What happened

Shares of Lantheus Holdings (NASDAQ:LNTH), a company focused on diagnostic medical imaging equipment and supplies, dropped 21% as of 10:35 a.m. EDT on Wednesday after the company announced that it is acquiring Progenics Pharmaceuticals (NASDAQ:PGNX), a commercial-stage biotechnology company focused on cancer.

So what

Here are the key terms of the deal:

  • This is an all-stock transaction. Lantheus will acquire all of Progenics' stock at a fixed exchange ratio. Progenics shareholders will receive 0.2502 shares of Lantheus Holdings stock for each share of Progenics stock they own.
  • Progenics' shareholders will own about 35% of the combined company.
  • This represents a premium of 21.5% over Progenics' 30-day volume-weighted average closing stock price.
  • The deal has been unanimously approved by both companies' boards.
  • The transaction is intended to be tax free to Progenics' stockholders.
  • The company expects to generate at least $15 million in run-rate cost savings by 2022.
  • Lantheus CEO Mary Anne Heino will lead the combined company.
  • The deal is expected to close in the first quarter of 2020.

Traders don't appear to share management's enthusiasm for the deal and are responding accordingly.

Illustration of big fish eating small fish.

Image source: Getty Images.

Now what

Here is the commentary Heino shared with investors:

With this combination, we broaden our reach in emerging uses of radioisotopes for precision diagnostics and the exciting and expanding field of radiopharmaceuticals in oncology treatment. Lantheus will be a leader in radiopharmaceutical innovation, providing medical professionals with essential tools and therapies to diagnose and treat neuroendocrine tumors and prostate cancer patients. Our complementary strengths, radiopharmaceutical manufacturing and supply chain expertise, and focus on commercial execution will deliver sustainable and diversified revenue streams and increase our gross margin potential. We have assessed the strategic fit with Progenics for a number of years and I am pleased that we are finally able to make this combination come to fruition; I believe that the combined company will be well positioned for long-term value creation for all of our stockholders.

Both boards of directors have already given this deal the thumbs-up, so the odds of it closing on time appear to be quite high. The onus is now on CEO Heino to execute successfully and turn this newly combined healthcare company into a growth stock that performs well for shareholders.