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Bristol-Myers to Pay up to $1.25B for Right to Buy Promedior

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Fibrotic diseases are a strategic area of focus for Bristol-Myers Squibb Company (BMY - Free Report) . The company announced that it has entered into an agreement with Promedior, Inc., gaining an exclusive right to acquire the latter.

The acquisition will add Promedior’s lead candidate PRM-151, a recombinant form of human pentraxin-2 protein, to Bristol-Myers’ pipeline. PRM-151 is being developed for the treatment of fibrotic diseases including idiopathic pulmonary fibrosis and myelofibrosis. The candidate enjoys orphan drug status in both the U.S. and EU for idiopathic pulmonary fibrosis and myelofibrosis. Additionally, the FDA has also granted Fast Track designation to PRM-151 for the myelofibrosis indication.

Under the terms of the agreement, Bristol-Myers will pay up to $1.25 billion, which includes an upfront cash payment ($150 million) for the right to acquire Promedior, an exercise fee payable if Bristol-Myers chooses to exercise its right and development and regulatory milestone payments.

It is expected that phase II studies on PRM-151 for idiopathic pulmonary fibrosis and myelofibrosis will be initiated in the coming weeks. Bristol-Myers can elect to exercise its right to acquire Promedior upon completion of either of these studies.

The acquisition of PRM-151 will complement Bristol-Myers’ growing fibrosis disease portfolio. The company’s recent deals to boost its fibrotic disease pipeline include collaboration with The Medical University of South Carolina (MUSC) and the California Institute for Biomedical Research.

Earlier, in Nov 2014, the company and Denmark-based Galecto Biotech AB announced that they have entered into an agreement whereby Bristol-Myers will have an exclusive option to acquire Galecto Biotech AB for a potential $444 million. The acquisition of Galecto Biotech AB will allow Bristol-Myers to obtain worldwide rights to Galecto’s lead candidate, TD139. The candidate, currently in phase I, is being evaluated for the treatment of idiopathic pulmonary fibrosis and other pulmonary fibrotic conditions.

We are impressed by the company’s efforts to develop its pipeline as generic competition for several drugs including the hepatitis B virus drug, Baraclude, continues to affect its revenues. Hence, the successful development of the pipeline holds the key to replace the lost sales to genericization. We expect investor focus to remain on pipeline related updates.

Bristol-Myers carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the health care sector are Corcept Therapeutics Incorporated (CORT - Free Report) , Valeant Pharmaceuticals International, Inc. and Alcobra Ltd. . While Valeant carries a Zacks Rank #1 (Strong Buy), Corcept and Alcobra hold a Zacks Rank #2 (Buy).

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