Bristol-Myers bails out of 'Diabetes Inc.' in $4.1B sell-out to AstraZeneca

When Bristol-Myers Squibb got out of the diabetes development business last month, the logical follow-up question was this: Will the company bag diabetes sales, too? 

The answer is yes. Bristol-Myers ($BMY) is selling out of its 6-year-old diabetes partnership with AstraZeneca ($AZN) for up to $4.1 billion.

For a Big Pharma, the turnabout was speedy. As recently as last summer, Bristol-Myers was fully committed to its diabetes business. That's when the company engineered a major expansion of the partnership, with the $5.3 billion buyout of diabetes specialist Amylin Pharmaceuticals.

AstraZeneca then shelled out $3.4 billion, bringing Amylin and its products--Byetta (exanatide) and its longer-acting cousin Bydureon--into the joint venture. Early this year, the two partners brought their diabetes marketing teams together in one location that AstraZeneca CEO Pascal Soriot called "Diabetes Inc."

Now, the British drugmaker will take Diabetes Inc. forward on its own. AstraZeneca will pay $2.7 billion up front, plus another $1.4 billion if the diabetes business hits sales and development targets. Bristol-Myers will also collect royalties through 2025.

With diabetes growing quickly worldwide, the opportunity is enormous. But the business is not without its challenges. Competition in the market is fierce, with longtime specialist Novo Nordisk ($NVO) and Big Pharma rivals Sanofi ($SNY) and Merck ($MRK) all hunting after market share. In fact, as The Wall Street Journal notes, AstraZeneca booked a $1.7 billion charge today, thanks to Bydureon's floundering sales. Onglyza (saxagliptin), its DPP-4 inhibitor, has scrabbled for a hold in the market but remains far outsold by Merck's Januvia (sitagliptin).

Meanwhile, the partnership's newest product, dapagliflozin, has suffered from a delay at FDA, which declined to approve it earlier this year. The drug won European approval soon after--under the brand name Forxiga--but ramping up sales in the EU isn't a quick proposition, thanks to each country's own reimbursement decisions. Indeed, the two partners last week pulled Forxiga in Germany after hitting an impasse in pricing negotiations.

Dapagliflozin won backing from an FDA advisory panel last week, though, so things are looking up for the drug. And AstraZeneca is obviously confident enough of success with it and the rest of its lineup to put up $2.7 billion for the chance.

Soriot sees diabetes as one of AstraZeneca's best chances for growth. Since he took the reins last fall, Soriot has been buying in drug candidates right and left but has done few deals that will yield immediate sales. Taking control of the diabetes venture could do just that; as the WSJ points out, Bristol booked $1.2 billion in sales from the partnership's four main products for the first 9 months of the year, while AstraZeneca posted $546 million.

And as Soriot said in a statement, AstraZeneca figures it can leverage its expertise in emerging markets to funnel its diabetes treatments to the fast-growing numbers of patients there. "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," Soriot said. "I would like to extend a warm welcome to the Bristol-Myers Squibb people who are due to join us."

So, just what happens to the Diabetes Inc. employees? AstraZeneca says that about 4,100 of the Bristol-Myers workers dedicated to diabetes will eventually move over. That includes workers from Amylin, 400 of whom lost their jobs earlier this year. 

- read the AZ press release
- get more from the WSJ (sub. req.)
- More on AZ's takeover of 2 U.S. plants from FiercePharma Manufacturing

Special Reports: 10 Top-Selling Diabetes Drugs of 2012 | Top Biopharma M&A deals of 2012 - Bristol-Myers Squibb and AstraZeneca/Amylin

Suggested Articles

Turns out Procter & Gamble didn’t want Pfizer’s consumer health unit after all. But it did want Merck KGaA’s.

Private equity firm, in exclusive talks with Sanofi, says it'll invest to pump up Zentiva into an "independent European generics leader."

With suitor Takeda circling Shire, the Dublin-based target has pulled off a deal of its own.