Why Shares of Eagle Pharmaceuticals Inc. Ripped Higher

By George BudwellFool.com

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What:Shares of developmental-stage biopharmaEagle Pharmaceuticalsjumped by 15% Tuesday morning on robust volume after the company announced a licensing deal with generic drugmakerTeva Pharmaceutical Industries Ltd.

Continue Reading Below

Per the press release, Teva will license Eagle's experimental bendamustine short infusion time treatment,EP-3102,for chronic lymphocytic leukemia, or CLL, and indolent B-cell non-Hodgkin lymphoma, or NHL. EP-3102 is a rival formulation to Teva's branded drug Treanda and iscurrently under review with the Food and Drug Administration.

Although the FDA previously granted EP-3102 Orphan Drug status for both indications, Teva plans to waive these designations to bring the drug to market faster, if it is approved.

So what: Small-cap Eagle will receive $30 million via an upfront payment from Teva and, potentially, another $90 million in milestone payments. If and when the drug hits the market, Eagle will also be eligible to book double-digit royalties from net sales of EP-3102.

Another key aspect of this licensing deal is that the company won't have to invest heavily in the drug's commercialization, which would almost certainly involve a massive secondary offering.

Tuesday's news also resolves the outstanding litigation between these two companies over one of CLL and NHL drug Treanda's key patents.

Now what: Under the terms of the agreement, Teva will be responsible for the drug's commercialization within the U.S., while Eagle still has the responsibility of completing the regulatory review process and conducting any post-approval studies. Although no drug's regulatory pathway should be considered a slam dunk by any stretch, Teva's involvement suggests that EP-3102 has a better than average chance. As such, Eagle looks like an interesting name to keep track of going forward.

The article Why Shares of Eagle Pharmaceuticals Inc. Ripped Higher originally appeared on Fool.com.

George Budwell has no position in any stocks mentioned. The Motley Fool recommends Teva Pharmaceutical Industries. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright 1995 - 2015 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.