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Baxter International, Inc. (BAX - Analyst Report) entered a collaboration agreement with Coherus Biosciences, Inc. to develop and commercialize a biosimilar to etanercept in Brazil, Europe, Canada, and certain other markets.

Under the agreement, Baxter will make an upfront payment of $30 million and up to $216 million based upon the development made by Coherus Biosciences regarding the product as well as regulatory factors.

Biosimilars are useful in treating a range of chronic and life-threatening diseases. It is also helpful in reducing costs and expanding patient access.

Under the agreement, both BAX and Coherus Biosciences will also develop and commercialize an alternative biosimilar to etanercept, based upon the outcome of clinical data.

Baxter International, a Zacks Rank #3 (Hold) stock, reported second-quarter adjusted (excluding one-time items) earnings per share of $1.16, which beat the Zacks Consensus Estimate by 3 cents and surpassed the year-ago earnings by 4%. The second-quarter result also exceeded the company’s earlier stated guidance of $1.12–$1.14.

Revenues for the quarter went up a tad 3% (up 4% at constant exchange rate or CER) to $3,669 million, missing the Zacks Consensus Estimate of $3,707 million. On a geographic basis, U.S.-based revenues in the quarter improved 3%, while international revenues rose 3% (up 4% at CER).

Baxter’s product pipeline is expected to be an important driver of sales growth in future, but will probably not bolster the top line significantly in the near term. Nevertheless, with the Gambro acquisition, Baxter gains an established set of products, which strengthen its existing line of dialysis products.

However, Baxter depends on the EU for about a third of its sales. This is a cause for concern given recent fiscal tightening, a glum outlook for hospital spending and tightening of reimbursement. It also faces pricing pressure due to the advent of group purchasing organizations (GPOs) in the U.S.

Most of the top peers of BAX are currently performing well. They include Alere Inc. (ALR - Snapshot Report) with a Zacks Rank #1 (Strong Buy), and Advaxis Inc. (ADXS) and Boston Scientific Corporation (BSX - Analyst Report), each with a Zacks Rank #2 (Buy).

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