NextWave's option arithmetic

NextWave Pharmaceuticals Inc.'s investors are in line for at least a 2.5X return on the $105 million they have put into the CNS company after Pfizer Inc. (NYSE:PFE) exercised an option to acquire it last week. The news follows last month's FDA approval of the biotech's ADHD drug Quillivant XR.

The pharma paid $20 million for the option in 2012. In exercising it, Pfizer agreed to pay $255 million up front plus up to $425 million in milestones. The total would come to $700 million if all of the undisclosed milestones pan out, representing a possible return of just under 7X...