The company disclosed that Bristol Myers-Squibb
The deal seems like a good one. Bristol Myers is paying $8 million up front and will fund Albany Molecular's future research into the compounds to the tune of $10 million. The pot gets sweeter if the medications advance in development. Albany Molecular would receive $66 million per drug for the first two compounds and $22 million for every additional compound, in addition to royalties on sales if any drugs are commercialized.
As an added bonus, Albany Molecular's chemistry services business may benefit from the pact. Bristol Myers agreed in the pact to hire Albany Molecular for additional chemistry services, including manufacturing, if the drug giant outsources in those areas. After a difficult 2004, Albany Molecular's contract service business has bounced back this year. Adding Bristol Myers as a client would only help that momentum.
Notably, Albany Molecular is not new to the licensing game. The company owns the rights to the active ingredients in the allergy drug Allegra, licensed by Sanofi-Aventis
However, the Allegra cash cow is now threatened. Barr Pharmaceuticals
Albany Molecular's contract services side is improving, and Allegra royalties won't disappear. Even so, the company seems to be facing some tough times ahead.
For more on Albany Molecular:
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Fool contributor Brian Gorman is a freelance writer in Chicago. He does not own shares of any companies mentioned in this article.