Nonlinear dispersal equation modeling insect aggregation

If the equation is correct, then it's probably another example that we need special treatment for the discretization of conservation law.

As mentioned in the comment above, one easy-to-notice issue of OP's trial is Sign[x] isn't differentiable at x == 0. This seems to be easy to resolve: we just need to define a differentiable approximate sign ourselves:

appro = With[{k = 100}, ArcTan[k #]/Pi + 1/2 &];

sign[x_] = Simplify`PWToUnitStep@PiecewiseExpand[Sign[x], Reals] /. UnitStep -> appro

Nevertheless, it just leads to a solution messing up quickly:

soltest = NDSolveValue[{D[u[x, t], t] == 
    D[sign[x]*u[x, t], x] + D[u[x, t]^2 D[u[x, t], x], x], u[-7, t] == 0, u[7, t] == 0, 
   u[x, 0] == Exp[-x^2]}, u, {x, -7, 7}, {t, 0, 2}]

NDSolveValue::ndsz At t == 0.25352360860722767`, step size is effectively zero; singularity or stiff system suspected.

NDSolveValue::eerr

Does this suggest the equation itself is wrong? Not necessarily, because the PDE involves differential form of consevation law, and we already have several examples showing that serious problem may come up if spatial discretization isn't done properly on such type of PDE:

Conservation of area solving a PDE via finite difference scheme

Instability, Courant Condition and Robustness about solving 2D+1 PDE

How to solve the tsunami model and animate the shallow water wave?

Problems with solving PDEs

So, how to resolve the problem? If you've read the answers above, you'll notice the most effective and general solution seems to be avoiding the symbolic calculation of outermost D before discretization, and I've figured out 3 ways to.

Additionally, a method that doesn't require one to transform the equation is found, but this only works in or before v11.2.

FiniteElement Based Solution

Thanks to the new-in-v12 nonlinear FiniteElement method, it's possible to resolve the problem completely inside NDSolve with the help of Inactive:

With[{u = u[x, t]}, 
 neweq = D[u, t] == 
   Inactive[Div][{{Sign[x] u/D[u, x] + u^2}}. Inactive[Grad][u, {x}], {x}]]

{bc, ic} = {{u[-7, t] == 0, u[7, t] == 0}, u[x, 0] == Exp[-x^2]}

solFEM = NDSolveValue[{neweq, ic, bc}, u, {t, 0, 2}, {x, -7, 7}, 
  Method -> {MethodOfLines, 
    SpatialDiscretization -> {FiniteElement, MeshOptions -> MaxCellMeasure -> 0.1}}]

p1 = Plot[solFEM[x, 2], {x, -7, 7}, PlotRange -> All]

Several warnings will pop up, but don't worry.

Tested on v12.0.0, v12.1.1.

Semi-NDSolve Based Solution

You may be suspicious of the result above because it's different from your first one. Also, you may find NDSolveValue fail for certain setting of MaxCellMeasure (say MaxCellMeasure -> 0.01), which seems to make the result more suspicious, so let's double check it with another method i.e. a self-implementation of method of lines, as I've done in answers linked above.

I'll use pdetoode for the discretization in $x$ direction.

domain = {L, R} = {-7, 7}; tend = 2;
With[{u = u[x, t], mid = mid[x, t]}, eq = {D[u, t] == D[mid, x],
   mid == Sign[x] u + u^2 D[u, x]};
 {bc, ic} = {u == 0 /. {{x -> L}, {x -> R}}, u == Exp[-x^2] /. t -> 0};]

points = 100;
grid = Array[# &, points, domain];
difforder = 2;
(* Definition of pdetoode isn't included in this post,
   please find it in the link above. *)
ptoofunc = pdetoode[{u, mid}[x, t], t, grid, difforder];
del = #[[2 ;; -2]] &;

Block[{mid}, Evaluate@ptoofunc@eq[[2, 1]] = ptoofunc@eq[[2, -1]]; 
  ode = ptoofunc@eq[[1]] // del];
odeic = ptoofunc[ic] // del;
odebc = ptoofunc[bc];

sollst = NDSolveValue[{ode, odebc, odeic}, u /@ grid, {t, 0, tend}];
sol = rebuild[sollst, grid, 2]

p2 = Plot[sol[x, tend], {x, L, R}, PlotRange -> All, PlotStyle -> {Dashed, Red}]

Tested on v9.0.1, v12.0.0, v12.1.1.

