(Reuters) - Activist hedge fund Starboard Value LP followed Bristol-Myers Squibb Co’s second-largest investor, Wellington Management, in opposing the drugmaker’s $74 billion purchase of biotech Celgene Corp on Thursday, sowing further doubt on what would be the largest pharmaceutical takeover ever.

FILE PHOTO: Logo of global biopharmaceutical company Bristol-Myers Squibb is pictured on the blouse of an employee in Le Passage, near Agen, France March 29, 2018. REUTERS/Regis Duvignau/File Photo

The shareholder unrest raises the stakes for Bristol-Myers and Chief Executive Giovanni Caforio, who is turning to dealmaking to revive the New York-based company’s fortunes after its most important growth driver, the cancer immunotherapy Opdivo, fell behind Merck & Co rival Keytruda in overall sales and the most lucrative lung cancer arena.

Bristol-Myers shareholders will get to vote on the Celgene acquisition on April 12. Wellington’s and Starboard’s statements kick off a race between proponents and opponents of the deal to win over a majority of Bristol-Myers shareholders.

Starboard reported on Thursday that it now owns 4.4 million shares, or 0.3 percent of Bristol’s outstanding shares, while Wellington owns an 8 percent stake. But with a reputation as one of corporate America’s most effective agitators, Starboard is seeking to win over more Bristol-Myers shareholders.

In a letter to Bristol-Myers shareholders on Thursday, Starboard said it plans to vote against what it called a “poorly conceived and ill-advised” deal. It said Bristol should instead consider other options, including selling itself.

Starboard also criticized the record of the company’s management, saying the drugmaker has underperformed the S&P 500 index by more than 40 percent over Caforio’s tenure.

“These results are not reflective of a management team and board of directors that has earned the right, in our view, to execute on a ‘bet the company’ acquisition,” Starboard Chief Investment Officer Jeffrey Smith wrote in the letter.

The hedge fund said it would sue Bristol for internal documents in Delaware court to gain a better understanding of how management decided to make the offer for Celgene.

Starboard’s letter came only hours after Wellington came out against the deal, criticizing it as too risky and expensive. Such a public stance was unusual for one of the world’s largest fund managers, with $1 trillion in assets.

Sources have told Reuters that Dodge & Cox, Bristol-Myers’ fifth largest shareholder, is also unhappy with the deal.

The developments fueled uncertainty among investors over the cash-and-stock deal’s prospects. Celgene shares closed down 8.6 percent at $83.12 on Thursday, while Bristol-Myers shares rose 1.4 percent to $51.66. The spread between Celgene’s share price and the value of the Bristol-Myers bid nearly doubled to around 20 percent.

Bristol-Myers on Thursday again defended the Celgene deal, through which it hopes to create a market leader in the lucrative treatment of cancer by combining two of the world’s biggest-selling portfolios of drugs that treat the disease, as well as adding assets in immunology and inflammation.

It said the combined company would have six drugs with expected near-term launches - five from the Celgene pipeline - representing over $15 billion in annual revenue potential, as well as strong early-stage experimental assets.

But Starboard painted a more negative picture, suggesting a scenario in which Celgene’s “risky” pipeline assets fail to make up for lost revenue from blockbuster drugs that lose patent protection.

SHAREHOLDER OVERLAP

Bristol-Myers holds a tactical advantage in defending the deal, based on shareholder overlap. Around two-thirds of Bristol-Myers’ top 100 shareholders - owning nearly half of the company’s shares - also have stakes in Celgene, according to Refinitiv data. Bristol-Myers shareholders will be less concerned about the company overpaying for the deal if the acquisition target is also owned by them.

“Even with the combined voting power for both Wellington and Starboard Value, we believe there continues to be a high hurdle for opposition to reach majority,” said Andy Hsieh, a William Blair analyst.

Were Bristol-Myers shareholders to shoot down the deal, the company would have to pay Celgene a $2.2 billion breakup fee.

That would be a small consolation to Celgene, whose recent string of clinical setbacks resulted in the loss of more than half of its market value between October 2017 and last month, when the deal was announced.

An expensive experimental Crohn’s disease drug touted as a future multibillion-dollar product failed, and expected approval of Celgene’s high-profile multiple sclerosis drug ozanimod has been delayed.

In addition, revenue from Celgene’s flagship multiple myeloma drug, Revlimid, which brought in nearly $10 billion last year, is set to start dropping in 2022 when it loses U.S. exclusivity.