Bayer and Orion Ink Oncology Deal - Analyst Blog

Bayer (BAYRY) inked a global agreement with Orion Corporation for the development and commercialization of ODM-201. ODM-201 is being developed for the treatment of patients suffering from prostate cancer.

Bayer and Orion intend to start a phase III program on ODM-201 later in 2014. The study will evaluate the efficacy and safety of ODM-201 in patients suffering from non-metastatic castration-resistant prostate cancer (nm-CRPC) at high risk of developing metastatic disease which can be identified because of rapid increase in Prostate Specific Antigen PSA.

We note that Bayer will be making an upfront payment of €50 million for the agreement to Orion. Orion will also receive additional cash payments from the German company upon achieving certain development, tech transfer and commercialization milestones. Moreover, Bayer will pay tiered double-digit royalties to Orion on future global net sales of ODM-201 after approval.

As per the terms of the agreement, Bayer will be bearing the majority of costs for the future development of the candidate. ODM-201 will be commercialized globally by Bayer. However, Orion has the option to co-promote the candidate in Europe and will also be responsible for the manufacturing of the candidate.

We note that Bayer already has Nexavar, Stivarga and Xofigo in its oncology portfolio. Last week, Bayer and partner Amgen Inc. AMGN announced that Nexavar was approved in the EU for the treatment of patients suffering from progressive, locally advanced or metastatic, differentiated (papillary/follicular/Hürthle cell) thyroid carcinoma (DTC) that is refractory to radioactive iodine treatment.

Nexavar, a key oncology product at Bayer, is approved in over 100 countries around the globe. In the EU, the drug is approved for two other indications – for the treatment of patients suffering from hepatocellular carcinoma and suffering from advanced renal cell carcinoma who have had unsuccessful interferon-alpha or interleukin-2 based therapy. Bayer reported Nexavar sales of €771 million in 2013.

We are encouraged by Bayer's progress with its oncology portfolio. However, companies like Roche (RHHBY) also have a strong presence in the global market.

Bayer, a large-cap company, currently carries a Zacks Rank #4 (Sell). Some better-ranked stocks include Allergan Inc. AGN, which carries a Zacks Rank #1 (Strong Buy).