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 Auxilium Pharmaceuticals (NASDAQ: AUXL) soared over 10% this morning after Endo International plc upped its unsolicited tender offer to buy the company by $400 million, for a grand total of $2.6 billion or $33.25 per share. As a refresher, Endo's initial offer on Sept. 17 was $2.2 billion, or $28.10 per share. Auxilium subsequently rejected the offer as being "too low".
Per the press release, Auxilium's board has reportedly approved this higher offer, but shareholders will get the final say in an upcoming vote. If the deal goes through, it would come at a 55% premium compared to where Auxilium shares were trading prior to Endo's original tender offer roughly a month ago.
So what: Auxilium's portfolio of urology and men's health products have had a rough year sales-wise, led by declining sales of its testosterone gel Testim. After a planned restructuring process, experts are expecting the company to return to growth in a big way, with earnings per share projected to more than quintuple from current levels next year.
Now what: Auxilium shareholders have a couple of options in terms of how this deal would be structured, if they elect to approve it. Specifically, they can select an all-cash, all-stock or cash-and-stock payment, according to reports.
Will this deal go through? It's looking more likely this time around. As I mentioned previously, Endo's initial offer did appear to be low, given Auxilium's strong growth prospects moving forward. With this higher bid and Auxilium choosing to nix its buyout of Canadian biotech QLT (NVLN) last Friday, I think all systems are now a go. Perhaps most importantly, shareholders would get a hefty premium via this revised bid, removing the risk of having to depend on organic growth next year.
