Bristol-Myers Squibb Company (BMY) recently announced that it has inked a deal with UK-based company Reckitt Benckiser Group plc for three years. As per the terms of the deal, Reckitt Benckiser will get exclusive rights to commercialize several over-the-counter (:OTC) drugs in Bristol-Myers’ portfolio targeting Latin American markets (primarily Mexico and Brazil).
The products covered under the agreement include Picot (antacid), Tempra (pain and fever), Micostatin (antifungal), Graneodin (cough and cold), Dermodex (rash), Luftal (gas) and Naldecon (cold and flu symptoms).
As per the terms of the agreement, Bristol-Myers will receive an upfront payment of $438 million from Reckitt Benckiser. Additionally, Bristol-Myers will also be eligible to receive royalties of the sales of products covered under the agreement.
The agreement includes an embedded option as per which Reckitt Benckiser can purchase all the right to these products for $44 million at the end of 3 years.
We are positive on the deal. We believe that Bristol-Myers will continue pursuing deals and acquisitions throughout 2013 to strengthen its portfolio thereby minimizing the impact of genericization.
Even though the genericization of Plavix and Avapro has resulted in a significant loss of revenues for Bristol-Myers, we believe that the company’s diversified business model combined with its strong financial position will help in countering the headwinds.
The company got a boost with the US approval of its anti-clotting drug Eliquis (apixaban) in Jan 2013. Moreover, in Nov 2012, type II diabetes drug, Forxiga, was approved in the EU.
Bristol-Myers carries a Zacks Rank #3 (Hold). However, other large cap pharma stocks such as Sanofi (SNY), Bayer (BAYRY) and Eli Lilly and Company (LLY) look more attractive and carry a Zacks Rank #2 (Buy).
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