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What happened

Investors in CoLucid Pharmaceuticals (NASDAQ: CLCD) should be smiling from ear to ear today. Shares of the clinical-stage biopharmaceutical company shot up 33% yesterday in response to receiving a buyout offer from pharma giant Eli Lilly (LLY 1.53%)

So what

Eli Lilly agreed to acquire CoLucid in an all-cash deal worth $960 million, or $46.50 per share. That figure represents a 33% premium over Tuesday's closing price. The deal is expected to close by the end of the first quarter of this year. 

Lilly's rationale for making the offer is that it will help to build out the company's pain management portfolio by bringing CoLucid's late-stage drug lasmiditan into its pipeline.

Lasmiditan performed quite well during its phase 3 SAMURAI trial. Top-line data from the study showed that lasmidtan succeeded in meeting both its primary and secondary endpoints as a migraine treatment. Patients who took lasmiditan demonstrated a statistically significant decline in headache pain at the two-hour point relative to the placebo group. Better yet, the drug was well tolerated by patients and was shown to decrease several other symptoms that are associated with migraines such as nausea and phonophobia.

CoLucid is currently running a second phase 3 study -- known as SPARTAN -- which is testing oral lasmiditan in three separate doses against a placebo after two hours. Data from this trial is expected in the second half of the year. If the data looks good, the drug could be sent off for regulatory review soon after.

David Ricks, Eli Lilly's CEO, expressed his optimism for the drug:

Lasmiditan is a novel, first-in-class molecule that could represent the first significant innovation for the acute treatment of migraine in more than 20 years, and CoLucid has made significant progress in advancing this potential medicine.

CoLucid's CEO Thomas P. Mathers also showed his enthusiasm for the deal by saying, "We are proud of the work that CoLucid has done to develop lasmiditan, and we believe Lilly's expertise in pain and commitment to innovation are a natural fit to potentially bring this medicine to patients."

Now what

Lilly stated it expects to incur an acquired in-process research and development charge of approximately $850 million, or approximately $0.80 per share, in the first quarter of 2017. In response, the company is lowering its reported earnings-per-share guidance for 2017. However, management said there will be no change to the company's non-GAAP earnings per share guidance.

If lasmiditan can go on to win approval, that looks like it would be money well spent. Estimates show that more than 36 million Americans suffer from migraines each year, which represents a truly massive market opportunity. While competition in the industry is fierce, lasmiditan's terrific data could help it stand apart from the crowd.

Yesterday's jump has turned CoLucid into an absolute home-run stock for investors. The company's shares more than quadrupled last year, which made it one of the best-performing stocks on the Nasdaq in 2016. The big move on Wednesday just goes to show that winning stocks tend to keep on winning.