Bristol-Myers Squibb (NYSE: BMY) and AstraZeneca (NYSE: AZN) are teaming up to buy Amylin Pharmaceuticals (Nasdaq: AMLN).

Makes sense to me. I thought it was a good idea a month ago.

Technically, Bristol is buying Amylin and then selling half of the company to AstraZeneca for about $3.4 billion. AstraZeneca has an option to make the deal a full joint venture, giving it an equal weight in "key strategic and financial decisions" for an additional $135 million.

Amylin's investors will only get about $5.3 billion of the approximately $7 billion cost that Bristol and AstraZeneca are splitting, because some of the cost is Amylin's debt and a payment owed to Eli Lilly (NYSE: LLY), Amylin's former partner. At $31 per share, investors are still getting a substantially better deal than the $22 per share that Bristol originally reportedly offered.

At 11 times net product sales last year, Bristol and AstraZeneca aren't stealing the company, but it doesn't look overly expensive, either. The duo already has a partnership to sell Onglyza and a related combination pill, Kombiglyze. The companies should incorporate Amylin's diabetes drugs with a minimal increase in costs for selling the drug, so most of the gross profit will fall to the bottom line. If the duo can ever get their diabetes drug candidate dapagliflozin approved, they'll have a substantial franchise to build from.

Also, keep in mind that valuing the company on 2011 sales doesn't include Amylin's once-weekly diabetes drug Bydureon, which was approved back in January. The drug hasn't gotten off to the fastest start, but if Bristol and AstraZeneca can use their marketing muscle to substantially accelerate the launch, there's upside for the deal.

If that can happen, the big winner of this deal might end up being Alkermes (Nasdaq: ALKS), which gets a royalty on sales of Amylin's Bydureon for contributing the extended release technology. A big pharma partner -- two, in fact -- trumps a small unprofitable biotech any day.

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