Deal Update: Orchid Chemicals

Deal Update: Orchid Chemicals

Orchid Chemicals and Merck have announced a strategic Research Collaboration and Licence Agreement focused on discovery, development and commercialization of novel agents for treatment of bacterial and fungal infections.

Orchid Research Laboratories, the wholly owned drug discovery subsidiary of Orchid, and Merck will work together to identify and develop novel anti-bacterial and anti-fungal compounds as clinically validated drug candidates.

Orchid will undertake discovery and candidate development through Phase IIa human clinical trials. Merck will conduct late stage clinical development and commercialization if regulatory approval is granted.

Under the terms of the agreement, Orchid will be paid an undisclosed upfront sum and would be eligible to receive payments totaling more than $100 million on achievement of various research and development (R&D) milestones.

The agreement contemplates Merck and Orchid working together on multiple targets and compounds, which will be evaluated against specific criteria for discovery and development.

Orchid is also eligible to receive significant royalties on worldwide Net Sales of any products commercialized under the agreement. We maintain a BUY on Orchid Chemicals, with a target price of Rs340.