(Adds details, analyst comment, previous forecast)
HELSINKI, June 2 (Reuters) - Finnish drug maker Orion said on Monday it had struck a deal with German peer Bayer to develop a prostate cancer drug, with the deal allowing Orion to upgrade its full-year sales and profit outlook.
The two companies will this year start a clinical phase III trial of the drug, called ODM-201, in patients with non-metastatic prostate cancer that cannot be treated by standard hormone therapy, Orion said in a statement.
Orion and Bayer will develop the new drug together, with Bayer contributing a major share of the development costs. Bayer would sell the product globally, and Orion said it was eligible for substantial royalties. It can also receive payments as development of the drug progresses.
"For Orion, joining up with a muscular partner is a good way to control risks, it lets Bayer pay the development costs and then gets royalties if the drug proceeds to production phase," said Inderes analyst Petri Kajaani. "The reaction in the stock market should be positive."
Orion will receive an upfront payment of 50 million euros ($68 million), it said, and added it would use a part of that to finance the study in the third and last phase of development required for regulatory approval.
Orion raised its profit forecast for the year, and now says its net sales and operating profit will be at a similar level as last year. Previously it had seen its operating profit falling slightly.
The Finnish company's Parkinson's drug Stalevo, which brings in one-fifth of its sales, faces competition from European rivals as the protection period on clinical data for the drug expired in October.
Bayer said the deal would complement its prostate cancer treatment business. It already has Xofigo, designed to target bone metastases from prostate cancer, which according to Bayer could become a "blockbuster" product with annual sales of least 1 billion euros. ($1 = 0.7328 Euros) (Reporting by Sakari Suoninen; Editing by Louise Heavens)