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Bayer, Seattle Genetics Join Forces

Zacks Equity Research

The HealthCare segment of Bayer (BAYRY) recently inked a collaboration agreement with Seattle Genetics Inc. (SGEN). The deal will allow Bayer to gain worldwide rights to Seattle Genetics’ auristatin-based antibody-drug conjugate (ADC) technology along with antibodies to several oncology targets.

Bayer will be paying an upfront and option exercise fees to Seattle Genetics of up to $20 million. Furthermore, Bayer will have to shell out approximately $500 million on achieving certain development and commercialization milestones. Bayer will further pay royalties on worldwide net sales of the products, approved under the collaboration agreement.

As per the terms of deal, Bayer will be responsible for the development, manufacturing and commercialization of all products under the agreement.

Bayer’s collaboration with Seattle Genetics is encouraging. The deal is expected to strengthen prior’s oncology portfolio. However, the oncology market currently has big companies like Roche (RHHBY).

Bayer has been pretty active on the acquisition and collaboration front this year. In Jun 2013, the company’s HealthCare segment was boosted by the acquisition of Conceptus Inc. for $31.00 per share or approximately $1.1 billion in cash.

Conceptus develops and commercializes innovative device-based solutions in permanent birth control. The acquisition ensured the presence of short-term, long-term and permanent contraceptive choices in Bayer’s portfolio for women.

The company also struck a deal to acquire all shares of Germany-based private company Steigerwald Arzneimittelwerk GmbH. Steigerwald Arzneimittelwerk specializes in pharmacy-only herbal medicines. The transaction is expected to close early July this year on the fulfilment of certain conditions, including antitrust clearance.

Bayer, a large-cap pharma company, presently carries a Zacks Rank #3 (Hold). Meanwhile, other large-cap stocks such as Novo Nordisk (NVO) currently look more attractive with a Zacks Rank #2 (Buy).

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