AstraZeneca is going all in with its diabetes business by paying what could amount to $4 billion or more for the rest of a joint venture with Bristol-Myers Squibb.
The British company Thursday announced an agreement calling for payment of $2.7 billion and up to $1.4 billion in regulatory, launch and sales-related payments. AstraZeneca has also agreed to pay various sales-related royalty payments up until 2025. In addition, AstraZeneca may make payments up to $225 million when certain assets are later transferred.
AstraZeneca has administrative, manufacturing and distribution operations in Delaware.
The agreement reinforces AstraZeneca’s long-term commitment to patients with diabetes an important platform for returning AstraZeneca to growth, the company stated. AstraZeneca has been hammered by the end of patent protection for blockbuster drugs. That has led to plans to cut 1,200 jobs in Delaware as part of a realignment that also includes putting a for sale sign on a part of its office campus in north Wilmington
Diabetes is a growing problem throughout the world, due to an aging population and its relationship to obesity.
About 4,100 Bristol-Myers Squibb employees dedicated to the diabetes business, including those at Amylin, will eventually move to AstraZeneca. A number of R&D and manufacturing employees dedicated to diabetes will stay with Bristol-Myers Squibb to progress the diabetes portfolio and support the transition for these areas.
Pascal Soriot, Chief Executive Officer of AstraZeneca said: “Diabetes is rapidly becoming a global challenge of epidemic proportions that is expected to affect more than 550 million people by 2030. Much of this impact will be felt in emerging markets where AstraZeneca has a strong presence. In recent years we’ve worked with our alliance partners at Bristol-Myers Squibb to develop an innovative portfolio of non-insulin anti-diabetic medicines that help address the needs of these patients.
The diabetes operation of the two companies posted a pre-tax loss of $400 million in 2012 and AstraZeneca will take a $1.7 billion non-cash charge to reflect the lower value of the operation after revenues from one drug came In below expectations. AstraZeneca says it still has confidence in the drug Bydureon and says the write-down will have no affected on cash flow.
The transaction is expected to become effective in January 2014.
