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Roche (RHHBY - Analyst Report) recently entered into an agreement with privately-held biopharma company Chiasma Inc. to develop and commercialize the latter’s pipeline candidate, octreolin.

As per the agreement, octreolin will be initially developed for acromegaly and subsequently for neuroendocrine tumors. Acromegaly is a disorder that develops when a person's pituitary gland produces excessive growth hormones.

Octreolin is an oral form of the peptide octreotide, a samatostatin analog, which is commercially available only by injection. Currently, octreolin is in a phase III clinical trial for acromegaly. If successfully developed and commercialized, octreolin will allow patients to avoid painful injections.

The agreement provides an exclusive worldwide license to Roche for the commercialization of Octreolin. Genentech, a wholly-owned subsidiary of Roche will market the product in the US following approval from the Food and Drug Administration (FDA).

Roche will make an upfront payment of $65 million to Chiasma along with milestone payments and royalties of up to $530 million.

We note that Roche entered into drug discovery collaboration with privately-held RQx Pharmaceuticals on Feb 12, 2013.

The collaboration is primarily for the discovery and development of novel drug compounds for an undisclosed target. As per the collaboration agreement, RQx will receive an upfront payment along with being entitled to receive research and development milestone payments for $111 million.  Additionally, RQx will also receive royalties on sales of products resulting from the collaboration.

We are positive on the current developments at Roche. Roche carries a Zacks Rank #4 (Sell). However, other large cap pharma stocks, such as Bayer (BAYRY - Analyst Report), Novo-Nordisk (NVO - Analyst Report) and Eli Lilly and Company (LLY - Analyst Report) currently look attractive with a Zacks Rank #2 (Buy).

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