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Why Avanur Pharmaceuticals is Soaring Premarket (AVNR)

Shares of Avanir Pharmaceuticals (NASDAQ: AVNR) are up 9 percent in premarket trading after the company announced Monday that it entered into a partnership with Merck & Co. (NYSE: MRK), the world’s third largest drug manufacturer, to promote, Merck’s Januvia family of products for use type 2 diabetes. Avanur will promote the products in long-term institutional care setting in the United States starting in October.

According to the release, Avanur will be paid a fixed fee plus an incentive-based program, similar to the compensation structure is normally used in the pharmaceutical sales industry. Merck will remain focused on promoting the products in other medical settings.

Peter Alberti, U.S. marketing leader, Diabetes, Merck, said,

“As a company dedicated to the advancement of diabetes care, we are excited to partner with Avanir to help improve diabetes management and offer our type 2 diabetes therapies to this patient population. We believe that combining Merck’s leadership in diabetes with Avanir’s unique capabilities will help this growing population get the diabetes care they need.”

Thomas Wei, analyst for Jefferies, said the deal will last for three years with Avanir eligible to receive up to $60 million. The deal has the potential to be extended since the products have patent protection through 2022.

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Disclosure: At the time of this writing, the author had no position in the company mentioned.

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