NEW YORK (AP) -- Shares of Alexza Pharmaceuticals Inc. jumped Wednesday after the company said Teva Pharmaceutical Industries Ltd., one of the world's largest drug companies, will market is agitation drug Adasuve in the U.S.
THE SPARK: The companies said Wednesday that Teva will be responsible for all U.S. commercial and clinical-related activities, including a required post-approval study. Teva will also have the right to study the drug as a treatment for other neurological disorders. Alexza, of Mountain View, Calif., will manufacture the drug and supply it to Teva.
The Israeli company will pay Alexza $40 million upfront and it could make another $195 million in milestone payments based on completion of post-approval studies and sales targets. Alexza will also receive royalties on sales of the drug, and Teva will lend Alexza up to $25 million to support Adasuve activities over the next five years.
THE BIG PICTURE: Adasuve is Alexza's first approved product. The drug is an inhaled treatment for agitation in patients with schizophrenia or bipolar disorder. The Food and Drug Administration cleared it in December and European Union regulators approved it in February.
Teva is the world's largest maker of generic drugs, and it also sells brand-name drugs like the multiple sclerosis treatment Copaxone. It reported $20.32 billion in revenue in 2012.
Groupo Ferrer International holds the marketing rights to Adasuve in Europe, Latin America, Russia and the Commonwealth of Independent States.
THE ANALYSIS: Roth Capital Partners analyst Scott Henry said the agreement is a "major positive" for Alexza and said he believes the royalty payments will be around 20 percent of total sales revenue. Henry wrote that Teva is now assuming the risks related to launching Adasuve, and its decision to do so will be interpreted as a vote of confidence in the drug.
He maintained a "Buy" rating on Alexza shares.
SHARE ACTION: Shares of Alexza gained $1.12, or 25.8 percent, to $5.47 in afternoon trading. Earlier the shares rose to an annual high of $6.65.
Shares of Teva picked up 27 cents to $38.62.