Indevus: Making Big Gains with Approval for Its New Drug

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 |  Includes: IDEV, TEVA
by: Andrew Snyder

Indevus Pharmaceuticals (IDEV) was up by over 100% Friday. The big gains come thanks to positive news from the FDA and company executives signing a great business deal with Teva Pharmaceutical (NYSE:TEVA). As the Wall Street mess is cleaned up, we will be seeing more winners just like this.

The biotech industry is making headlines. Thanks to some positive news from the Food and Drug Administration and word of a lucrative business deal, shares of one small firm are worth twice as much Friday as they were on Thursday.

Shares of Indevus Pharmaceuticals are up by over 100% on news that the company will be resubmitting its approval application for its testosterone-replacement therapy product, Nebido, sooner than once thought.

In June, the FDA announced it could not approve the product due to a lack of safety data. Company officials believed it could take as long as 18 months to gather the required information. Accordingly, the share price made a nearly 70% plunge when the news was announced.

Fortunately, the re-application process will be much shorter than thought. Using previously existing data, Indevus will submit its latest Nebido application during the first three months of next year. IDEV is fantastic news for investors.

Two-tiered profits

Making share price jump even higher today is the news that Indevus will be teaming up with Teva Pharmaceutical to help get the company's stuttering treatment through the often expensive and complicated FDA trial process.

The deal helps Indevus pay for the trial costs, but also gives Teva a 50% share of domestic profits if the treatment hits the market. For now, the news saves Indevus roughly $90 million in upfront costs.

The deal will reduce costs now, keeping the company solvent, but will reduce earnings down the road. Obviously, with share price soaring, the Street believes it offers a net benefit to Indevus. In a time of increased borrowing costs and shrinking liquidity, this deal could prove monumental in the success of the company.

With the nation nervously awaiting legislation from Congress, it is reassuring to see a healthy company getting rewarded for its hard work and responsible growth.

Once this credit mess is washed away, we will be seeing many more news events like this. Keep searching for the winners and invest accordingly. Remember, capitalism always prevails.

Stock position: None.