AstraZeneca will pay up to $4.1B for Bristol's share of their diabetes pact

AstraZeneca CEO Pascal Soriot

As Bristol-Myers Squibb ($BMY) backs away from diabetes development, AstraZeneca ($AZN) has stepped up to buy its partner's stake in the pair's joint venture, agreeing to hand over as much as $4.1 billion in a move that will add some promise to a thinning pipeline.

Under the deal, AstraZeneca will pay out an initial $2.7 billion with another $1.4 billion tied to regulatory and commercial milestones, the companies said. About 4,100 Bristol employees will join AstraZeneca's ranks, including many who came over in the pair's $7 billion deal for Amylin last year.

The move comes as little surprise in light of Bristol's announcement last month that it would get out of the diabetes discovery business, but it was still welcome news for AstraZeneca's investors, boosting the company's shares to about $60 in premarket trading, their highest value since 2006.

For AstraZeneca, the deal gives it exclusive rights to on-the-market treatments like Byetta and Bydureon and late-stage assets including the promising dapagliflozin and the orphan drug metreleptin. (Bristol is so confident in dapagliflozin that it's including a $700 million approval-triggered milestone payment in its forecast for the first quarter of next year.) And while late-stage failures have rended many of AstraZeneca's hopes in fields like oncology and depression, the company believes a deeper dive into diabetes will help right the ship, CEO Pascal Soriot said.

"Diabetes is rapidly becoming a global challenge of epidemic proportions that is expected to affect more than 550 million people by 2030," Soriot said in a statement. "... Together with Bristol-Myers Squibb we concluded that consolidating ownership of the diabetes portfolio would benefit both companies and allow us to better serve the needs of diabetic patients."

As for Bristol, the cash-out gives it another opportunity to revamp its approach to R&D. Last month, the company announced it would pull the plug on discovery efforts for diabetes, hepatitis C and neuroscience, focusing instead on en-vogue immunotherapies to treat cancer and drugs "that drive the greatest long-term value for patients," CEO Lamberto Andreotti said.

"Today's announcement puts the diabetes franchise in the capable hands of AstraZeneca and allows us to move to a more simplified operating model consistent with our pipeline and portfolio," Andreotti said in a statement.

- read AstraZeneca's announcement
- and here's the Bristol statement