An Overnight 2-Bagger

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You've got to love drug development. Where else can you see stocks double overnight?

Indevus Pharmaceuticals (Nasdaq: IDEV) looked like it was down and out after the Food and Drug Administration said it wanted more safety data about a rare side effect of its long-acting testosterone substitute, Nebido. But it looks like the agency won't require additional clinical trials after all. Instead, Indevus will be allowed to submit data from trials in the U.S. and Europe to explain why the drug should be approved despite short-term coughing episodes that occur immediately after some injections when a small amount of the oily solution containing the drug enters the bloodstream. The share price doubled on Friday in response.

The drugmaker will submit the data during the first quarter of next year and hopes it will have Nebido on the market by the end of the year. Ahh, what a difference a few months make!

Adding fuel to the fire, Indevus announced that it partnered with Teva Pharmaceuticals (Nasdaq: TEVA) to develop its phase 2 compound pagoclone, which treats stuttering. The partnership allows for either a 50/50 split, with Teva paying Indevus up to $92.5 million in milestone and research reimbursement payments, or it can be transformed into a royalty stream. While complicated, the structure of the deal could give Indevus some flexibility should it start running low on funds.

I like Teva's move to expand the number of name-brand drugs it sells. The generics-plus strategy, which Mylan (NYSE: MYL) recently decided to stick with, allows generic-drug makers, like Barr Pharmaceuticals (NYSE: BRL) and Par Pharmaceutical (NYSE: PRX), to sell higher-margin branded drugs to supplement their lower-margin generic business. It's clear that the two can coexist -- even pharmaceutical companies like Novartis (NYSE: NVS) and Sanofi-Aventis (NYSE: SNY) are making it work.

Turning back to Indevus, while the pair of announcements last week are certainly good news and the company deserves the higher market cap (as I said it did in June), Indevus isn't out of the woods yet. The FDA has agreed to accept the data, but that's still a long way from an approval. And pagoclone has another phase 2 and a couple of phase 3 trials to go before we'll know if it'll be a success.

Indevus could easily double again from here, but with that potential for reward comes lots of risk. Tread lightly, Fools.