By Peter Loftus
Bristol-Myers Squibb Co. (BMY) hopes its commercial muscle will help accelerate sales of new diabetes drug Bydureon, which Bristol stands to obtain with its proposed $5.3 billion purchase of Amylin Pharmaceuticals Inc. (AMLN).
The initial performance of Bydureon since it was cleared by U.S. regulators earlier this year hasn't exactly blown away Wall Street analysts. Bydureon is a once-weekly version of an older diabetes drug, Byetta.
J.P. Morgan's Chris Schott said the drug's initial uptake has lagged that of competing drug Victoza from Novo Nordisk A/S (NVO). Bernstein analyst Tim Anderson said in a research note Monday that Bydureon can be cumbersome to use.
Mr. Schott said combined annual sales for Bydureon and Byetta need to reach $1.5 billion to $2 billion to justify the price Bristol is paying. He said in a research note that target "is not out of the question."
Amylin reported $6.9 million in first-quarter Bydureon sales and hasn't yet reported second-quarter results. Byetta sales for all of 2011 were $518 million. But Bristol executives said Monday that the company and its diabetes-drug partner, AstraZeneca PLC (AZN), could help Bydureon grow.
On a conference call with analysts, Bristol's head of research and development, Elliott Sigal, noted that Bydureon was the first once-weekly medicine for diabetes, giving the product a lead in the marketplace over similar drugs still in development by other companies. He also said a new formulation is in the works that could improve the drug-delivery experience for patients.
Giovanni Caforio, head of Bristol's U.S. pharmaceutical business, said he believes the U.S. launch of Bydureon has been positive, with inroads among specialist doctors known as endocrinologists. He expects Bristol and AstraZeneca to expand the prescriber base to primary-care physicians.
"We think we can do much better now that we have the combined forces of the three companies," he said.
Bristol executives also said they expect to achieve operating-expense savings savings of about 30% from the Amylin deal. In addition, Bristol may realize certain tax benefits resulting from Amylin's net operating losses.
Bristol plans to account for Amylin's U.S. business by booking 100% of product sales, paying 50% of gross profits to AstraZeneca from Bristol's cost of goods sold. Bristol will book 50% of the operating expenses. The accounting treatment will vary outside the U.S.
Bristol sees the deal diluting earnings in 2012 and 2013, but adding to earnings beginning in 2014.
The acquisition of Amylin is the latest in a series of deals Bristol has done in recent years, which have bolstered its R&D and product portfolio. This strategy has helped cushion the recent loss of market exclusivity for Bristol's top-selling drug, the anti-clotting treatment Plavix.
All indications are the strategy will continue even after Bristol shells out money for Amylin. Chief Financial Officer Charles Bancroft said Monday the company will be in a strong financial position after the Amylin deal, and business development remains a top priority.
Write to Peter Loftus at email@example.com