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Victory for vernakalant!

No, that's not German. It's the scientific, generic name of the experimental heart rhythm maintenance drug at a little Canadian company called Cardiome (CRME). The announcement came out Wednesday evening that Merck (MRK) is hooking up with CRME in yet another partnership deal between big pharma and baby biotech. Merck is giving CRME $60 million cash right now and access to a $100 million line of credit at an attractive rate. But it's on the hook for several hundred million dollars more in payments to Cardiome if everything pans out with vernakalant, which would be sold under the brand name of Kynapid. The agreement covers a Kynapid pill and an intravenous form of the drug. It's for a condition known as atrial fibrillation.

Shares of CRME spiked after hours and will continue rallying today. For a huge drugmaker like Merck, $60 million is chump change. But especially in this environment where poor, small biotechs are going out of business or are in danger of folding because they're quickly running out of money, a cash infusion of that size — and the potential for much more down the road — is going to move a stock.

Joseph Schwartz, the biotech analyst at Leerink Swann, which specializes in healthcare stock coverage, says the deal is "about as good as it gets." In a research note to clients Schwartz calls it a "lucrative partnership" that leaves Cardiome with "no loose ends remaining with all drugs partners worldwide and cash in the bank...." Leerink makes a market in CRME and may trade in MRK.

Partnerships like this one and acquisitions are part of an ongoing trend in biopharma that shows no signs of letting up. Big pharma needs drugs. Biotech needs cash. That's why Merck hearts Cardiome and Cardiome loves Merck right back.

Source: Merck / Cardiome: Big Pharma Meets Baby Biotech