Shares of Avanir Pharmaceuticals jumped 10 percent in premarket trading Tuesday after it struck an exclusive deal with Merck & Co., the world's third-largest drugmaker, to promote type 2 diabetes treatments.

Avanir said Monday after markets closed that in October, its sales force will start promoting Merck's Januvia family of products at long-term care facilities in the U.S.

Avanir gets a fixed fee plus an incentive-based payment as part of the multi-year agreement. It didn't provide further details about the agreement.

Jefferies analyst Thomas Wei said in a research note that the deal lasts three years, and Avanir is eligible to receive up to $60 million. He also said that the deal could be extended since Januvia has U.S. patent protection extending at least until 2022.

"We see this co-promotion arrangement as a positive way for (Avanir) to leverage its dedicated sales force at minimal additional cost," Wei wrote, noting that he company recently expanded to 80 representatives from 54.

That expanded sales force allows Avanir to reach about 50 percent of all nursing homes, Wei said.

The agreement may also help defray some the costs fo Avanir to build out its sales team, Wei said, and the new products will have little impact on their ability to promote Avanir's Nuedexta. That drug treats pseudobulbar affect, a condition associated with brain disease or injury that involves involuntary emotional outbursts like laughing or crying.

Shares of Avanir Pharmaceuticals Inc. climbed 45 cents to $4.95 in premarket trading. The stock has traded between $2.07 and $5.09 over the past year.

 

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