Bristol-Myers Squibb and AstraZeneca entered into a collaboration to develop and commercialize two investigational compounds discovered by BMS for the treatment of Type 2 diabetes.

Saxagliptin, a dipeptidyl peptidase-4 (DPP-4) inhibitor, is currently in Phase III development. Pending successful completion of the program, the companies plan to file for U.S. regulatory approval during the first half of 2008. Dapagliflozin, a sodium-glucose cotransporter-2 (SGLT2) inhibitor, is currently in Phase IIb development. The collaboration on these compounds is worldwide, except for Japan. Should either party develop additional DPP-4 or SGLT2 compounds, the other company can elect to add those compounds to the collaboration.

Under the terms of the agreement, AZ will make an upfront payment of $100 million to BMS. From 2007 through 2009, AZ will fund the majority of development costs and any additional development costs will be shared equally. BMS may also receive additional payments of as much as $650 million based on development and regulatory milestones, as well as potential sales milestones of as much as $300 million per product. The companies will jointly develop the clinical and marketing strategy of the compounds, and will share commercialization expenses and profits/losses equally on a global basis, excluding Japan. BMS will manufacture both products and book sales.

“This collaboration provides BMS the opportunity to maximize our primary care assets, and it is aligned with our corporate strategy to concentrate R&D efforts on serious diseases such as diabetes while maintaining commercial focus on specialists and high prescribing primary care physicians,” said Jim Cornelius, chief executive officer, BMS. “BMS has a strong legacy in treating Type 2 diabetes and cardiovascular disease, and we look forward to leveraging the combined expertise of our company and AZ to further develop and commercialize these compounds.”

David Brennan, chief executive officer of AZ, said, “This deal represents a significant step in delivering our externalization strategy as it gives us access to two strategically important late-stage compounds in an area of high unmet medical need. We believe that BMS’s recognized contributions to diabetes research will complement our existing strengths. Additionally, our combined expertise will develop new areas of opportunity for both companies and the potential to bring real medical benefit to the wider community.”