Avanir Pharmaceuticals (AVNR) rose 61% to $10.88 Monday after demonstrating once again that cough syrup produces a nice, mellow high. Alzheimer's patients became less agitated after taking the company's AVP-923 compared to a placebo, according to results from a phase II study.

AVP-923 combines an over-the-counter cough suppressant dextromethorphan with generic quinidine (commonly used to control heartbeats.) Avanir already markets AVP-923 under the brand name Neudexta as a treatment to dull episodes of uncontrolled laughing and crying in patients with pseudobulbar affect. Insurance companies have placed significant restrictions on Neudexta reimbursements, which hampers Avanir's commercial efforts. Neudexta sales only reached $75 million last year and are on track to top $100 million this year. With today's surging stock price, Avanir's market cap approaches $2 billion.

The company believes it can do better by expanding use of AVP-923/Neudexta to treat people who become agitated due to Alzheimer's. But if payers balk at paying for what amounts to over-priced cough syrup to treat the relatively small number of PBA patients, why would they consent to reimbursement for potentially millions of Alzheimer's patients? True drug development innovation this is not.

Before payers are even faced with that task, Avanir has to convince FDA that merely treating agitation associated with Alzheimer's -- and not the loss of memory or function -- constitutes a clinically meaningful endeavor.

The company intends to use results from the phase II study to seek guidance from regulators here and in Europe about the design of a phase III study.

Adam Feuerstein writes regularly for TheStreet. In keeping with company editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback;

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