Recently, Bristol-Myers Squibb Company ( BMY ) announced that it has expanded its partnership with the Chinese pharmaceutical company Simcere Pharmaceutical Group ( SCR ). Per the terms of the new deal, the companies will co-develop Bristol-Myers' cardiovascular candidate BMS-795311. We remind investors that the two companies had inked a deal to co-develop cancer candidate BMS-817378 late last year.
Per the terms of the expanded agreement, financial terms of which were undisclosed, Simcere will develop and commercialize BMS-795311 in China while Bristol-Myers will retain the rights in all other markets. The BMS-817378 deal terms were similar.
We note that BMS-795311 is currently undergoing pre-clinical development. The strengths of Bristol-Myers and Simcere are expected to expedite the development of the candidate which inhibits the development of cholesteryl ester transfer protein (CETP). The prevention of the development of CETP aids in stopping heart diseases by raising the level of good cholesterol.
We note that the deal is mutually beneficial. Simcere stands to benefit from its association with a leading pharmaceutical player such as Bristol-Myers. On the other hand, Bristol-Myers would benefit from its presence in a fast developing (emerging) market like China.
Emerging markets represent significant commercial opportunities with factors like pricing pressure in the EU and intensifying generic competition affecting sales in large pharmaceutical markets. Bristol-Myers, like many other pharma players, is facing a generic threat on many of its key drugs, including the blockbuster blood thinner Plavix. This will result in significant loss of revenues. Consequently, the focus on emerging markets makes strategic sense for Bristol-Myers.
Bristol-Myers is also looking to combat the generic threat by introducing new products. The company has tasted a great deal of success in this regard in 2011.
Currently, we have a long-term Neutral recommendation on Bristol-Myers, which carries a Zacks #3 Rank (short-term Hold rating).