What happened

Shares of Alder Biopharmaceuticals (NASDAQ:ALDR) jumped 111% in September, according to data provided by S&P Global Market Intelligence, after the biotech said it will be acquired by Lundbeck.

So what

Lundbeck, a fairly large drugmaker in Denmark, is after Alder Pharmaceuticals' migraine medication eptinezumab, which is under FDA review with a decision expected in February 2020. Alder also has a preclinical program for migraines, but essentially all of its value is wrapped up in eptinezumab.

Eptinezumab is a CGRP inhibitor in the same class as Teva Pharmaceutical's Ajovy, Eli Lilly's Emgality, and Aimovig from Amgen and Novartis. Those big pharmaceutical companies posed a substantial threat to Alder's ability to market eptinezumab, and investors rightfully discounted the drug's potential accordingly.

But in the hands of Lundbeck, eptinezumab is worth more, which allowed the Danish company to offer a substantial premium to acquire Alder. When the deal closes, investors will receive $18 per share plus a contingent value right for an additional $2 if eptinezumab is approved for sale in the EU.

Woman holding her head with a pained expression.

Image source: Getty Images.

Now what

As the Alder deal shows, the potential for an acquisition offers substantial upside for biotech investors. Unfortunately, acquisitions aren't under investors' control, and even biotechs' managements don't have much power -- they can be open to an acquisition, but it takes an interested buyer at a good price to reward investors.

Rather than focusing on companies that might be acquired, investors should look for companies that are valuable on their own and consider the potential for an acquisition as a bonus.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.