) inked a European licensing agreement with Oncova Therapeutics,
Inc for the anti-cancer compound rigosertib. Per the agreement,
Baxter has the right to commercialize rigosertib in the European
Union as well as in other European nations.
Rigosertib is presently in a Phase III study for the diagnosis
of an unusual hematologic malignancy termed Myelodysplastic
Syndromes (MDS). Elementary results for the MDS study are expected
in the second half of 2013. It is also under a Phase II/III study
for pancreatic cancer.
According to statistics, MDS affects three out of 100,000 in the
European population annually while pancreatic cancer is highly
aggressive with low survival rates. With increasing mortality rates
in Europe due to pancreatic cancer, rigosertib offers a significant
commercial opportunity to Baxter.
Baxter's innovative and extensive portfolio underpins its growth
performance. Management believes that rigosertib complements the
company's existing portfolio. Baxter generates roughly 60% of its
total revenues from the overseas market, with Eurpean operations
contributing approximately 32% in 2011. The European licensing
agreement underlines the company's core strategy to expand its
Baxter has an extant $50 million equity investment with Oncova
and it can engage in the development and commercialization of
rigosertib at its discretion. The company will record its upfront
payment of $50 million to Oncova as a special pre-tax in process
research and development expenditure in the third quarter of 2012.
Apart from sales milestones and royalties, Oncova could receive up
to $515 million as pre-commercial development and regulatory
milestones for the MDS and pancreatic cancer indications.
We derive comfort from the solid performance of most of Baxter's
operating platforms. Despite resilience in Plasma Proteins and
Antibody Therapy sub-segments, we are concerned about a slightly
somber outlook for hospital spending and tightening of
reimbursement. We also account for the unfavorable impact of
foreign exchange translation and possible dilution associated with
the company's acquisitions of Baxa and Synovis.
Improved execution has lifted sentiment somewhat toward Baxter. It
is a good bet for value investors willing to wait as fundamentals
improve further. Among others, the company competes with
Becton, Dickinson and Company
) in certain niches.
Baxter currently retains a Zacks #3 Rank, which translates into
a short-term Hold rating.
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