Monday, April 30, 2007

BMS: Unlocking value from late stage compounds

The IN VIVO Blog has praised Bristol's moves regarding unlocking value from its phase III compounds by licensing them to other companies. The latest such move by BMS was in licensing anticoagulant apixaban for as much as $1B in upfront and licensing payments from Pfizer.

Looks like a good move by BMS under most possible outcomes. If the product turns out to be a an "Exubera", then BMS comes out ahead. If it turns out to be a medium size product, then for BMS, the value of getting $1B early (helps with dividend payments and other investments which hopefully earn a good return) probably makes it worthwhile. The only scenario where this may not be such a good deal (and even then only from an opportunity cost point of view) is if the product turns out to be another Plavix and BMS is forced to split $6B (or something in that range) with Pfizer. However given that J&J+Bayer have a similar product (rivaroxaban ) further along in development, makes it all the more unlikely that this product will be a Plavix.

One other interesting point that occurs to Pharmalyst is that BMS seems to be rotating its licensing deals among other big-pharma partners. Besides Pfizer, there was that deal with AZ a few months back and that ill-fated collaboration with Merck over Pargluva. Having so many partners is likely to keep BMS independent and these JV deals give BMS the cash to pay a high dividend and therefore a high stock price making an acquisition harder (even Sanofi is rumored to have balked at the price). These appear to be the real reason behind these deals rather than Bristol's stated intent (see this) to focus on specialty and move away from a primary care model..Pharmalyst believes that BMS - the company that sells Plavix (& previously sold Pravachol) already had a strong primary care presence. Also if you look at their financial statements (see here), their SG&A expenses have stayed not really declined - so at least their spending doesn't give any dramatic indication that they are cutting back on a lot of their primary care activities like reps etc.

Expect BMS to stay an independent company for a long time - temporary or permanent CEO not withstanding?

1 comment:

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