Bristol-Myers Squibb ( BMY) and AstraZeneca ( AZN) agreed to a venture to develop a type 2 diabetes drug.

Terms of the agreements include an upfront payment of $100 million by AstraZeneca to Bristol-Myers Squibb. The companies have agreed upon initial development plans for the two compounds, both of which were developed by Bristol. From 2007 through 2009, the majority of development costs will be funded by AstraZeneca. Any additional development costs will be shared equally.

Bristol-Myers Squibb may also receive additional payments of up to $650 million based on development and regulatory milestones for the two compounds. In addition, potential sales milestones up to $300 million per product are also possible. The companies will jointly develop the clinical and marketing strategy of the compounds, and post-launch will share commercialization expenses and profits/losses equally on a global basis, excluding Japan. Bristol-Myers Squibb will manufacture both products and book sales.

The collaboration covers Saxagliptin, a dipeptidyl peptidase-4 (DPP-4) inhibitor currently in Phase III development, and Dapagliflozin (previously referred to as BMS-512148), a sodium-glucose cotransporter-2 (SGLT2) inhibitor, 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.