Bristol-Myers buying hepatitis C drug developer for $885 mln

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Pegylated-interferon lambda is in midstage clinical testing, and if approved could be an important contributor to its future growth, Bristol-Myers said. The latest deal adds Recothrom, a drug used to reduce bleeding during surgeries, to Bristol-Myers' portfolio.

Bristol-Myers is depending on its string of pearls initiative that includes a combination of acquisitions and licensing deals.

In August 2009, Bristol-Myers bought Medarex Inc. for $2.4 billion, the largest String of Pearls acquisition to date, significantly expanding its oncology and immunology pipeline. In January 2010, Bristol-Myers announced an agreement with Allergan Inc. to develop and commercialize an oral medication for the treatment of neuropathic pain.

Bristol-Myers expects the purchase of ZymoGenetics to reduce its earnings per share by about $0.03 in 2010 and by about 7 cents next year.

“We expect ZymoGenetics’ pipeline and biologics capabilities to complement and enhance our existing efforts in Hepatitis C, oncology and immunoscience,” said Elliott Sigal, chief scientific officer of Bristol-Myers.

The acquisition by Bristol-Myers should boost its pipeline for hepatitis C that is forecast to grow into a multi-billion dollar market.

Hepatitis C is a contagious liver disease that results from infection with the Hepatitis C virus and is transmitted through direct contact with blood, primarily through sharing contaminated needles to inject drugs. According to Centers for Disease Control and Prevention, an estimated 3.2 million persons in the United States have chronic Hepatitis C virus infection.

Morgan Stanley & Co. Inc. is serving as financial advisor to Bristol-Myers in connection with the acquisition.

Following the transaction, Denmark-based healthcare company Novo Nordisk divested its ownership of ZymoGenetics. Novo Nordisk, which has licensing deals with ZymoGenetics, owns about 22.14 million shares, or about 26 percent of the Seattle-based company.

Last week, Fitch Ratings lowered its outlook for Bristol-Myers to “Negative” from “Stable”, saying the company will face a period of significant drug patent expiry when it loses U.S. market exclusivity for its top selling blood thinner Plavix and blood pressure drug Avapro.

The outlook reflects the uncertainty of the credit profile for the subsequent periods to the drug patent lapses, with the largest stress anticipated to occur in 2013, Fitch had said.

Bristol-Myers’ other products include the psychiatric disorder treatment Abilify, Atripla, Reyataz and Sustiva for HIV, Erbitux and Sprycel for cancer, and Onglyza for diabetes.

Shares of Bristol-Myers ended Tuesday’s regular trading session up 0.11 percent at $26.61.