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ABVC BioPharma (NASDAQ:ABVC) stock shot up as much as 100% Tuesday following news that it has entered into a tentative licensing deal to develop its psychiatric drug candidates ABV-1504 and ABV-1505 for the Chinese market.

Shares of ABVC were up 42% at $3.53 at around 1:45 p.m. ET on Tuesday after hitting a high of $5.08 earlier in the day.

The biotech said it has signed a legally binding term sheet, subject to certain closing conditions, with Chinese drugmaker Xinnovation Therapeutics granting them exclusive Chinese licensing rights to the products, which are in Phase 2 testing.

ABV-1504 has been in clinical testing for the treatment of major depression disorder, or MDD, while ABV-1505 is being studied as a treatment of attention deficit/hyperactivity disorder, or ADHD. The drugs are based on plant extracts used in traditional Chinese medicine.

Under the deal, Xinnovation will be responsible for clinical development of the drugs, along with manufacturing, marketing and distribution, in China. In exchange, ABVC could receive up to $20M in aggregate income, plus royalties ranging from 5% to 12% based on annual net sales in China.

ABVC said that it estimates the deal could generate around $50M a year in revenue for the company and approximately $1B over the patent lives of the two assets if they hit certain sales targets.

On Monday, ABVC said it sold 500M shares priced at $3.50 per share to an institutional investor through a direct offering valued at $1.75M. The company conducted a 1-for-10 reverse stock split on July 25, primarily to comply with Nasdaq listing rules.

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