As most investors would be aware, investing in the biotechnology sector is an incredibly risky way of making money. Indeed, there are plenty of reasons why a stock can suffer heavy falls – just ask Acrux Limited (ASX: ACR) and GI Dynamics Inc (ASX: GID) shareholders – but the gains can also be incredible when things go right.
That is certainly the case for Pharmaxis Ltd. (ASX: PXS) which more than doubled in price earlier in the session, although it has since retreated marginally to be trading 64.6% higher for the day.
Source: Yahoo! Finance
The company, which is developing treatments for chronic respiratory disorders, said it had signed an Option and Purchase Agreement with Boehringer Ingelheim International (one of the world's 20 leading pharmaceutical companies).
Under the agreement, Boehringer was granted an exclusive option to acquire worldwide rights to Pharmaxis' PXS4728A product for approximately $1.8 million. The option provides Boehringer with the opportunity to complete its assessment on the treatment which it believes could be used to fight the liver-related disease Non-Alcoholic Steatohepatitis (NASH).
If the option is exercised, Boehringer will acquire Pharmaxis' entire PXS4728A program, while Pharmaxis would receive approximately $39 million and various other payments could also be received down the track. Given that Pharmaxis maintains a market capitalisation of just $25 million, this could be a very good deal for the junior biotech.
Pharmaxis isn't the only biotech bouncing today. Sirtex Medical Limited (ASX: SRX) has risen 3.7%, while Admedus Ltd (ASX: AHZ) has surged 14.6% higher.
NEW: The Motley Fool's TOP tech stock to buy in 2015
