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 Avanir Pharmaceuticals (NASDAQ: AVNR), a biopharmaceutical company focused on developing therapies to treat central nervous system disorders, rocketed higher by as much as 13% after agreeing to be purchased by Japan's Otsuka Pharmaceuticals.

So what: Under the terms of the $3.5 billion deal announced before the opening bell today, Otsuka will pay $17 in cash for each share of Avanir. Both boards have already approved the deal with closing expected to take place in the first quarter of 2015.

With the purchase Otsuka gains access to Food and Drug Administration-approved pseudobulbar affect drug Nuedexta which is on pace for a little over $100 million a year in sales based on its $26.5 million in revenue in the third quarter. More importantly, Otsuka gains AVP-923, Avanir's promising pipeline candidate to treat agitation associated with Alzheimer's disease. In addition, Otsuka will also own the rights to AVP-825, an experimental inhaled migraine medication that was rejected by the FDA last month, but may eventually have another shot at approval once the FDA's concerns are resolved.

Now what: I'll be the first to admit that I'm a bit shocked by the price paid for Avanir by Otsuka -- it seems steep. Alzheimer's has traditionally been one of the toughest diseases for pharmaceutical companies to crack (the blood-brain barrier is tricky to overcome), and if AVP-923 fails to live up to the hype in late-stage studies then Otsuka is probably going to lose on this deal.

Of course, AVP-923 has its merits too. The drug performed well in midstage trials, hitting its primary endpoint of reducing agitation in Alzheimer's patients, and many of the secondary endpoints also demonstrated its efficacy. Best of all, because Alzheimer's drug are so difficult to develop, any approved drug could have a long shelf life with minimal competition.

For now I'm going to say the jury's out on this deal. It could be a winner if AVP-923 is approved, but that's a lot of money riding on one drug hopeful. Nuedexta and AVP-825 are probably not going to provide enough sales to justify a $3.5 billion valuation by themselves.