Infinity Pharmaceuticals’ stock had its best ever day after the company said it reached a deal with AbbVie to develop and commercialize a cancer treatment called Duvelisib.
The stock soared 37.732% at the open on the news, and also helped by a rise in U.S. stocks after reports of a cease-fire in Ukraine.
The deal is great for Infinity. it will get an upfront payment of $275 million and will be eligible to get $530 million in additional milestone payments.
Investors said this continues the recent trend of big pharmaceutical companies, such as Merck and Roche, joining forces with smaller biotechnology firms to develop drugs for rare conditions. This year’s M&A activity in healthcare has been a record, and 71% of those deals are in the pharmaceuticals industry.
Infinity will also share double-digit royalties on product sales. Duvelisib has so far been effective across a range of blood cancers, such as non-Hodgkin lymphoma and lymphocytic leukemia. The company is conducting trials to further judge the safety and potency of the drug. RBC Capital analyst Mike Lee has an ‘outperform’ rating on Infinity.
More such deals might come later this year as big pharma firms search for the next blockbuster drug. More than $60 billion in revenue was lost by the big firms in the industry to cheaper generic competition from 2010-2012, and another $50 billion may be lost in the next five years, according to Bloomberg analytics data.
To deal with this, companies have reorganized existing units or sold them, which has freed up cash to spend on acquiring smaller firms, or collaborating with them to create drugs that are expected to treat hitherto incurable conditions, will be priced high, and see healthy demand. Stocks of acquired firms will expectedly shoot through the roof whenever such deals are announced.
Follow @anirvanghosh on StockTwits.