Zacks_Analysts' Blog : Bristol-Myers Signs Deal - Analyst Blog

Recently, Bristol-Myers Squibb Company (BMY) inked a deal with biopharmaceutical company Ambrx Inc. to bolster its diabetic and cardiovascular pipeline. The deal grants Bristol-Myers exclusive global rights pertaining to the research, development and commercialization of biologics based on Ambrx’s Fibroblast Growth Factor 21 (FGF-21) protein program and Relaxin hormone. Both programs are in preclinical development.

FGF-21, a naturally occurring protein, is a potent metabolic regulator. Results from preclinical studies have revealed that FGF-21 reduces blood glucose apart from increasing good cholesterol and encouraging weight loss. ARX618, or PEG-FGF-21, the lead compound in the FGF-21 program, has almost completed preclinical development.

The other program included in the deal is Relaxin, a naturally occurring hormone. Relaxin has been shown to improve cardiac function according to results from preclinical studies.

Bristol-Myers will shell out $24 million as upfront payment for the deal. Moreover, the pharma major will make milestone payments to Ambrx, based in La Jolla, California, in the event of the two candidates hitting the market.

We note that Bristol-Myers has been looking to expand via acquisitions and partnership deals to counter the loss of revenues that would arise following the genericization of its key drugs, including the blockbuster blood thinner Plavix. Plavix has been co-developed with Sanofi-Aventis (SNY).

Some recent deals include the collaboration with Japanese drug maker Ono Pharmaceutical Co. Ltd, the purchase of the privately-held Amira and the collaboration with Roche Holdings Ltd. (RHHBY).

The deal with Ono gives Bristol-Myers exclusive rights to develop and commercialize cancer candidate, BMS-936558/ONO-4538, in all markets apart from Japan, Korea and Taiwan. Moreover, Bristol-Myers and Ono have also formed a strategic alliance for the joint development and commercialization of Bristol-Myers’ rheumatoid arthritis (RA) drug, Orencia in Japan. By acquiring Amira Pharma, Bristol-Myers enters the market for fibrotic diseases.

Meanwhile, the deal with Roche pertains to the development of a combination drug involving Roche’s vemurafenib and Bristol-Myers’ Yervoy to treat patients with BRAF-mutated metastatic melanoma (skin cancer).

In January 2011, Bristol-Myers inked a deal with Pharmasset Inc., a clinical-stage pharmaceutical company, to develop a combination of Bristol-Myers’ BMS-790052 and Pharmasset’s PSI-7977 for treating patients suffering from the hepatitis C virus (HCV). Both candidates are currently undergoing development.

Our Recommendation

We have a Neutral stance on Bristol-Myers. The stock carries a Zacks #2 Rank (Buy rating) in the short run.