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Why DepoMed Inc. Shares Popped

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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 DepoMed (NASDAQ: DEPO  ) , a specialty pharmaceutical company focused on developing therapies to treat central nervous system disorders, popped by as much as 13% after announcing plans to acquire migraine medicine Cambia from Nautilus Neurosciences.

So what: Under the terms of the deal, DepoMed will pay Nautilus $48.7 million to acquire the U.S. rights to the drug and could be on the line for an addition $5 million based on whether annual net sales milestones are met. According to DepoMed's press release, Cambia is the only non-steroidal anti-inflammatory drug approved for the indication of treating migraines, with drug itself seeing revenue grow in excess of 30% last quarter.

Now what: It's not often that Wall Street rewards an acquisition, but the move by DepoMed to add a rapidly growing drug that'll be protected from generic competition for another 10 years to its product portfolio appears to make a lot of sense. The next step, obviously, is to see DepoMed make strides toward turning a profit in 2014. Until I see that black ink, though, I'd rather just be a casual observer from the sidelines.

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Related Tickers

9/28/2016 4:00 PM
DEPO $24.53 Up +0.13 +0.53%
DepoMed CAPS Rating: ****