Bayer will pay Evotec €12 million ($15.52 million) up front, with another €580 million potentially to come, to collaborate with the Hamburg-based small-molecule drug developer on three clinical candidates to treat endometriosis over a five-year period.

Both parties will come up with drug targets and carry out early research. Bayer, however, will take over any subsequent clinical development and commercialization.

Evotec will see the €580 million in additional payments if its compounds hit certain preclinical, clinical and sales milestones. Evotec may also get a "low-double-digit" percentage of the net sales generated by a drug covered by the deal, depending on which of the two parties creates the compound, Bayer said in a statement.

For Bayer, the collaboration represents the second strategic move it has made recently to strengthen subsidiary Bayer Healthcare LLC, having bought Teva Pharmaceutical Industries Ltd.'s animal health business for $145 million on Sept. 14.

Making a deal with Evotec particularly bolsters Bayer's women's health business, which has sagged a bit since blockbuster birth control pill Yaz began facing generic competition in 2010. Bayer had been rumored as the most likely suitor for Warner Chilcott plc when the Irish drugmaker -- which has a women's healthcare segment that brought in $2.74 billion in revenue in 2011 -- explored potential buyout offers earlier this year. Warner Chilcott, however, abandoned sale talks in early August.

Bayer's biggest-selling products in women's healthcare continue to be Yaz (€1.07 billion in 2011) and intrauterine device Mirena (€581 million in 2011). But Yaz has seen its sales decline over the past few years. Its sales last year fell from the €1.11 billion generated in 2010, as generics began taking share. Only a couple of years earlier, in 2008, Bayer's women's healthcare sales had been €1.22 billion.

Bayer, however, is also doing research regarding additional gynecological therapies and contraception options, among them a birth control patch that it submitted to European regulators in late September.

Endometriosis, too, is an area Bayer is pinning its hopes on in the women's health segment. Endometriosis is a female health disorder that occurs when cells from the lining of the uterus abnormally grow in other areas of the body, leading to pain, bleeding and infertility in some women. The condition affects roughly 176 million women worldwide. It is typically seen in women between the ages of 25 and 35.

There is no known cure for endometriosis, just treatments to help patients deal with the pain and infertility it causes. Hormone therapy to reduce estrogen levels is one type of treatment. But Bayer believes there are bigger opportunities if it can develop therapies addressing the individual needs of affected women.

"Endometriosis is a disease with insufficient treatment options today," said Andreas Busch, a member of Bayer Healthcare's executive committee and its head of global drug discovery, in a statement. "It is one of Bayer's strategic research indications and our new collaboration with Evotec will perfectly complement our activities in this field of high unmet medical need."

Evotec, meanwhile, has a number of development partnerships and drug discovery alliances with various members of Big Pharma, among them Boehringer Ingelheim Corp., Biogen Idec Inc. and Novartis AG. The company, for example, signed an $830 million pact with a $10 million up-front payment with Roche Holding AG in September 2011 to develop an experimental therapy for Alzheimer's disease.