Bristol-Myers Inks Deal

Recently, Bristol-Myers Squibb Company (BMY - Analyst Report) inked a deal with a Chinese pharmaceutical company, WuXi PharmaTech (WX - Snapshot Report) to conduct stability studies of new small-molecules. The studies will support the global marketing applications submitted by Bristol-Myers for the candidates.

Under the terms of the agreement, the Chinese company will build and operate a facility in Shanghai for storing and testing stability samples in addition to performing other tasks for Bristol-Myers.

Through this deal, whose financial terms were not disclosed, Bristol-Myers aims to strengthen its presence in China. Bristol-Myers aims to utilize WuXi Pharma’s efficient technology to further strengthen its robust pipeline.

We note Bristol-Myers has entered into many collaborations in the recent past to strengthen its pipeline. Earlier in the year, the New York-based pharma major, inked a deal with Pharmasset, Inc., a clinical-stage pharmaceutical company, to develop a combination of two candidates, Bristol-Myers’ BMS-790052 and Pharmasset’s PSI-7977, for treating patients suffering from the hepatitis C virus.

Late last year, Bristol-Myers signed a pact with Japanese company Oncolys BioPharma Inc. The deal with Oncolys allows Bristol-Myers exclusive global rights to manufacture, develop and commercialize festinavir, a once-a-day, orally available nucleoside reverse transcriptase inhibitor currently in mid-stage development for HIV. Moreover, Bristol-Myers acquired biotechnology firm, ZymoGenetics Inc. for $9.75 per share in cash last year.

We believe that all these deals/acquisitions are aimed at countering the loss of revenues resulting from the genericization of its key drugs. Bristol-Myers lost patent protection on products worth approximately $4 billion over the past few years.

The loss of exclusivity of key drugs including the blockbuster Plavix will result in a significant loss of revenues for Bristol-Myers. Plavix, co-developed with Sanofi-Aventis (SNY - Analyst Report) is scheduled to go off patent on May 17, 2012.

Our Recommendation

We currently have a Neutral recommendation on Bristol-Myers, which is supported by a Zacks #3 Rank (short-term Hold rating).

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