AstraZeneca Buying Bristol-Myers Stake in Diabetes JV for Up to $4.1 Billion

Andrew Klips |

Bristol-Myers Squibb Co. (BMY) said early Thursday that it has come to terms with AstraZeneca (AZN) to sell its stake in a diabetes joint venture between the two biotechs as it aims to simplify its operating model and focus on new cancer treatments.  The companies entered into the JV in 2007 with a focus on developing new drugs for Type 2 diabetes and have since expanded the relationship for additional diabetes products.

The possibility of a deal between the two arose in November when Bristol-Myers said that it was halting discovery work in diabetes and hepatitis C to pursue other investments where it see significant growth drivers, such as in its immuno-oncology program.  On Wednesday, the Wall Street Journal cited sources close to the matter as saying a $3-billion deal was nearing completion.

Shares of AZN closed ahead by 2.1 percent at $58.84 on Wednesday, while shares of BMY jumped ahead 2.9 percent to $52.59.

Per the deal, AstraZeneca will make an upfront payment of $2.7 billion to Bristol-Myers with additional milestone payments that can reach another $1.4 billion.  Bristol-Myers is also eligible for royalty payments on net sales through 2025 and additional payments up to $225 million upon the transfer of certain assets to AstraZeneca.

Bristol-Myers said it expects to receive the $2.7-billion payment in the first quarter of 2014 as well as another $700 million payment, assuming that the FDA approved dapagliflozin, a SGLT2 inhibitor for the treatment of diabetes being jointly developed by BMY and AZN.  The drug is already marketed in Europe under the brand name Forxiga.  The FDA rejected approval of the drug two years ago, but last Friday the advisory panel to the FDA voted 13-1 to recommend approval now that additional safety studies have been conducted.

The JV included development of numerous drugs that will now beef-up AstraZeneca’s thin pipeline.  Upon completion of the transaction (expected Q1 2014), AstraZeneca will own intellectual and global rights to develop, manufacture and commercialize the diabetes business, including Onglyza, Kombiglyze XR/Komboglyze, dapagliflozin, Byetta, Bydureon, Symlin and metreleptin.

AstraZeneca also gets the former Amylin manufacturing facility in West Chester, Ohio and the agreement covers the future purchase of Bristol-Myer’s manufacturing facility in Mt. Vernon, Indiana about 18 months following the closing of the transaction.

“Together with Bristol-Myers Squibb we concluded that consolidating ownership of the diabetes portfolio would benefit both companies and allow us to better serve the needs of diabetic patients. Today’s announcement reinforces AstraZeneca’s long-term commitment to diabetes, a core strategic area for us and an important platform for returning AstraZeneca to growth,” said Pascal Soriot, chief executive at AstraZeneca, in a statement this morning.

AstraZeneca does not see the acquisition as having any impact on core earnings in 2013 or 2014.

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Companies

Symbol Name Price Change % Volume
BMY Bristol-Myers Squibb Company 55.23 -0.01 -0.02 8,191,230
AZN Astrazeneca PLC 26.27 0.42 1.62 7,212,763
AOMOY AO Mosenergo ADR (Sponsored) 1.00 0.00 0.00 0

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