What happened

Shares of the clinical-stage biotech Achillion Pharmaceuticals (NASDAQ:ACHN) rose by a jaw-dropping 82% on heavy volume in pre-market trading this morning.

The spark? Achillion's shares bolted higher this morning in response to a $930 million all-cash buyout offer from the rare-disease drug giant Alexion Pharmaceuticals (NASDAQ:ALXN). Alexion's shareholders, however, don't seem to be particularly thrilled with the deal. As proof, the biotech's stock dropped by 2% right after this acquisition news hit the wires. 

Two people shaking hands over a clipboard on top of a desk.

Image Source: Getty Images.

So what

Per the terms of the deal, Alexion will reportedly pay $6.30 for each Achillion share, representing a 72.6% premium relative to where the shares closed on Tuesday. Additionally, Achillion's shareholders stand to rake in even more cash for their shares in the form of nontradeable contingent value rights (CVRs) tied to the achievement of certain clinical and regulatory milestones.

Specifically, the two CVRs associated with this deal include a $1 per share for the U.S. approval of danicopan as a treatment for the rare blood disease paroxysmal nocturnal hemoglobinuria (PNH) and another $1 per share for the advancement of the experimental oral factor D inhibitor ACH-5228 into late-stage development. The two companies said the transaction should close in the first half of 2020.   

Now what

While Alexion's shareholders may not be happy with the fact that the company is paying a rather hefty premium to acquire a clinical-stage rival, this deal makes sense for the biotech in several ways. Most importantly, Alexion will gain two high-value clinical assets with danicopan and ACH-5228 through this bold move.

The long and short of it is that these two promising drug candidates should turn out to be worth the price of admission for Alexion and its shareholders once everything is said and done. As an added sweetener, Alexion will also gain Achillion's cash balance, which stood at $230 million at the end of September, as part of the deal.