This article is more than 1 year old

This article is more than 1 year old

Bristol-Myers Squibb is to buy US rival Celgene for about $74bn (£59bn), creating a major pharma company with several blockbuster cancer drugs as competition in the immunotherapy space heats up.

Bristol-Myers pioneered immunotherapy with its Yervoy and later Opdivo, but has come under pressure as Merck’s rival treatment Keytruda moved ahead in market share in lung cancer treatment, the most lucrative oncology market.

The deal will create a company with nine treatments bringing in more than $1bn in annual sales and a significant potential for growth in oncology, immunology and inflammation, and cardiovascular disease.

Talks opened in September, with Bristol-Myers approaching Celgene, according to a source familiar with the matter.

BMO Capital Markets analyst Alex Arfaei said the deal addresses a priority for Bristol-Myers to diversify from immunotherapy, calling the acquisition opportunistic but expensive.

“This proposed deal does not send a confident signal about Bristol’s independent growth prospects,” Arfaei said in a client note.

Increasing competition for main cancer treatments of both companies and clinical setbacks last year have resulted in investor concern over their future prospects.

Celgene shares have lost nearly 40% in value in 2018, while those of Bristol-Meyers have shed just over 15%.

Last year, Celgene bought experimental cancer drug developer Juno Therapeutics for $9bn, betting on its chimeric antigen receptor T-cell therapy, known as CAR-T, in a bid to reduce reliance on its mainstay drug, Revlimid.

Celgene shareholders will receive one Bristol-Myers Squibb share and $50 in cash for each share held, or $102.43 per share, a premium of 53.7% to Celgene’s Wednesday close.

Bristol-Myers shares fell nearly 14% in early trading in New York on Thursday after the proposed deal was announced, while Celgene shares rose 26%.

Sign up to the daily Business Today email or follow Guardian Business on Twitter at @BusinessDesk

Bristol-Myers said it expects to speed up a share repurchase programme of up to about $5bn, subject to the closing of the transaction, market conditions and board approval.

The companies expect to close the deal in the third quarter of 2019. The cash portion will be funded through a combination of cash on hand and debt financing.

The deal is expected to add more than 40% to Bristol-Myers’s earnings on a standalone basis in the first full year after the deal closes.