Bristol Will Buy Diabetes Drug Maker

By JONATHAN ROCKOFF

Bristol-Myers Squibb Co. will buy diabetes drug maker Amylin Inc. in a $7 billion deal that will intensify the competition to treat the growing number of people afflicted with the disease.

New York-based Bristol said late Friday it would pay $31 a share to snatch up Amylin, which had been under pressure from investor Carl Icahn to pursue a deal. The price-tag is $9 a share higher than what Bristol had reportedly offered for Amylin earlier in the year.

In connection with the deal, AstraZeneca PLC will expand its diabetes collaboration with Bristol and pay at least $3.4 billion.

The tie-ups will create a bigger player better able to compete with diabetes powerhouses like Novo Nordisk SA, Merck & Co. and Sanofi SA. Bristol had $583 million in world-wide diabetes sales last year, while Amylin had $622 million, according to EvaluatePharma.

Combined, the two companies would form the sixth-largest diabetes drug maker in the world. Yet they'd still lack the heft of category leader Novo, which notched $9.4 billion in world-wide sales of anti-diabetic treatments and had 27% of the overall market, EvaluatePharma said.

Some 280 million people world-wide have diabetes, and 1 in 10 Americans, Bristol said.

Amylin recently won Food and Drug Administration approval for a long-acting drug for Type 2 diabetics called Bydureon, which competes in one of the biggest and fastest-growing segments of the $35 billion global diabetes market. The San Diego company also sells Byetta, taken twice daily.

The diabetes market is one of the pharmaceutical industry's brightest, and sales are expected to rise to $58 billion world-wide by 2018, according to EvaluatePharma.

Competition has become fierce. For instance, Novo is working on a new insulin designed to rival Sanofi's blockbuster Lantus insulin. Novo also sells a therapy called Victoza that Bydureon is trying to compete with.

Bristol and AstraZeneca already sell two diabetes drugs, the pill Onglyza and a combination of Onglyza and metformin. "Now our alliance with AstraZeneca can offer three of the modern approaches to" treating the disease, Elliott Sigal, Bristol's research and development chief, said in an interview.

Providing a roster of diabetes treatments is becoming important to capture share in the crowded marketplace. Bristol executives noted that Bydureon's label says it both controls blood sugar but also reduces weight—an attractive selling point with patients, doctors and health plans.

But the partnership faces a steep climb to outpace top-selling products like Merck's Januvia or once-daily Victoza, Bydureon's direct competition.

"We also believe the class itself will see accelerated growth now that a once weekly agent is in the marketplace," said Giovanni Caforio, who leads Bristol's U.S. business.

"The broadening of our diabetes collaboration with Bristol-Myers Squibb is another important step towards creating a leadership position in the treatment of a disease with growing unmet medical need that is reaching epidemic proportions in many areas of the world," Simon Lowth, interim chief executive officer of AstraZeneca, said in a statement.

Both Bristol and AstraZeneca have been looking for new products to offset the loss of sales from patent losses. The blood thinner Plavix, one of the world's top-selling medicines which Bristol helped sell, recently started facing generic competition. Analysts have been encouraging AstraZeneca to do deals to make up for one of the industry's steepest patent cliffs.

Amylin has been on the auction block since it and Eli Lilly & Co. severed a partnership last year and then Bydureon won approval in January from the U.S. Food and Drug Administration.

Mr. Icahn, who owns nearly 10% of Amylin's shares, sent a letter lambasting Amylin after it rejected Bristol's earlier offer as too low.

Under terms of the deal, Bristol will pay $5.3 billion for Amylin and take on an additional $1.7 billion in debt and money owed Lilly. Bristol expects to launch the tender offer in seven business days and close within about six weeks.

"As you look at our own diabetes franchise, this fits in very well," Chief Financial Officer Charles Bancroft said in an interview.

Write to Jonathan Rockoff at Jonathan.Rockoff@wsj.com

A version of this article appeared June 30, 2012, on page B2 in the U.S. edition of The Wall Street Journal, with the headline: Bristol Will Buy Diabetes Drug Maker.