Bristol-Myers Squibb is buying Celgene. Photo: John Greim/LightRocket via Getty Images

Bristol-Myers Squibb is acquiring Celgene in a stock-and-cash deal worth $74 billion, creating a pharmaceutical giant with roughly $37 billion in annual drug sales.

Why it matters: This is one of the largest drug company buyouts ever, combining two firms that are making a lot of money. However, Celgene has struggled to evolve over the past few years as its top product, the blood cancer drug Revlimid, loses patent protection — which has spurred a sell-off in Bristol-Myers' stock.

The details: Celgene's investors will receive one share of Bristol-Myers' stock and $50 for every share of Celgene they own, and they could earn extra cash if three Celgene drugs obtain federal approval by certain dates.

  • Several Celgene executives would get a huge payday if both companies approve the deal. That includes former Celgene CEO and failed Senate candidate Bob Hugin, who would immediately cash out $185 million and hold an additional 3.7 million shares of Bristol-Myers.
  • Both firms expect to cut $2.5 billion in costs by 2022, and a lot of those likely will come from laying off Celgene's scientists and other staff.

The big picture: Bristol-Myers and Celgene are still highly profitable companies within the health care industry, and the deal would turn Bristol-Myers into one of the largest cancer drug companies in the world.

My thought bubble: It's also a remarkably generous deal for Celgene. The company is heavily dependent on Revlimid, a high-priced drug that makes up two-thirds of its revenue and faces cheaper alternatives in the next few years. Regulators also have criticized Celgene for delaying generic competition. Bristol-Meyers is essentially banking on the success of Celgene's newly acquired drugs, like the cancer ones made by Juno Therapeutics.

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