Bristol’s Pfizer, AstraZeneca Deals Could Add Up To $2 Billion To R&D Budget

Bristol-Myers Squibb's partnerships with AstraZeneca and Pfizer to develop several late-stage compounds may provide the company with $2 billion to support its research and development initiatives, the firm said.

The company announced an agreement with Pfizer to develop and commercialize its Phase III anticoagulant apixaban April 26. The companies also unveiled a separate deal to co-develop Pfizer drugs for metabolic disorders.

The deal was announced a little over three months after Bristol entered into a similar partnership with AstraZeneca to develop two of Bristol's top diabetes candidates, saxagliptin and dapagliflozin (¹ (Also see "Bristol/Astra Diabetes Deal Further Indicates Bristol Will Stay Independent" - Pink Sheet, 15 Jan, 2007.), p. 16).

Both agreements will lead to a "significant investment in R&D - these two, three compounds potentially could add over $2 billion to our R&D budget over the next couple of years," CFO Andrew Bonfield stated during an April 26 first quarter earnings call.

Under terms of the deal, Pfizer will make a $250 million upfront payment to Bristol, and the firm will also fund 60 percent of all planned development costs, effective January 1, 2007. Bristol may also receive additional payments of up to $750 million based on development and regulatory milestones.

The firms will co-develop the clinical and marketing strategy for apixaban, and will share commercialization expenses and profits and losses equally on a global basis.

While it is somewhat unusual for large pharma companies to enter into such development and marketing agreements, Bristol asserts the strategy helps offset the risks of solo drug development, and at the same time frees up funding for both early- and late-stage pipeline projects.

"This is part of our risk mitigation strategy," Bonfield explained. "I think it's very important we continue to do that, and basically from our perspective, it does allow us to see some upside, because we will have the sales and marketing capability of Pfizer and AstraZeneca - both of whom are very strong sales and marketing companies, and complement ours - so we potentially may see some upside from a top line perspective from their efforts as well."

The Pfizer deal also reflects Bristol's strategy of focusing on specialty products and seeking partnerships for primary care products in an effort to avoid having to maintain a large primary care sales force (² (Also see "Bristol Is Not Bayer: Primary Care Strategy Is “Different, Not Exit”" - Pink Sheet, 20 Sep, 2004.), p. 29).

In addition to announcing the Pfizer deal, Bristol reported that Jim Cornelius, who had been serving as chief executive on an interim basis, has been installed as permanent CEO (see ³ (Also see "Bristol Extends Interim CEO Cornelius’ Reign, But Acquisition Rumors Persist" - Pink Sheet, 30 Apr, 2007.)).

Cornelius noted that the AstraZeneca and Pfizer deals speak to the company's attitude regarding the development of blockbuster drugs in the future. "We do expect R&D to continue to grow but in this ... it's clear that we must participate in the blockbuster space, but I think the industry, knowing the risks and rewards, has to approach blockbusters in a different way."

Bristol "is showing a lead alternative by making a big product even bigger with the right partner," he said. "We're going to gain a lot of development and commercialization expertise and muscle and make [apixaban] an even bigger product."

Echoing Bonfield, Cornelius noted that Bristol "will be using the savings to invest in the pipeline."

"We have significant investments in the label expansions for Abilify , Erbitux , Sustiva , Reyataz , and more recent launches of Orencia and Sprycel ," Cornelius continued. "All of these require important investments and focus, and we're able to do this, as well as bring on some of these high risk but high reward products of the future."

"My focus is to balance our investments in the earlier part of the pipeline to secure long term sustainability. That comes out in [the Pfizer] deal by obtaining a quid pro quo in the metabolic area."

The AstraZeneca deal - with its potential for a large cash infusion - was seen as a sign that Bristol, which has been the target of acquisition rumors in recent months, may remain independent. However, the addition of another big partnership has done little to quiet speculation regarding Bristol's future.

The company noted that with both the Pfizer and AstraZeneca deals, there is no change of control provision, which could make it more attractive to potential suitors.

Under the Pfizer deal, "when we do get to profit split in three or four years' time, the profits will be split 50/50 between ourselves and Pfizer," Bonfield explained. Similarly, Bristol and AstraZeneca will split global profits and losses for the diabetes drugs.

Apixaban, a direct factor Xa inhibitor, is currently being evaluated in the prevention of venous thromboembolism and the prevention of stroke in patients with atrial fibrillation in two Phase III trials.

Phase II studies are underway in treatment of acute symptomatic deep vein thrombosis and for the secondary prevention of cardiovascular events in patients with acute coronary syndrome.

Bristol and Pfizer intend to file for U.S. regulatory approval of apixaban for prevention of VTE in the second half of 2009, followed by filings for additional indications starting in 2010, a Bristol press release said.

"We do not have a projection yet to disclose on exact filing times," Bonfield said. However, the company has an idea of where it stands among its competitors in the development of factor Xa inhibitors.

"We will be somewhat behind Bayer and J&J in deep vein thrombosis, we think we are neck-and-neck in atrial fibrillation, and we may be ahead in acute coronary syndrome."

Bayer/Johnson & Johnson's rivaroxaban is in Phase III for stroke prevention in atrial fibrillation, as well as treatment and long-term secondary prevention of VTE.

Under the metabolic disorders agreement, the companies will collaborate on the research, development and commercialization of Pfizer's metabolic disorders discovery program, including advanced pre-clinical compounds with potential applications for the treatment of conditions including obesity and diabetes.

Pfizer will be responsible for research and early-stage development, and the firms will jointly conduct Phase III development and commercialization activities.

As part of the agreement, Bristol will make an upfront payment of $50 million to Pfizer. In addition, Pfizer will share 60 percent of all development and commercialization expenses, as well as profits/losses, with Bristol picking up the remaining 40 percent.

"The metabolic disorders program complements existing research efforts in another area of significant unmet medical need where Bristol-Myers Squibb is quite active," according to Cornelius.

- Brooke McManus ([email protected])