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Roche and Inovio Tie Up

Zacks Equity Research

Roche (RHHBY) recently announced that it entered into a license agreement with Inovio Pharmaceuticals, Inc. (INO) whereby both companies will collaborate to commercialize Inovio's multi-antigen DNA immunotherapies for the treatment of prostate cancer and hepatitis B.

The agreement provides Roche license to Inovio's DNA-based prostate cancer vaccine INO-5150 and hepatitis B vaccine INO-1800. Additionally, the license allows Roche to use Inovio's CELLECTRA electroporation technology for delivery of the vaccines. Moreover, Roche obtained an option to license additional vaccine opportunities in the field of oncology.

As per the terms of the deal, Roche will make an upfront payment of $10 million to Inovio followed by milestone payments of $412.5 million. The agreement also allows additional development milestone payments to be paid to Inovio if Roche develops the vaccines for other indications. Inovio is entitled to royalties on product sales.

The preclinical data on both the vaccines was encouraging.

Meanwhile, we are encouraged by the Roche’s efforts to boost its already strong oncology portfolio. Earlier this month, Roche announced that a subcutaneous formulation of its oncology drug, Herceptin, was approved in Europe for treating patients suffering from HER2+ breast cancer.

We note that Roche has a solid position in the breast cancer market. Apart from Herceptin, Roche has drugs like Perjeta and Kadcyla in its kitty for the treatment of patients suffering from HER2+ breast cancer.

The EU approval of the subcutaneous formulation of Herceptin should further strengthen the breast cancer franchise at Roche which generated sales of CHF 3.3 billion in the first half of 2013, up 11% year over year.

Roche currently carries a Zacks Rank #3 (Hold). Right now, Jazz Pharmaceuticals (JAZZ) and Ironwood Pharmaceuticals (IRWD) look attractive with a Zacks Rank #2 (Buy).

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