Shares of the leading hybrid ophthalmic pharmaceutical and medical technology company Avedro (NASDAQ:AVDR) rose by as much as 45% today on heavy volume, while fellow eye disease company Glaukos (NYSE:GKOS) saw its shares drop by a hefty 14.6% in the first half of today's session. What event triggered these moves?
After the closing bell Wednesday, Glaukos announced that it will acquire Avedro in an all-stock transaction. Per the terms of the deal, Avedro's shareholders will reportedly receive 0.365 shares of Glaukos stock for every share they own upon closing. The transaction is expected to close in the fourth quarter of 2019. As of 1:32 p.m. EDT, Avedro's stock was still up by a healthy 36.5%, whereas Glaukos' shares were down by approximately 11%, in response to this proposed merger agreement.
Avedro's shareholders are cheering this deal today because they are receiving what amounts to a 60% premium compared to the volume-weighted average price of the company's stock over the last 60 trading days. Glaukos' shareholders, on the other hand, will essentially be diluted by approximately 15% once this deal closes, which explains their overtly negative reaction to this proposed merger agreement.
The one clear positive outcome for Glaukos' shareholders is that this deal should boost the company's top-line growth over the next decade. Avedro's Photrexa system, which is designed to treat patients with a corneal disease called progressive keratoconus, has started to gain traction in the marketplace after all. So investors might want to consider sticking with Glaukos despite the negative short-term impacts associated with this definitive merger agreement.