Biotech Values

[DewDiligence]

BMY, Otsuka Extend Abilify US Marketing Deal Through 2015

[The extended deal runs until Apr 2015 when Abilify goes off-patent in the US.]

http://www.reuters.com/article/marketsNews/idINN0638477620090406

›Mon Apr 6, 2009 9:09am EDT
By Ransdell Pierson

NEW YORK, April 6 (Reuters) - Bristol-Myers Squibb Co said on Monday it will sell its Abilify schizophrenia drug more than two years longer than expected, helping to shore up profits after the company's $5.6 billion-a-year Plavix blood clot preventer faces generic competition in mid-2012.

Abilify, with global sales last year of $2.15 billion [actually, the annualized run rate in 4Q08 was $2.4B] is Bristol-Myers' second-biggest product and one of its fastest growing [4Q08 sales were up 31% year-over-year]. The company had been expected in November 2012 to return U.S. sales rights to the medicine's discoverer, Otsuka Pharmaceutical Co of Japan.

But in a revision to the drugmakers' decade-old licensing deal, Bristol-Myers said it will now be allowed to sell Abilify in the United States until it loses patent protection in April 2015.

"The extension of the U.S. agreement for Abilify will help Bristol-Myers address an important financial need in 2013," said company spokeswoman Tracy Furey, referring to the first full-year that Plavix faces generics in the United States.

Analysts polled by Reuters Estimates on average have predicted company profits will fall 16 percent to $1.88 per share in 2013 as Plavix -- sold in partnership with Sanofi-Aventis -- loses perhaps three-fourths or more of its U.S. sales to cheaper copycats.

Bristol-Myers has not made a profit forecast for 2013, but on Monday said the revised licensing deal with Otsuka will contribute at least 30 cents per share to company profit in 2013 and 2014.

"The agreement ... will help build our earnings base for 2013 and transition us to an expected period of growth in 2014 and beyond," Lamberto Andreotti, chief operating officer of Bristol-Myers, said in a statement.

Miller Tabak analyst Les Funtleyder said the revised deal is "a positive" that will help Bristol-Myers withstand the coming Plavix patent cliff, but was not a big surprise because companies often change terms of licensing deals.

"Bristol is taking small steps to prepare for the post-Plavix era, as opposed to huge deals, so this is consistent with that strategy," Funtleyder said.

Funtleyder cautioned, however, that Abilify's sizzling past growth could be threatened in 2011, when inexpensive generic forms of Eli Lilly and Co's rival Zyprexa schizophrenia drug become available.

Bristol-Myers long been considered a leading takeover candidate, with some analysts suggesting the New York drugmaker would become a far more tempting target if it finds a way to better offset expected sales declines of Plavix.

Under Bristol-Myers' revised deal with Otsuka, its longtime neuroscience partner will begin participating in Bristol-Myers' oncology business, with an option to co-market its Sprycel leukemia drug and to help further develop Bristol's Ixempra breast cancer medicine.

Sprycel, introduced in 2006, has annual sales of about $300 million and is still growing at a fast clip. Ixempra, recently launched in the United States, had sales last year of $101 million. Bristol-Myers last month withdrew its European marketing application for Ixempra, given regulatory concerns whether its benefits outweigh its risks.

Under the revised licensing agreement, Bristol-Myers said it will pay Otsuka $400 million cash upfront.

Bristol-Myers, now entitled to 65 percent of U.S. Abilify sales, will see its share decline to 58 percent in 2010, to 53.5 percent in 2011 and 51.5 percent in 2012, under the new terms. But Otsuka, which currently shoulders no expense for marketing Abilify, will be responsible during the period for 30 percent of such costs.

Beginning January 2013, Bristol-Myers will receive half of all net Abilify revenue, up to $2.7 billion of the drug's sales, and a declining share of sales above $2.7 billion. Otsuka will assume half of Abilify marketing expenses during the same period.

Bristol-Myers reaffirmed it expects full-year 2009 earnings per share of $1.58 to $1.73 and compounded annual earnings growth of 15 percent between 2007 and 2010.‹