In a bid to boost its flagging late-stage pipeline, AstraZeneca has linked up with Bristol-Myers Squibb to get access to two of its diabetes compounds in a deal that could end up costing $1.35 billion.

The Anglo-Swedish firm, which has suffered a string of disappointments in late-stage trials of late, is to make an initial payment of $100 million to help develop and commercialise saxagliptin, a dipeptidyl peptidase-4 inhibitor which is in Phase III, and dapagliflozin, a sodium-glucose cotransporter-2 inhibitor in Phase IIb development.

Under the terms of the alliance, the majority of development costs will be funded by AstraZeneca from 2007 through 2009. B-MS may also receive additional payments of up to $650 million based on development and regulatory milestones for the two compounds, while potential sales milestones up to $300 million per product are also possible. The companies say they will jointly develop “the clinical and marketing strategy of the compounds, “and post-launch will share commercialisation expenses and profits/losses equally on a global basis, excluding Japan. There, Otsuka Pharmaceutical Co has signed an exclusive rights deal with B-MS for saxagliptin.

AstraZeneca spokesman Steve Brown told PharmaTimes World News that the deal was consistent with the firm’s new strategy of focusing more sharply on core research areas, namely diabetes and obesity, infection, inhalation projects, analgesia and oncology. He also said that the group had acknowledged that “perhaps we do have a gap” at the business end of the R&D portfolio and “late-stage is somewhere we have to concentrate on.”

In that respect, AstraZeneca has succeeded with this diabetes deal (the firms are hoping to file for US regulatory approval of saxagliptin during the first half of 2008) and Mr Brown noted that the firm had won what had been a very competitive fight with other drugmakers to seal the pact with B-MS, which was particularly impressed with AstraZeneca’s sales and marketing expertise. The spokesman concluded by saying that the agreement also further highlights AstraZeneca’s “externalisation” strategy, noting that it has struck nine deals, each worth potentially $1 billion or more (not including the B-MS pact) since December 2005 in a bid to strengthen its pipeline.

Both AstraZeneca and B-MS will be hoping their luck has changed as they have suffered some serious setbacks in late-stage diabetes trials recently, as neither the former’s Galida (tesaglitazar) and B-MS’ Pargluva (muraglitazar) made it through Phase III. The two firms are also facing generic competition to key products so the importance of getting this drugs approved is clear. If given the green light, saxagliptin will likely be the third DPP-4 inhibitor to hit the market, behind Merck & Co’s Januvia (sitagliptin) and Novartis’ Galvus (vildagliptin).