Journey to best-in-class post Celgene Corporation acquisition
BMS completed its US$90bn acquisition of Celgene Corporation in November 2019, and since then, BMS Treasury has been on a transformational journey to build a best-in-class organisation. The integration presented a unique set of challenges and opportunities, as it significantly increased the size, complexity and transaction volume of the combined company. As of the close of the transaction, BMS Treasury was responsible for managing US$15bn+ in cash and investments, 500+ bank accounts, US$45bn+ debt and US$12bn+ FX and interest rate risk portfolio.
Technology transformation – “Treasury Forward”
To ensure that BMS has world class processes and technology aligned with BMS Treasury’s vision, in 2021, treasury leadership embarked on a multi-year technology excellence initiative called “Treasury Forward” with a focus on people, process and technology. The following two themes permeated the culture:
“Hyper automate treasury activities” to streamline processes even further and “Accelerate Data Availability and Insights Generation” to foster bold and innovative solutions. Overall, the entire BMS Treasury team participated in over 100 projects, which resulted in BMS Treasury making a quantum leap in process improvement. This helped build a continuous improvement mindset, and multiple benchmarking exercises clearly showed that the Treasury team at BMS was at the forefront of innovation.
“It was clear from the start that no one technology could solve all the challenges we faced. Multiple fit-for-purpose technologies were identified by working closely with the subject matter experts, vendors and internal IT teams, considering the complexity and size of the problem being addressed. Below are some of the key initiatives completed and their outcomes,” explains Sandra Ramos-Alves, Senior Vice-President & Treasurer.
- A Treasury Data Lake (repository of data stored in its raw/refined format) was established in S3 AWS [Amazon Web Services], where data from disparate sources was ingested and refreshed periodically. This significantly improved data availability, which in turn improved their analytical capabilities. In addition, insights could now be generated as data was combined to allow for a holistic view, which was not possible earlier.
- Multiple analytical capabilities were built using Tableau’s visualisation tool. Usage of Tableau dashboards eliminated the need to manually run multiple reports from source systems and then figure out a way to consolidate them.
- Used self-service tools such as Microsoft Power Automate to automate multiple manual workflows.
- End-to-end automation of FX risk management process; enhanced by implementing Atlas FX for exposure identification which was instrumental in expanding the hedging programme to over 30 currencies and daily hedging, trading on 360T and electronic confirmations via Finastra.
- Clinical Trial Insurance Portal: clinical trials are the lifeblood of pharma companies and proof of insurance is mandatory in every country with unique requirements. Clinical trials quadrupled within a year due to M&A activities and additional new studies. An end-to-end automated process for requesting and fulfilling clinical trial insurance requests was developed internally, saving 40+ hours a week in processing time while increasing agility and accelerating clinical trial timelines.
Risk management programmes
Strategic debt refinancing
In Q122, before the historic increase in inflation and the war in Ukraine, the BMS capital markets team proactively took decisive action to issue US$6bn of new debt. The proceeds were then used to strategically repurchase US$4.5bn of existing debt maturing during the loss of exclusivity (LOE) period of key brands.
The remaining US$1.5bn was used to repurchase high-interest debt for interest savings and a positive P&L impact. This freed up cash flow to allow for additional investments in business development transactions, existing pipeline, new product launches and strategically reduced pressure on the company’s liquidity position during the LOE period while producing interest savings on a go-forward basis.
The strategic debt refinance was a huge win as the transaction resulted in accretion to earnings per share (EPS) through annual interest savings, a positive net present value and an extension of the company’s overall weighted average debt maturity by ~two years (~14 years post transaction vs ~12 years pre-transaction). If the team had not acted decisively and proactively, the opportunity to lock in low long-term interest rates would have been lost. The transaction was a significant achievement for not only achieving its strategic objectives but also for the rapid pace of execution (three weeks from inception to execution with approvals from senior management and the company’s Board of Directors) during one of the most opportune execution windows of 2022. Given unprecedented market conditions, the timing and quality of execution of the transaction was impeccable and it resulted in huge appreciation from the external investment community for BMS’s bold decision to go to market when most other market participants were waiting on the sidelines.
Cash flow hedging
The team also significantly accelerated the pace of its 2023 cash flow hedging programme to mitigate currency headwinds and reduce P&L volatility. After assessing the risks associated with geopolitical events and monetary and fiscal policy implementation, the BMS Treasury team decided to complete 2023 cash flow by mid-2022. These hedges insulated earnings from FX volatility and protected the company from potentially cutting other parts of the business. Additionally, the programme was expanded to rolling 24-month tenor hedging additional currencies and additional instruments to hedge longer dated exposures.
Cross-currency swaps
The team further executed a variety of cross-currency swaps to hedge their net investment in six currencies (up from one the year prior). In addition, the BMS Treasury team identified an opportunity to synthetically convert a net investment hedge from a long-dated existing EUR bond into a series of shorter dated cross-currency swaps, allowing the company to monetise the borrowing rate differential between USD and EUR. These hedges generated interest expense savings for 2022 and 2023, while providing additional restructuring flexibility for future market opportunities.
Total return swaps
The team also implemented a total return swap to hedge P&L volatility resulting from equity market performance associated with the non-qualified deferred compensation plans.
D&O insurance
The team successfully negotiated reduced premiums on multiple corporate insurance policies, including D&O, resulting in multi-million-dollar savings for the enterprise.
Benefits delivered
The projects undertaken by the team at BMS have delivered some impressive benefits, including:
- Cost savings.
- Administrative synergies.
- Process efficiencies.
- Increased automation.
- Risk mitigation.
- Improved visibility.
- Increased system connectivity.
“The BMS Treasury team deserves this award because of the scale of innovation touching all areas of treasury. The team made significant strides in the technology footprint with the Treasury Forward programme and implemented innovative solutions to reduce P&L volatility and cost of capital,” says Ramos-Alves.
The success of these endeavours is clearly due to the grit and determination of the BMS Treasury team, with strong sponsorship from senior leadership. All these initiatives were completed in addition to the usual day-to-day activities, as well as the integration efforts resulting from the Celgene acquisition.
BMS Treasury leadership also created a new leadership role within the treasury team responsible for the transformation and technology strategy and its execution. This person was instrumental in accelerating the speed of innovation and developing and leveraging relationships with internal IT teams and external vendors.
A culture of innovation
The entire BMS Treasury team (32) based out of New Jersey and Ireland were involved at various levels in various initiatives. There is a strong culture of innovation in BMS Treasury, and the team is empowered to be bold and work in an agile manner. Senior leadership put significant efforts to cultivate this innovation culture, and this did not happen overnight.
Overall, there has been a paramount shift in processes and management of risk at BMS Treasury and the team has cemented its role as a true, trusted partner to the business. The automation and simplification of processes have allowed the lean team to be agile and more proactive in managing risk for the enterprise.
Congratulations for this truly outstanding achievement.
