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Merck KGaA (MKGAF) recently announced a deal with Bristol-Myers Squibb (BMY - Analyst Report) for the promotion of different formulations of Glucophage (metformin hydrochloride) in China. Glucophage is used for the treatment of type II diabetes particularly in overweight patients when diet and exercise alone have failed.

As per the agreement, Merck KGaA and Bristol-Myers will co-promote the drug in China and share profits.

Our Take

We are positive on Merck KGaA’s decision to collaborate with Bristol-Myers. The two companies will use their strengths to expand the geographical reach of Glucophage IR. Both companies have a long history in the treatment of diabetes. Bristol-Myers Squibb-SASS has been marketing the drug in China since 1999. This collaboration will help the drug reach more patients in urban and rural areas for the treatment of type II diabetes.

As per information provided by the International Diabetes Federation (IDF), diabetes is a major public health problem in China, affecting more than 90 million people. China ranks highest in the number of people suffering from this disease.

Within a short time, Bristol-Myers and Merck KGaA intend to launch Glucophage XR in China.

This is the second collaboration to be announced by Merck KGaA this week. The company 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.

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).

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