For Somaxon Pharmaceuticals
A really big deal as you can see from the gain its shares are experiencing today -- up as much as 62% -- after announcing that Procter & Gamble
Somaxon didn't break out the fees and royalties it'll pay to P&G, but the company did say that the current forecast puts the level at no more than 15% of net U.S. sales. That's a small price to pay for the potential to increase sales above where Somaxon probably could have gotten them on its own.
How much above remains to be seen, though. P&G has an experienced sales force, but Silenor is launching into a very crowded space. Sepracor's Lunesta, sanofi-aventis'
Bringing in P&G is an endorsement of Silenor, but investors should be careful not to read too much into the partnership. P&G isn't offering any upfront payments, and the marketing agreement only extends through 2012. That could be lucrative for Somaxon if Silenor is able gain traction in the insomnia market and the company feels it can take care of marketing on its own, but it also means P&G isn't risking all that much.
Somaxon's investors may sleep well tonight, but there's still plenty to keep them awake over the next few quarters.
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Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. Pfizer is a Motley Fool Inside Value recommendation. Procter & Gamble is an Income Investor pick. The Fool owns shares of and has written covered calls on Procter & Gamble. Try any of our Foolish newsletter services free for 30 days. The Fool has a disclosure policy.