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.
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