TensorProductGrid Based Solution

It's a bit surprising that the following method even work in v9, because pdord is just equivalent to failure in my memory:

{L, R} = {-7, 7}; tend = 2;

With[{u = u[x, t], mid = mid[x, t]},
 eq = {D[u, t] == D[mid, x], mid == Sign[x] u + u^(2) D[u, x]};
 {bc, ic} = {u == 0 /. {{x -> L}, {x -> R}}, u == Exp[-x^2] /. t -> 0};]

icadditional = mid[x, 0] == eq[[2, 2]] /. u -> Function[{x, t}, Evaluate@ic[[2]]]

solTPG = NDSolveValue[{eq, ic, bc, icadditional}, {u, mid}, {t, 0, tend}, {x, L, R}, 
  Method -> {MethodOfLines, 
    SpatialDiscretization -> {TensorProductGrid, MaxPoints -> 500}}]

p3 = Plot[solTPG[[1]][x, 2], {x, L, R}, PlotRange -> All, PlotStyle -> {Orange, Thin}]

Again, you'll see several warnings, simply ignore them.

Tested on v9.0.1, 11.3.0, v12.0.0, v12.1.1.

fix Based Solution (Only Works Before v11.3)

Luckily, my fix turns out to be effective on the problem. If you're in or before v11.2, then this is probably the simplest solution (but as you can see, it's not quite economical, 2000 grid points are used to obtain a good enough result):

appro = With[{k = 100}, ArcTan[k #]/Pi + 1/2 &];

sign[x_] = Simplify`PWToUnitStep@PiecewiseExpand[Sign[x], Reals] /. UnitStep -> appro

solpreV112 = 
 fix[tend, 4]@
  NDSolveValue[{D[u[x, t], t] == D[sign[x] u[x, t], x] + D[u[x, t]^2 D[u[x, t], x], x], 
    u[-7, t] == 0, u[7, t] == 0, u[x, 0] == Exp[-x^2]}, u, {x, -7, 7}, {t, 0, 2}, 
   Method -> {"MethodOfLines", 
     "SpatialDiscretization" -> {"TensorProductGrid", "MaxPoints" -> 2000, 
       "MinPoints" -> 2000, "DifferenceOrder" -> 4}}]

Plot[solpreV112[x, tend], {x, -7, 7}, PlotRange -> All]

Tested on v9.0.1.

The 4 solutions agree well. Your first result in Python is wrong.

Remark

If you want to check the $m=frac{1}{2}$ case mentioned in p404 of the book, remember to add a Re to the code to avoid tiny imaginary number generated by numeric error. To be more specific, you need to use

With[{u = u[x, t]}, 
 neweq = D[u, t] == 
   Inactive[Div][{{Sign[x] u/D[u, x] + Re[u^(1/2)]}}. Inactive[Grad][u, {x}], {x}]]

in the FiniteElement based approach,

With[{u = u[x, t], mid = mid[x, t]}, eq = {D[u, t] == D[mid, x],
    mid == Sign[x] u + Re[u^(1/2)] D[u, x]};]

in the semi-NDSolve based and TensorProductGrid based approach, and

Plot[solpreV112[x, tend] // Re, {x, -7, 7}, PlotRange -> All]

in the fix based approach. (Yeah in fix approach you just need to add Re into Plot. )

BTW the obtained result seems to be consistent with the one in the book: