Caforio also stated in the company's Q1 conference call that results from a phase 3 study evaluating a combination of Opdivo and Yervoy as a first-line treatment for non-small cell lung cancer will be announced this summer. But the odds of a huge surge in BMS' share price probably aren't very high.
An important extra
Investors do have another reason to buy Celgene stock now, though, regardless of what happens with Bristol-Myers Squibb's share price. There was a sweetener thrown into the acquisition deal. Celgene shareholders will also receive one tradeable contingent value right (CVR) for each Celgene share they own.
This CVR is worth $9 per share if the U.S. Food and Drug Administration (FDA) approves three drugs developed by Celgene -- ozanimod, liso-cel, and bb2121. The catch is that the FDA must approve all three drugs by certain dates. Ozanimod and liso-cel must win FDA approval by Dec. 21, 2020, while bb2121 must be approved by March 31, 2021.