Merck KGaA ( MKGAF ) recently announced a strategic deal with Nordic Bioscience Clinical Development A/S for its pipeline candidate, sprifermin (recombinant human FGF-18). Sprifermin is being developed for osteoarthritis (OA) of the knee.

Terms of the Deal

As per the agreement, Nordic Bioscience will receive service fees, potential milestone and royalty payments for providing clinical development services to Merck KGaA. Merck KGaA is responsible for the development and commercialization of sprifermin. Financial details were not provided.

The FORWARD Study

FORWARD is a multi-national phase IIb study scheduled to start enrollment in the second half of 2013. The study will evaluate sprifermin for inhibition of the progression of structural damage, reduction of pain and improvement of physical function in patients with OA of the knee.

Earlier, two phase I studies in moderate/severe OA of the knee were completed on the candidate. Currently, sprifermin’s efficacy and safety is being evaluated in a phase II study in patients with cartilage injury of the knee. Merck KGaA had originally in-licensed this program from ZymoGenetics, a Bristol-Myers Squibb ( BMY - Analyst Report ) company, in 2004.

Our Take

We are positive on Merck KGaA’s decision to collaborate with Nordic Bioscience. Nordic Bioscience’s expertise in OA would be a major boost for sprifermin’s development.

As per information provided by the World Health Organization (WHO), osteoarthritis of the knee affects more than 5% of the people over 40 years in developed countries, or more than 30 million people.

Merck KGaA carries a Zacks Rank #3 (Hold). Currently, companies like Lannett Company, Inc. ( LCI - Snapshot Report ) and WuXi Pharma Tech (Cayman) Inc. ( WX - Snapshot Report ) look more attractive with a Zacks Rank #1 (Strong Buy).