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Roche Collaborates with RQx Pharma

Zacks Equity Research

Roche (RHHBY) recently entered into a drug discovery collaboration with privately-held RQx Pharmaceuticals, Inc. through its wholly-owned subsidiary, Genentech.

The collaboration is primarily for the discovery and development of novel drug compounds for an undisclosed target.

As per the collaboration agreement, RQx will receive an upfront payment along with being entitled to receive research and development milestone payments for $111 million.

Additionally, RQx will also receive royalties on sales of products resulting from the collaboration.

RQx develops broad-spectrum small molecule antibiotics to combat serious life threatening infections including those caused by multi drug-resistant Gram-negative bacteria.

We note that Genentech is a part of the Pharmaceuticals Division of the Roche group with its primary focus on oncology along with immunology, neuroscience, metabolism and infectious disease.

Roche had inked a global licensing agreement with biotechnology company Afraxis, Inc. in Jan 2013 for developing candidates for an undisclosed novel target.

The licensing agreement provides Roche with exclusive rights to develop and commercialize Afraxis' proprietary compounds on a worldwide basis.

As per the agreement, Afraxis is eligible for an upfront fee along with research, development and commercialization milestone payments totaling $187.5 million.

Roche also obtained approval from the US Food and Drug Administration (:FDA) in Jan 2013 for Avastin (bevacizumab) for a new indication in metastatic colorectal cancer (mCRC).

We are positive on the current developments at Roche. Roche carries a Zacks Rank #4 (Sell).

However, other large cap pharma stocks, such as Bayer (BAYRY), Novo-Nordisk (NVO) and Eli Lilly and Company (LLY) currently look attractive with a Zacks Rank #2 (Buy).

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