What happened
Shares of the small-cap drugmaker Zogenix (ZGNX) rose by as much as 67% in pre-market trading Wednesday morning. The company's shares are surging higher today in response to a buyout agreement with the Belgian pharmaceutical company UCB.
UCB will reportedly pay $26 in cash per share for Zogenix. In addition, UCB will be on the hook for another $2 per share if Fintepla is approved for Lennox-Gastaut syndrome in the European Union before the end of 2023. The total potential value of this deal is $1.9 billion. The up-front portion of this transaction represents a hefty 66% premium relative to Zogenix's closing price Tuesday afternoon.
Image source: Getty Images.
So what
Zogenix's stock has been losing ground steadily over the prior 12 months despite Fintepla's stellar commercial potential. Keeping with this theme, Wall Street expects the drug's 2024 sales to come in at approximately $467 million. That's a sizable sum for a company that had a market cap under $900 million as of Tuesday's closing bell.
The problem was that the market wasn't convinced that Zogenix could get the most out of Fintepla. As proof, the biotech's shares were off of their 52-week highs by a notable 33% prior to today's buyout announcement. This buyout deal, in turn, is probably a wise move on the part of Zogenix's management.
Now what
Is Zogenix stock still worth buying for the contingent value right? Probably not. Regulatory reviews are unpredictable. And this regulatory risk simply isn't worth a possible 6% to 7% gain.
