What happened

Shares of Kindred Biosciences (NASDAQ:KIN) soared 46% on Wednesday after the pet-focused biotech company said it agreed to be acquired by Elanco Animal Health (NYSE:ELAN)

So what

The deal values KindredBio at roughly $440 million, or $9.25 per share. That's a premium of nearly 46% from the stock's closing price on Tuesday.

KindredBio will help to bolster Elanco's pet therapeutic pipeline in fast-growing markets such as dermatology. The combination is also projected to strengthen Elanco's relationships with veterinary clinics. In all, Elanco's management sees the deal boosting the animal health leader's revenue by as much as $100 million by 2025, while also improving its profit margins over time.

A veterinarian is examining a dog.

Image source: Getty Images.

The transaction is expected to close in the third quarter, subject to shareholder and regulatory approval.

"From the beginning, we have been focused at KindredBio on bringing the best medicines to our animal family members," KindredBio co-founder and CEO Richard Chin said in a press release. "With this transaction with Elanco, a widely respected leader in veterinary medicine with global reach, we will maximize the impact our innovative pipeline will have on improving the lives of pets."

Now what

The pet care market has surged during the coronavirus pandemic, as lockdowns and social distancing measures have driven more people to adopt dogs and cats. Americans, in turn, spent a whopping $99 billion on their pets last year, according to The American Pet Products Association. Elanco's leadership knows this, and it's acting aggressively to advance the company's position within this booming market.

"Ultimately, we believe the combination positions Elanco to bring innovative solutions to veterinarians and pet owners in areas of unmet or under-served medical needs, fueling continued growth in the exciting pet therapeutic category and creating sustainable long-term value for shareholders," Elanco CEO Jeff Simmons said.

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