NEW YORK—Bristol-Myers Squibb has announced an agreement under which it will sell its diabetes business that was part of its collaboration with AstraZeneca. Per the terms of the agreement, AstraZeneca will pay $2.7 billion up front, with the potential for regulatory- and sales-based milestone payments of up to $1.4 billion. Bristol-Myers Squibb will also receive payments of up to $225 million if and when certain assets are transferred, and will be eligible for royalties based on net sales through the year 2025. The company’s board of directors approved the transaction, which is expected to close in Q1 2014, subject to customary closing conditions.
The alliance agreement between AstraZeneca and Bristol-Myers Squibb began in January 2007, when the companies joined forces to research, develop and commercialize certain investigational drugs for the treatment of type 2 diabetes. Bristol-Myers Squibb will be selling the diabetes business that was part of that collaboration, which includes drugs such as Onglyza, Kombiglyze XR/Komboglyze, dapagliflozin/Forxiga, Byetta, Bydureon, Symlin and metreleptin. The sale of the former Amylin manufacturing facility in West Chester, Oh., is also included in the agreement, and the terms cover AstraZeneca’s future purchase of Bristol-Myers Squibb’s manufacturing facility in Mt. Vernon, Ind., approximately 18 months after the transaction closes.
“This agreement will allow us to further evolve our business model as a leading specialty BioPharma company and increase resources behind the opportunities that drive the greatest long-term value for patients, our company and our shareholders,” Lamberto Andreotti, CEO of Bristol-Myers Squibb, said in a press release. “Today’s announcement puts the diabetes franchise in the capable hands of AstraZeneca and allows us to move to a more simplified operating model consistent with our pipeline and portfolio.”
In conjunction with the sale of Bristol-Myers Squibb’s diabetes business, both companies expect that essentially all related employees will be transferred to AstraZeneca, which amounts to some 4,100 employees. Select R&D and manufacturing employees dedicated to diabetes work will remain at Bristol-Myers Squibb to progress the portfolio and support the transition.
“Diabetes is rapidly becoming a global challenge of epidemic proportions that is expected to affect more than 550 million people by 2030. Much of this impact will be felt in emerging markets where AstraZeneca has a strong presence,” Pascal Soriot, CEO of AstraZeneca, commented in a statement. “In recent years we’ve worked with our alliance partners at Bristol-Myers Squibb to develop an innovative portfolio of non-insulin anti-diabetic medicines that help address the needs of these patients. 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. I would like to extend a warm welcome to the Bristol-Myers Squibb people who are due to join us. My colleagues and I look forward to working with them.”
Bristol-Myers Squibb expects to receive $3.4 billion in the first quarter of next year as a result of this agreement, consisting of the upfront payment and $700 million if dapagliflozin receives regulatory approval. The transaction is expected to be accretive to the company’s non-GAAP earnings per share in the short term and likely dilutive to the same figures later in the decade. The same day this transaction was announced, Bristol-Myers Squibb also announced a dividend increase of approximately 3 percent, beginning in the first quarter of next year.
AstraZeneca forecasts no impact from this transaction on its core earnings per share forecast for 2013, and expects it to be neutral to core earnings per share next year.