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Bayer’s (BAYRY - Analyst Report) Healthcare unit recently received encouraging news from the US Food and Drug Administration (FDA) when the latter cleared the German company’s Stivarga (regorafenib) for an additional indication.

The US regulatory body recently approved Stivarga for the treatment of patients suffering from locally advanced, unresectable or metastatic gastrointestinal stromal tumor (GIST). The patients were previously treated with Novartis’ (NVS - Analyst Report) Gleevec (imatinib mesylate) and Pfizer Inc.’s (PFE - Analyst Report) Sutent (sunitinib malate).

Stivarga is already available in the US for treating patients suffering from metastatic colorectal cancer (mCRC), whose disease had progressed even after treatment with the standard drugs prescribed for the disease.

The FDA approval for the new indication was based on encouraging data from a phase III study (GRID: n=199), which evaluated patients suffering from metastatic and/or unresectable GIST. The disease had progressed in the evaluated patients in spite of being previously treated with Gleevec and Sutent. Stivarga’s label in the US carries a boxed warning citing the risk of hepatotoxicity.

Notably the FDA reviewed Bayer’s oncology drug on a priority basis. We note that the US regulatory authority generally reviews those drugs on a priority basis, which offer major advances in treating diseases that do not have adequate therapy.

We expect the sales potential of Stivarga to be boosted further with the approval of the new indication (GIST). The good news came just before Bayer is gearing up for its fourth quarter announcement. Bayer will report its financial results for the fourth quarter and full year 2012 on Feb 28, 2013.

Bayer, a large cap pharma company, currently carries a Zacks Rank #2 (Buy). Another large cap pharma stock Eli Lilly and Company (LLY - Analyst Report) also carries a comparable rank.

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