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The HealthCare unit of Bayer (BAYRY - Analyst Report) announced recently that it has filed an application seeking approval to market its low-dose birth control patch, ethinylestradiol/gestodene, in the EU. Bayer further stated in its press release that the nation, which will act as the reference point in the decentralized procedure for gaining marketing approval in the EU member states will be France.

We note that Bayer’s birth control patch has performed well in clinical trials. Data from the trials, which evaluated 4,200 women across the globe, revealed that the drug, a hormonal contraceptive, was not only effective but also boasted a good safety profile. Bayer intends to present data from the studies at the FIGO world congress of gynecology and obstetrics in Rome next month.

Bayer’s move of seeking European approval for its birth control patch is aimed at expanding its birth-control business, which already boasts birth control pills such as Yaz. The birth control market already has players like Warner Chilcott .

Our Recommendation

We recently upgraded Bayer to Outperform following its strong second quarter 2012 results, an upbeat guidance and a series of positive subsequent developments at the German company. The stock carries a Zacks #1 Rank (Strong Buy rating) in the short run.

Bayer performed impressively in the second quarter of 2012 driven by increased revenues. Following the impressive results, management raised their guidance for 2012 revenues as well as earnings. Subsequently, Bayer has witnessed a series of positive developments including progress regarding oncology candidate regorafenib and label expansion efforts for blood thinner Xarelto, which has been co-developed with the Janssen Research and Development unit at Johnson & Johnson (JNJ - Analyst Report). Moreover, the decision of Bayer’s HealthCare unit to buy Teva Pharmaceutical Industries Limited’s (TEVA - Analyst Report) animal health business in the US is a positive move.

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