Shares of Endo International (ENDP -0.83%) and BioSpecifics Technologies (BSTC) were soaring 13.9% and 45.1%, respectively, as of 3:31 p.m. EDT on Monday. The big gains came after Endo announced plans to acquire BioSpecifics Technologies for $540 million net of cash acquired in the deal.
It makes perfect sense why BioSpecifics Technologies share price took off. Endo's offer of $88.50 per share represented a 45% premium over the closing price of the small biotech stock on Friday.
Why did Endo's share price jump? Investors appeared to really like the company's move to acquire BioSpecifics.
The match between the two companies seems to be a good one. Endo and BioSpecifics have been partners since 2004. BioSpecifics originally developed collagen-based therapy Xiaflex, which was licensed and marketed by Endo. Another product included in the collaboration agreement between the two drugmakers, injectable cellulite treatment Qwo, has already won approval from the U.S. Food and Drug Administration (FDA) and is on track to be launched commercially in the first half of next year.
Endo CEO Blaise Coleman stated that the acquisition of BioSpecifics is part of the company's strategy to invest in "the significant long-term growth potential" of Xiaflex and Qwo. Coleman added that the deal will immediately boost Endo's adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) and "create significant value for shareholders of both organizations."
Endo's planned acquisition of BioSpecifics has already been unanimously approved by the boards of directors of both companies. A major shareholder of BioSpecifics, the Edwin H. Wegman Marital Trust, has also already committed to tendering its shares in support of the deal. The two companies expect the transaction to close later this year.