Investors are typically relieved and upbeat when a company completes an important acquisition. But in topsy-turvy sessions like the one we saw on Monday, even the best news for stocks can be taken badly.
Biotech Axsome Therapeutics (AXSM -4.34%) was a victim of this. Following the announcement of a successful closing of an asset buy, its shares ended the day 10% lower.
Monday morning before market open, Axsome announced that it has completed the acquisition of the U.S. commercialization and intellectual property rights for Sunosi, a drug used to improve wakefulness in people suffering from excessive daytime sleepiness (EDS) linked to narcolepsy or obstructive sleep apnea.
The company added that the portion of the deal granting ex-U.S. rights to Sunosi is expected to close within the next 60 days.
The deal is closing fast. It was originally announced at the end of March. At that time, Axsome and its counterparty Jazz Pharmaceuticals (JAZZ -1.21%) said that Axsome was buying the aforementioned rights worldwide for an up-front payment of $53 million.
Additionally, Jazz is to be paid a high single-digit royalty on Sunosi's U.S. net sales for the drug's current approved indication. It will also earn a mid single-digit royalty should it get the Food and Drug Administration's (FDA) nod for other indications. No specifics were provided for those percentages.
In that March press release about the Sunosi deal, Axsome said it expects to fund it with an existing $300 million term loan facility.
It's possible investors are somewhat dismayed that a big chunk of that facility will be devoted to that up-front payment alone.
But I think the stronger sentiment here is that on such a dark day for the market, the more speculative stocks -- like biotechs -- have to deliver not only good news, but also good news that is both strongly positive and unexpected. Axsome closing the Sunosi deal is certainly a positive development; it's just not positive enough.