Avalon Pharmaceuticals ( AVRX) was soaring some 30% in extended trading Tuesday after it struck a deal to develop cancer drugs with pharmaceutical giant Merck ( MRK).

Avalon will conduct preclinical screening with its drug-discovery platform in order to develop "inhibitors for an undisclosed target" important in cancer development. In exchange, it may receive milestone payments in excess of $200 million, as well as royalties on any resultant products.

Merck will take care of any and all clinical trials and commercialization. Avalon shares were up $1.35 to $5.98. Merck stock was unchanged after closing the regular session up 42 cents, or 1%, at $44.67.

Optimal Group ( OPMR), a Canadian company that provides payment-processing systems, jumped after fourth-quarter adjusted profit totaled $5.7 million, or 23 cents a share. That smashed two analysts' 4-cent estimates, according to Thomson Financial. A year ago, Optimal earned $4.8 million, or 18 cents a share. Revenue sank 35% to $33.9 million, but this still tops three analysts' $31.7 million expectations. Shares were up $1.10, or 14.1%, to $8.90.

Payless Shoesource ( PSS), a discount shoe-store chain, gained after it swung to a 16-cents-per-share profit, excluding items, that powered past Wall Street's estimates of 7 cents. Last year, the Topeka, Kan., company lost a penny a share. Same-store sales were up 6.8% from a year ago, and overall revenue climbed 13% to $693 million. Shares were up $1.97, or 6.3%, to $33.40.

TiVo ( TIVO) rose after the California-based maker of digital video recorders said it will offer bundled services with Internet service provider EarthLink ( ELNK). Terms of the deal weren't disclosed. TiVo shares were up 6 cents, or 1%, to $6. EarthLink was unchanged after closing the regular session up 24 cents, or 3.6%, to $6.95.

CV Therapeutics ( CVTX) shares were plunging nearly 27% after a large-scale study of its existing Ranexa chronic-angina treatment proved the drug ineffective in treating a different heart-related illness -- a specific type of acute coronary syndrome. The Palo Alto, Calif., company was losing $3.31 to $8.99.

Progenics Pharmaceuticals ( PGNX) sank after it and Wyeth ( WYE) announced they will need to reformulate their methylnaltrexone drug, a proposed treatment for side effects of opioid analgesics (severe-pain relievers). This comes after preliminary midphase results that were too weak to warrant late-phase testing. The two pharma companies don't expect to file a new drug application with the Food and Drug Administration until late 2009, at the earliest. Tarrytown, N.Y.-based Progenics was sliding $3.26, or 12.2%, to $23.50. Wyeth was off a penny to $49.35.

Leather-products purveyor Wilson's ( WLSN) saw plummeting fiscal fourth-quarter income that widely missed estimates. The Brooklyn Park, Minn., company earned $12 million, or 31 cents a share, compared with $41.7 million, or $1.07 a share, a year ago. Analysts were looking for 48 cents a share. Sales also plunged 25.7% from last year to $133 million, missing the consensus by $22 million. Shares were falling a dime, or 5.2%, to $1.83.