What happened

Shares of Advanced Accelerator Application (NASDAQ:AAAP) are up 12% as of 11:23 a.m. EDT after Bloomberg reported that Novartis (NYSE:NVS) is considering acquiring the radiopharmaceutical company. If it goes through, the buyout would be a welcome sight in a rather dismal year for biotech acquisitions.

So what

As typically happens with these things, Bloomberg cites unidentified "people familiar with the matter," with both companies declining to comment. Nevertheless, the fact that Bloomberg has people -- as opposed to a person -- willing to talk gives the idea a little more validity. The people said the companies have actually held talks, implying that this is more than just a fleeting idea for Novartis.

When information about mergers and acquisitions is leaked to the media, it's a good idea to try and figure out why that might happen. It's possible that the person has gone rogue, but with multiple people willing to talk, it's more likely that one of the companies -- likely through their investment bankers -- has decided that it's helpful to make the information public.

Rising stock chart superimposed over digital map of the world

Image source: Getty Images.

One possibility is that Novartis sees talks breaking down and thinks making the potential acquisition public will get Advanced Accelerator Application's shareholders to put pressure on management to reach an agreement. It's also possible that it's Advanced Accelerator Application's people that are talking to the media, trying to get Novartis to offer a higher price or perhaps spur a bidding war.

Of the two, it seems more likely that it's Advanced Accelerator Application involved with the media leak since Bloomberg notes that the company "could also attract interest from other drugmakers, the people said," which sounds more like something Advanced Accelerator Application's representatives would point out.

Now what

The fit between Novartis and Advanced Accelerator Application seems reasonable, with many of the radiopharmaceutical company's drugs used to diagnose and treat cancer, which falls in one of Novartis' wheelhouses.

But just because it's a good fit doesn't mean the acquisition will go through; the two companies still need to agree to a price. Investors buying in the hopes of an acquisition are taking unknown risk with unknown near-term rewards, which sounds more like gambling than investing.