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Bayer Expands Drug Discovery Collaboration with X-Chem

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Bayer AG (BAYRY - Free Report) announced that it has entered into an expanded global drug discovery deal with privately held biotechnology company, X-Chem, Inc., across multiple therapeutic areas and target classes. The collaboration focuses on the discovery of innovative lead structures for complex drug targets in areas of high unmet medical need.

The latest agreement will extend Bayer’s access to X-Chem’s DEX technology, which is based on DNA-encoded libraries of small molecules with more than 120 billion molecules.

Per the terms of the new agreement, X-Chem will receive up-front payment, research and development funding, in addition to potential pre-clinical, clinical and regulatory milestone payments, worth up to $528 million. In addition, X-Chem is eligible to receive royalties and sales milestones for each successfully commercialized drug that results from collaboration program. Moreover, Bayer will have an exclusive option to license programs generated through the collaboration.

We note that the companies have been partners under a research collaboration since 2012. Bayer has already licensed two programs for multiple series of small molecules from X-Chem that address complex target structures such as protein-protein interactions.

We are positive on the latest expansion of the existing deal. The new multi-year collaboration agreement is expected to significantly expand the scope and duration of the partnership.

Bayer is currently a Zacks Rank #3 (Hold) stock. Some better-ranked stocks in the health care sector include Merrimack Pharmaceuticals, Inc. (MACK - Free Report) , Fibrocell Science, Inc. and Bristol-Myers Squibb Co. (BMY - Free Report) . While Merrimack and Fibrocell sport a Zacks Rank #1 (Strong Buy), Bristol-Myers carries a Zacks Rank #2 (Buy).

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