What happened

Shares of small-cap biopharma company Spero Therapeutics (NASDAQ:SPRO) are up 15.3% as of midday Thursday after announcing a new product partnership with Pfizer (NYSE:PFE), in addition to a major equity investment by the same pharmaceutical icon. Namely, Pfizer is now a licensee of Spero's drug-resistant infection treatment SPR206, as well as an owner of about $40 million worth of Spero Therapeutics. That's nearly a 10th of the small company.

So what

The move is a somewhat risky one on Pfizer's part. Spero is not yet generating any product revenue, and SPR206 is only in the midst of phase 1 trials as a treatment for multidrug-resistant (or MDR), Gram-negative infections. The company's most-developed project is a treatment for urinary tract infections called Tebipenem HBr. It's only recently completed phase 3 trials, though, and has yet to be submitted to regulators for final approval.

Rising bar chart drawn on a chalkboard.

Image source: Getty Images.

The need for new ways of fighting bacterial infections is tremendous, though, as older drugs are less and less effective. Bacteria evolve and adapt, too, as a means of working around previously effective therapies. The World Health Organization deems antibiotic resistance as one of today's most significant threats to human health.

Now what

While $40 million is a significant sum to Spero Therapeutics, given its $478 million market cap, it's not a particularly large sum to Pfizer. If for some reason SPR206 isn't approved, the pharmaceutical giant is no worse off.

Pfizer's interest in a controlling stake in a small biopharma name like Spero is telling all the same, though, as is its specific licensing interest in such an early-stage drug. Thursday's surge might well be met with some profit taking, but investors should see this development in a bigger-picture context: The tie-up serves as a vote of confidence in Spero and its pipeline.

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