If a drug brand is suddenly worth less, then pieces of that brand are worth less, too. Perhaps so much less that they're no longer worth the effort. That appears to be the rationale for Bristol-Myers Squibb ($BMY) and Sanofi's ($SNY) revamped agreement on the bloodthinner Plavix and blood-pressure remedy Avapro.
After all, both companies were spending time, money and other resources on promoting the drugs--and to a decreasing yield. Bristol-Myers' Plavix revenues plummeted by 60% during the second quarter, now that the megablockbuster faces copycat rivals. Sanofi predicts that Plavix and Avapro generics will erase $1.85 billion in profits this year.
So, Sanofi is taking over--mostly. The French drugmaker will take back the rights to Avapro and its combination-therapy sister Avalide, worldwide. Sanofi also gets worldwide Plavix rights, except for in the U.S. and Puerto Rico. Bristol-Myers keeps those, at least through 2018, and gets royalties on Sanofi's Plavix and Avapro sales through 2018. At the end of that year, Sanofi is on the hook for a $200 million terminal payment.
For Bristol-Myers, stepping away from the previous partnership gives it the opportunity to focus its efforts elsewhere. The company just agreed to buy diabetes specialist Amylin Pharmaceuticals ($AMLN) and amp up its diabetes partnership with AstraZeneca ($AZN). And if its new bloodthinner, Eliquis, is approved as expected next year, it will be marketing that product in concert with Pfizer. "This revised agreement simplifies operations and supports Bristol-Myers Squibb's ability to focus on delivering our promising, innovation-driven R&D portfolio," CEO Lamberto Andreotti said in a statement.
For its part, Sanofi gets the chance to spread the two drugs in new markets and grow elsewhere, mostly unfettered. Global operations chief Hanspeter Spek said the revised partnership "further supports Sanofi's strategic priorities," which includes plenty of expansion in fast-growing markets. In Latin America, for instance, the company just bought Colombia's second-largest generics maker, Genfar. "We see an opportunity for Sanofi to operate with more freedom and an easier coordination in several emerging markets," Bryan, Garnier analyst Eric Le Berrigaud told Bloomberg.
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