American Medical Shares Skyrocketed: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of American Medical Systems (Nasdaq: AMMD  ) soared more than 30% today after drugmaker Endo Pharmaceuticals (Nasdaq: ENDP  ) offered to buy the incontinence treatment specialist for $2.9 billion.

So what: The all-cash deal values American Medical at $30 per share and represents a 34% premium to its Friday closing price. Endo is making the move to reduce its reliance on best-selling pain patch Lidoderm, and judging from the stock's 5% pop, investors agree wholeheartedly with the strategy.

Now what: While American Medical shares are probably all popped out, Endo might be worth a closer look. 2011 revenue for the combined company will be about $3 billion, with Endo expecting cost savings of at least $50 million by 2013. Mr. Market's main concern with Endo has always been the dominance of Lidoderm in its portfolio, but with the company having just "blunted that with diversification," as CEO Dave Holveck put it, the stock should continue to get a lift.

Interested in more info on American Medical? Add it to your watchlist. Interested in more info on Endo Pharmaceuticals? Add it to your watchlist

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Try any of our Foolish newsletter services free for 30 days.

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