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Biopharmaceutical company, Tranzyme Pharma , announced recently the completion of its chemistry-based drug discovery partnership with pharma giant Bristol-Myers Squibb Company (BMY - Analyst Report).

Following the completion of the deal, Tranzyme Pharma transmitted the compounds to Bristol-Myers for their further development across several drug targets. As per the terms of the deal, Tranzyme Pharma retains the option to pursue few selected collaboration targets for internal development.

We note that the partnership, established in 2009, aimed to make use of Tranzyme Pharma's proprietary chemistry technology, Macrocyclic Template Chemistry, for discovering novel active macrocycles against multiple diverse biological targets, which are not easy to access with the help of conventional small molecule chemistry.

As per the terms of the deal, Tranzyme Pharma was responsible for early lead compound discovery. Bristol-Myers Squibb has multiple responsibilities including optimizing the identified lead compounds. The Pharma major is also responsible for the completion of the preclinical and clinical development of all the drugs generated out of the partnership.

The responsibility for their successful commercialization also rests with Bristol-Myers. Tranzyme Pharma stated in its press release that the milestone payments under the deal (without royalties and sales milestones) could amount to approximately $80 million for each target program.

We are positive on Tranzyme Pharma’s tie-up with a leading pharma player like Bristol-Myers. Tranzyme Pharma, which carries a Zacks #3 Rank (Hold) in the short run, focuses on the discovery, development and the commercialization of novel, mechanism-based therapies for treating patients suffering from upper gastrointestinal motility disorders.

Currently, we have a long-term Neutral recommendation on Bristol-Myers. The stock carries a Zacks #4 Rank (Sell) in the short run. Large-cap pharma companies that currently look better-positioned include Novo Nordisk (NVO - Analyst Report). Novo Nordisk carries a Zacks #2 Rank (Buy).

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