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 Anacor Pharmaceuticals (NASDAQ:ANAC), a biopharmaceutical company focused on developing small-molecule therapeutics on its proprietary drug platform, rocketed higher by as much as 31% after announcing a favorable arbitration ruling with Valeant Pharmaceuticals (NYSE:VRX).
So what: The ruling stems from a contention made by Anacor that Dow Pharmaceutical Services, which is a subsidiary of Valeant, breached a contract between the two companies forged in 2004 with regard to the development of Jublia, a drug designed to treat onychomycosis -- which is the scientific term for a fungal infection of the nail. Jublia is currently approved in Canada, but not in the United States (the company did, though, just file a new drug application in the U.S. this month). According to the arbiter, Valeant will be required to pay $100 million to Anacor, as well as all litigation fees.
Now what: Given that Anacor has just $18 million in net cash on its balance sheet and is burning in the neighborhood of $50 million a year in cash on its R&D pipeline, this appears like the perfect time for a win! This fresh infusion of cash should give Anacor another two years without needing to even consider a secondary offering of shares, giving it plenty of time to advance its pipeline and boost sales of its existing drug, Jublia. While I do feel today's move higher is justified, I'd still prefer to stick to the sidelines with Anacor until we find out more conclusive trial data on its two clinical-stage topical psoriasis treatments -- AN2728 and AN2898 -- which I suspect have far greater potential than its topical antifungal drugs.
Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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