Yesterday, small biotech Indevus Pharmaceuticals (NASDAQ:IDEV) announced that it has reached an agreement with the European pharmaceutical company PLIVA to market Indevus' drug Sanctura (Trospium). The deal is especially noteworthy because PLIVA is paying Indevus $30 million now and another $120 million if the Food and Drug Administration (FDA) approves the drug next month.

The cash payments totaling $150 million are a huge amount for Indevus, a company with a market cap just under $300 million. Given the magnitude of this potential payment compared to the company's market cap, it is interesting that the stock price has barely budged compared to the $6.05 closing price the day before the deal was announced.

The FDA decision on Sanctura can be expected right around May 28. That is the Prescription Drug User Fee Act action date by which the FDA should choose whether or not to approve the drug. This can almost be viewed as make or break for Indevus, at least with respect to the company's near-term fortunes. The other drugs in its pipeline are years from commercialization. Therefore, an extreme price move on this decision is probably to be expected.

If the FDA signs off on Sanctura, Indevus would pocket another $120 million and would have an approved drug that should be pretty competitive in the overactive bladder market despite competition from companies like Pfizer (NYSE:PFE). Under that scenario, I think we could expect the stock to take off from its current level. On the other hand, if the FDA turns the drug down or asks for additional data, then a standard biotech stock nosedive is probably to be expected. In this situation the magnitude of the decline would depend upon the ability to address the FDA's concerns in a timely manner.

Sanctura has points in its favor. It has been on the market in Europe for years; unlike some of the approved drugs in this segment, it does not cross the blood-brain barrier; and clinical data suggest that it has a lower incidence of dry mouth than the competitors. That said, guessing what the FDA will do can be playing with fire, and in this case, it looks like the market is being cautious.

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Fool contributor Charly Travers does not own shares of Indevus.