Appeals court restores shareholders’ massive claims against Bristol Myers Squibb.
A federal appeals court has brought back a $6.7 billion lawsuit accusing Bristol Myers Squibb of delaying government approval for several drugs and costing former Celgene shareholders billions of dollars. The decision reverses a previous lower court ruling that had thrown out the case and allows the dispute to move forward. The lawsuit grew out of Bristol Myers’ $80.3 billion purchase of Celgene in 2019. As part of that deal, some Celgene shareholders received contingent value rights, known as CVRs. Those rights gave holders the chance to receive an additional $9 per share if Bristol Myers secured US Food and Drug Administration (FDA) approval for three drugs by set deadlines.
The drugs included Liso-cel, now sold under the name Breyanzi, along with Ozanimod and Ide-cel. Shareholders who held the CVRs became concerned that the drugmaker would not obtain the required approvals in time. If the deadlines were missed, the shareholders stood to lose the extra payments tied to the rights.
A group of CVR holders hired UMB Bank to serve as a new trustee and bring claims against Bristol Myers. UMB later accused the drugmaker of failing to make a serious effort to obtain the approvals within the required time limits. The bank also accused Bristol Myers of removing the CVRs from the New York Stock Exchange before holders had a chance to enforce their rights.
Bristol Myers obtained FDA approval for Breyanzi to treat non-Hodgkin lymphoma on February 5, 2021. The approval came about five weeks after the deadline connected to the CVRs. That delay became a central part of the shareholders’ case.
The drugmaker has denied that it intentionally delayed the approval process. In a court filing, Bristol Myers rejected claims that it failed to make the required effort or worked to weaken the rights of CVR holders.
The lawsuit was dismissed in September 2024 by U.S. District Judge Jesse Furman in Manhattan. UMB appealed that decision, leading to Thursday’s ruling from the 2nd U.S. Circuit Court of Appeals. The three-judge appeals panel found that UMB had the legal right to bring the case even though there had been an error in the way the bank was appointed as trustee. The court found that Bristol Myers, the former trustee and most of the people who held beneficial interests in the CVRs had approved UMB’s appointment.
The appeals court rejected the idea that Bristol Myers was somehow unaware of who had selected UMB. The decision allows the trustee to continue pursuing the claims on behalf of the affected shareholders.
The case includes allegations that Bristol Myers breached its agreement with CVR holders and failed to act in good faith. UMB is also challenging the company’s handling of the rights before their removal from the stock exchange.
The ruling comes while another lawsuit involving UMB and Bristol Myers is already moving forward. Furman allowed UMB to pursue several claims in that separate case in December, including allegations involving breach of contract and a failure to act in good faith. It was not immediately clear how Thursday’s appeals ruling would affect that case or whether the two matters could overlap.
The dispute could eventually require the court to examine whether Bristol Myers took sufficient steps to secure the drug approvals and whether the company’s actions affected the payments that former Celgene shareholders expected to receive. The ruling only restores the lawsuit after the lower court’s dismissal. The claims will still have to be addressed as the case continues.
Sources:
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