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 biotechnology company NPS Pharmaceuticals jumped as much as 21% after announcing that it and Takeda Pharmaceuticals had revised their collaborative agreements.

So what: And by "collaborative agreements" I mean that NPS agreed to pay Takeda $50 million in NPS' common stock in order to regain full global rights to its short bowel syndrome drug, Gattex, known as Revestive in Europe, and recombinant human parathyroid hormone 1-84. Takeda will also be eligible to receive a milestone payment from NPS when combined net sales of these two compounds exceed $750 million in a calendar year.


Now what: It's a slight bit worrisome that NPS is approaching sales of Revestive in Europe without a strong marketing partner in Takeda, but I believe it should be able to sell the short bowel syndrome drug without too much trouble given that SBS sufferers have few options to begin with. Overall, it looks like NPS got off incredibly cheap. Peak sales estimates of $350 million have been thrown around in the U.S. for Gattex, and I have to assume something similar is possible in Europe. Ultimately, the company is valued just a hair over the potential peak sales of its SBS drug, which it now owns outright. NPS could still have quite a bit of running room ahead of it.

Craving more input? Start by adding NPS Pharmaceuticals to your free and personalized watchlist so you can keep up on the latest news with the company.

While you can certainly make huge gains in biotechs like NPS, you have to keep an eye on the overall market, too. What macro trend was Warren Buffett referring to when he said "this is the tapeworm that's eating at American competitiveness"? Find out in our free report: "What's Really Eating At America's Competitiveness." You'll also discover an idea to profit as companies work to eradicate this efficiency-sucking tapeworm. Just click here for free, immediate access.

The article Why NPS Pharmaceuticals Shares Soared originally appeared on Fool.com.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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