Thursday, April 26, 2007

Bristol as Biotech

Bristol-Myers Squibb is acting more and more like a biotech, and from various points of view.

First and most obviously, it's focusing on specialist medicines while hedging its bets in the far more expensive and risky world of primary care. The strategy turned out brilliantly for it, first in its 2004 deal with Merck on muraglitizar (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, sending two primary-care diabetes drugs to the UK company in return for, potentially, a much bigger pot of cash. Now, with its Pfizer deal, it's going one step further--selling rights to a primary-care product for a potential $1 billion.

In the second place, it'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. It's a strategy of disaggregation biotechs get--and pharma, by and large, doesn't. In effect, Bristol, like biotechs, are recognizing that it can't handle -- almost no one can -- the astonishing complexity and gambles 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).

Third, Bristol 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. In fact, part of the Pfizer deal brings Bristol development rights to a Pfizer discovery program with potential in diabetes and obesity -- but for which Pfizer will probably take on the lion's share of commercialization: Bristol looks largely to be applying development expertise (expertise evidenced in the earlier Merck and AZ deals).

But in one way, Bristol's program is very unlike a venture-directed biotech: the company is making itself rather difficult to acquire. When Jim Cornelius was named interim CEO, and given Bristol's generics disaster with Apotex and Plavix, most people saw his job as cleaning up the company for a sale. Instead--now that he's been named real, not just interim, CEO--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 Sanofi-Aventis, its partner on Plavix and Avapro. In short, while 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.

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