Bristol-Myers Squibb Continues Evolution to Specialty BioPharma Through Sale of Its Diabetes Business

Bristol-Myers Squibb Company (BMS) has signed an agreement to sell its global diabetes business that was part of its collaboration with AstraZeneca.

Under terms of the agreement, AstraZeneca will make an upfront payment of $2.7 billion to Bristol-Myers Squibb, with potential regulatory- and sales-based milestone payments of up to $1.4 billion and will make royalty payments based on net sales through 2025. In addition, AstraZeneca will make payments of up to $225 million if and when certain assets are subsequently transferred. The Bristol-Myers Squibb Board of Directors has approved this transaction.

The company also provided 2014 non-GAAP EPS guidance of $1.65 to $1.80. There is no readily accessible or reliable comparable GAAP measure for this non-GAAP EPS information at this time.

“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,” said Lamberto Andreotti, chief executive officer, Bristol-Myers Squibb. “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.”

BMS and AstraZeneca entered into an alliance agreement in January 2007 to enable the companies to jointly research, develop and commercialise select investigational drugs for type 2 diabetes. The alliance has since been expanded to collaborate on additional diabetes products.

BMS will sell its global diabetes business that was part of its collaboration with AstraZeneca, which includes Onglyza (saxagliptin), Kombiglyze XR/Komboglyze (saxagliptin and metformin HCl extended release), dapagliflozin (marketed as Forxiga outside the US), Byetta (exenatide), Bydureon (exenatide extended release for injectable suspension), Symlin (pramlintide acetate) and metreleptin. The agreement also includes the sale of the former Amylin manufacturing facility in West Chester, Ohio, and covers the future purchase by AstraZeneca of Bristol-Myers Squibb’s Mt. Vernon, Indiana, manufacturing facility approximately 18 months following the closing of the transaction.

As part of the transaction, and subject to local consultation and legislation, BMS and AstraZeneca anticipate that substantially all employees of BMS dedicated to the diabetes business will be transferred to AstraZeneca. A number of R&D and manufacturing employees dedicated to diabetes will remain with BMS to progress the diabetes portfolio and support the transition for these areas. BMS will work closely with AstraZeneca to ensure a smooth transition.

The company expects to receive $3.4 billion in the first quarter of 2014, which includes $2.7 billion in an upfront payment and an additional $700 million assuming regulatory approvals of dapagliflozin. The transaction is expected to be accretive to non-GAAP EPS in the near-term and likely dilutive to non-GAAP EPS toward the latter part of the decade.

BMS and AstraZeneca anticipate that the transaction will close during the first quarter of 2014. Closing of the transaction is subject to customary closing conditions, including clearance under the Hart-Scott-Rodino Antitrust Improvements Act. The closing of the transaction as it relates to China is also subject to the satisfaction of certain conditions in the Sino-American Shanghai Squibb Pharmaceutical Company joint venture agreement between BMS China and its joint venture partners.

Goldman, Sachs & Co. is serving as financial adviser to BMS in connection with the transaction and Kirkland & Ellis LLP is its legal adviser.