Pfizer Deal Highlights Bristol's Biotech Swagger

Bristol-Myers' asset sale continued with a huge deal with Pfizer in April. The move demonstrates BMS' biotech-like strategy of monetizing late-stage assets to hedge risk.

Bristol-Myers Squibb Co. continued selling off pieces of its late-stage pipeline in April, notching a monster deal with Pfizer Inc. worth up to $1 billion in up-front payments and milestones. [See Deal]

The move demonstrates Bristol's biotech-like strategy of monetizing its assets prior to commercialization. Deals like this allow the Big Pharma to hedge its development bets while at the same time, perhaps, providing takeover insurance against the overtures of its most likely acquirer, Sanofi-Aventis , its commercialization partner on the blockbuster clopidogrel (Plavix). [See Deal]

Pfizer gets a piece of Bristol's Phase III anticoagulant apixaban, in exchange for $250 million up-front cash and up to $750 million in development and regulatory milestones. The companies will share profits and commercialization expenses equally, and Pfizer will fund 60% of any development costs from January 1, 2007 onward. Apixaban is being studied in prevention of venous thromboembolism and prevention of stroke associated with atrial fibrillation.

Separately, the companies said they would also work together in metabolic disease, in a deal centered on a Pfizer discovery program with potential in diabetes and obesity. There, BMS is paying Pfizer $50 million, and the companies will split profits/losses and all expenses 60-40--with Pfizer picking up the lion's share of the tab and rewards. [See Deal]

Although Pfizer clearly hopes to fill the void left by the failure of torcetrapib, its HDL-raising compound that was yanked from Phase III trials last year (see "Best Laid Plans: Pfizer’s Torcetrapib Tanks," IN VIVO, December 2006 (Also see "Best Laid Plans: Pfizer's Torcetrapib Tanks" - In Vivo, 1 Dec, 2006.)), BMS seems to recognize its own, different strengths: preclinical and clinical development, judging by its recent spate of deals, is its self-determined sweet spot. Commercially, the company has hitched its star to specialty areas, while hedging its bets on the far more expensive and risky business of primary care. The strategy turned out brilliantly for it before; first in its 2004 deal with Merck & Co. Inc. on muraglatizar [See Deal] (the drug failed--but Bristol had bought a $100 million insurance policy from Merck, which nicely repaid at least some of its costs) and then in its more recent deal with AstraZeneca PLC [See Deal], where it dealt 50% of two primary-care diabetes drugs to the UK company in return for, potentially, a much bigger pot of cash: $750 million in pre-commercial milestones. (See "BMS Deals Diabetes Drugs, Solidifies Specialist Stance," IN VIVO, February 2007 (Also see "BMS Deals Diabetes Drugs, Solidifies Specialist Stance" - In Vivo, 1 Feb, 2007.).)

Bristol’s doing what biotechs like to do: take products to proof-of-concept and, now that proof-of-concept brings such enormous values from product-desperate licensees, sell them, unlocking cash and value that would otherwise be trapped for years. In its Pfizer deal it is pursuing a strategy not unlike a much smaller company with a similar proposition: Portola Pharmaceuticals Inc. In early May, Portola pulled in $70 million in Series C funding from existing VCs and a handful of public investors, including Goldman Sachs and T. Rowe Price. [See Deal] Like Bristol, Portola now has sufficient cash to take its Phase II oral Factor Xa inhibitor through proof-of-concept trials in a variety of indications. Bristol’s payday surely was a vote of confidence.

It's a strategy of disaggregation biotechs understand--and pharma, by and large, doesn't. In effect, Bristol, like most biotechs, recognizes that it can't handle the astonishing complexity and risks that now define true vertical integration in the drug industry (among them: the different development, regulatory, manufacturing, marketing and reimbursement challenges, and risk profiles, of large and small molecules and primary-care and specialty businesses).

Bristol also seems to be saying that one of the things it does best is discovery and early-stage development (not primary-care marketing and sales)—an astonishing thought for anyone who knew the R&D impoverishment of Bristol in the 1990s, before it hired the late James Palmer, one of the unsung heroes of Bristol's R&D revival. Gaining rights to Pfizer’s preclinical metabolic disease programs—projects for which Pfizer will probably take on the lion's share of commercialization—underscores this point. Bristol looks largely to be leveraging its development expertise within its own pipeline to expand its reach into that of others.

Even its May early-stage deal with Isis Pharmaceuticals Inc. on PCSK9 inhibitors and backup compounds seems to support the strategy. [See Deal] Presumably, Bristol could have paid the money to buy rights to Isis’ Phase II cardiovascular project, an apolipoprotein B-100 inhibitor, ISIS 301012. But if Bristol’s real skill is in getting to proof-of-concept, not post-proof-of-concept trials or mass marketing, why should it pay post-proof-of-concept prices?

Bristol differs from Portola and its ilk in at least one very important way: the company is making itself rather difficult to acquire. When Jim Cornelius was named interim CEO, and given Bristol's generics disaster with Apotex Inc. and Plavix [See Deal], most people saw his job as cleaning up the company for a sale. (See "Generic Plavix: As Bristol Swoons, Broad Implications," IN VIVO, September 2006 (Also see "Generic Plavix: As Bristol Swoons, Broad Implications" - In Vivo, 1 Sep, 2006.).) Instead--now that he's been persuaded to stay on as permanent, not just interim, CEO (on the same day as the Pfizer deal)--he seems to be trying to clean up the company for continued independent life. With its major primary care products now in the hands of partners, it will be difficult for anyone (perhaps except its partners AZ and Pfizer) to afford a bid--particularly its one-time logical suitor Sanofi-Aventis. In short, although biotechs and their investors like to keep their exit options open, Bristol seems to be aiming for a long life as a new kind of biotech.