Bristol-Myers Signs Option Deal to Acquire Galecto Biotech

Bristol-Myers Squibb Company (BMY) and Denmark-based Galecto Biotech AB announced that both companies have entered into an agreement whereby Bristol-Myers Squibb will have an exclusive option to acquire Galecto Biotech AB for a potential $444 million.

The acquisition of Galecto Biotech AB will allow Bristol-Myers Squibb to obtain worldwide rights to the former’s lead candidate, TD139.

TD139, currently in phase I, is being evaluated for the treatment of idiopathic pulmonary fibrosis (IPF) and other pulmonary fibrotic conditions.

As per the terms of the agreement, Bristol-Myers Squibb can exercise its option to acquire Galecto at any time following the execution of the transaction agreement. However, the acquisition cannot be delayed by more than 60 days following the completion of the phase Ib trial. Both companies have agreed on pre-clinical studies and a phase I development plan which will be executed by Galecto AB during the option period.

We note that Bristol-Myers is developing an early-stage fibrosis portfolio. The company already has a pipeline candidate, BMS-986020 – a lysophosphatidic acid 1 (LPA1) receptor antagonist in development for the treatment of IPF.

We are impressed by the company’s efforts to develop its pipeline as generic threats loom large over some of its key drugs.

Bristol-Myers’ hepatitis B virus drug, Baraclude is now facing generic competition as Teva Pharmaceuticals (TEVA) launched its generic version of the drug in Sep 2014. Moreover, the genericization of Plavix and Avapro in 2012 in the U.S. has resulted in a significant loss of revenues.

Hence, the successful development of the pipeline holds the key and we expect investor focus on updates from the same.

Bristol-Myers carries a Zacks Rank #2 (Buy). Other well-placed stocks in the health care sector include AbbVie (ABBV) and Allergan (AGN). Both carry a Zacks Rank #2.

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