(Reuters) -Finnish drug maker Orion on Wednesday raised its full year outlook after it signed a collaboration agreement with Merck aimed at developing a prostate cancer drug, sending its shares to two-year high.
Given the upfront payment of $290 million Orion is to receive from Merck, the Finnish company expects sales and operating profit in 2022 to be "clearly higher" than in 2021.
"This agreement positions Orion to harness the potential of ODM-208 for the good of patients while continuing to invest in our other programs without compromising our financial targets", Orion's Chief Executive Timo Lappalainen said in a statement.
The deal for co-development and co-commercialisation of Orion's investigational ODM-28 molecule includes, besides prepayment, milestone payments and double-digit sales royalties.
According to OP analyst Carlo Gylling, the total value of the deal is around 2.05 per share and creates good conditions for Orion to have a strong dividend again next year.
Orion stock rose 5% following the news and is up 27% year-to-date, including a boost in February from positive study result on a prostate cancer drug developed in cooperation with Bayer (OTC:BAYRY).
The German drug developer said in February it expected to gain more the 3 billion euros from the sale of Nubeqa drug in 2022, with Orion's royalty rate at around 20%.
While developing a variety of drugs, including intensive care sedatives, prescription drugs, self-care products and veterinary medicines, Orion said in March it would shift its focus to cancer and pain medications.
($1 = 0.9990 euros)