Bristol-Myers To Buy Zymogenetics

Bristol-Myers Squibb will acquire ZymoGenetics in a deal that values the company at $885 million. The acquisition is the latest in a series of targeted purchases designed to bolster BMS’s portfolio of biopharmaceuticals.

The acquisition builds on an earlier collaboration between the companies around treating the hepatitis C virus (HCV). Last year, BMS licensed ZymoGenetics’ PEGylated interferon-λ, now in Phase II trials to treat HCV. The immunotherapy uses the same cell-signaling pathway as interferon-α, one of two drugs currently used to quell an HCV infection, but it is expected to have milder side effects.

In a note to investors, Deutsche Bank stock analyst Barbara Ryan called the deal “another solid ‘string of pearls’ acquisition,” referring to BMS’s strategy of small acquisitions of technologies and drug candidates. Previous “pearls” have come in the form of both outright purchases—Adnexus, Kosan Biosciences, and Medarex, for example—and licensing deals for specific compounds of interest, such as its pact this spring with Allergan for a pain medication in Phase II trials.

The deal “makes sense strategically and financially,” Leerink Swann stock analyst Seamus Fernandez says. He forecasts interferon-λ sales to reach $275 million in 2015 and $400 million the following year. Seattle-based ZymoGenetics also contributes one approved drug, the coagulation protein Recothrom, and an IL-21 protein in Phase II trials as a melanoma treatment.

From a strategic standpoint, the purchase strengthens BMS’s virology portfolio. BMS is one of several companies trying to develop combinations of small-molecule antivirals in order to eliminate the need for interferon and ribavirin, the current standard of care in treating HCV (C&EN, May 3, page 12).

But analysts say there’s still room for ZymoGenetics’ interferon-λ to treat the “null responders”—patients who fail to respond to the standard of care. New Phase III data released last week for Vertex Pharmaceuticals’ telaprevir, expected by most industry observers to be the first protease inhibitor for HCV to reach the market, highlighted the limitations of the new treatments. In the telaprevir trial, the virus was fully suppressed in just 29% of the null responders.