Max Nisen is a Bloomberg Gadfly columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.

(Updated )

In this global game of pharmaceutical hot potato, Bristol-Myers Squibb could be happy it got it back.

Nine years ago, Medarex -- which Bristol-Myers acquired a couple of years later for $2.4 billion -- sent a drug called HuMax-IL8 to Danish biotech Genmab. In 2012, Genmab passed that drug to a small Swedish biotech, Cormorant Pharmaceuticals. Now Bristol-Myers is bringing the drug back home, announcing Tuesday that it will pay up to $520 million for Cormorant. 

The deal may add to the company's blockbuster portfolio of cancer drugs that bolster the immune system, acquired from Medarex in the first place and expected to pass $10 billion in annual sales by 2020. Plus any downside is relatively limited. Bristol-Myers is paying only $95 million up front and in near-term milestone payments; the rest comes if the drug hits longer-term milestones. 

Onward and Upward
The stock price of Bristol-Myers has more than tripled since it acquired Medarex in 2009
Source: Bloomberg

Bristol-Myers is in good shape for deals. It had nearly $8 billion in cash on hand as of its last filing and has a relatively modest 1.34 total debt to adjusted Ebitda ratio compared with an average of 1.74 for its peers. And it's not desperate for a deal that will pay off in the near term. Analysts expect Bristol-Myers will have large pharma-leading sales growth of 10.4 percent a year from 2016 to 2019, driven in large part by its lead cancer drug, Opdivo. 

The Cormorant deal is definitely for the long term. Its early stage trial for HuMax-IL8 in solid tumors is still recruiting patients, according to But the real potential, according to Bristol-Myers, is in the possibility that the drug can boost other immune-system enhancing cancer treatments. 

First-generation immunotherapy drugs like Opdivo can be extremely effective. But they only work in a limited number of patients and cancers. The hope is that combinations with other drugs will make them more useful broadly. 

Bristol-Myers has a big head start in immunotherapy. Analysts expect Opdivo to outsell its closest competitor by $1.8 billion this year. It's also ahead in combinations; Opdivo and an earlier Bristol-Myers drug called Yervoy remain the only such drugs to be approved as a duo so far. 

Out Front
Sales of Bristol-Myers's immunotherapy drugs are expected to substantially outstrip those of its competitors
Source: Bloomberg

This deal is part of its bid to maintain its dominance as many more types of double and triple drug combinations are tested. Bristol-Myers has a number of other early stage immunotherapy candidates, and this adds yet another distinct approach. 

Having a broad spectrum of internally owned assets is just good economics. Owning a backbone drug like Opdivo plus others that add to its effectiveness could increase both sales and pricing power. Payers are more likely to buy a wholly owned discounted combination than pay full price to different companies for each drug. There's likely to be a big advantage for companies with broad portfolios.

Some might see the drug's long development history as a negative, and Medarex did let it go. But it did so when cancer immunotherapies, let alone combinations of them, were still a distant hope. Moreover, Bristol-Myers has people that are most likely familiar with this drug and can nurture its development.

The last time Bristol bet on Medarex, it paid off big time. It's nice to have one of its drugs that slipped away back in the fold. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

(Adds details about composition of deal in third paragraph.)

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Max Nisen in New York at

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