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Baxter Collaborates with Momenta - Analyst Blog

Baxter International ( BAX ) recently announced a worldwide collaboration with Momenta Pharmaceuticals to create and launch biosimilars. Biosimilars copy pre-existing, branded biologics utilized in the treatment of many illnesses such as auto-immune disorders and cancer. The deal is expected to be fulfilled in the first quarter of 2012 subject to standard closing clauses including passage of waiting period as per Hart-Scott-Rodino Antitrust Improvements Act.

Following this agreement, Momenta will utilize its experience in areas such as process and product development. Baxter will harness its expertise in fields like sterile injectables.

Per the agreement, Baxter will pay $33 million upfront to Momenta for working together on as many as six follow-on biologic compounds. The company may incur more payments in future in order to develop the compounds, subject to the fulfillment of regulatory, technical and other milestones with regards to all six offerings.

Baxter believes that its agreement with Momenta provides synergy to its early-stage pipeline and permits it to enhance its leadership in biologics. Momenta stated that it was keen to have Baxter as a working partner.

The news regarding Baxter still remains mixed. On the positive side, Baxter's focus on life-sustaining products, which are not commoditized, partly insulates it from an economic downturn. The company is able to generate recurring revenues, and consistent cash flow, due to its focus on chronic diseases.

On the flip side, despite recent stability in Plasma Proteins and Antibody Therapy sub-segments, we are concerned about sluggishness in sales, a slightly somber outlook for some hospital spending and tightening of reimbursement.

Improved execution has lifted sentiment somewhat toward Baxter. The company is a good bet for value investors willing to wait as fundamentals improve further. Among others, it competes with Becton, Dickinson and Co. ( BDX ) in certain niches. We are currently Neutral on the stock, backed by a short-term Zacks #3 Rank (Hold).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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