What happened
Shares of Forma Therapeutics Holdings (FMTX) were up by a healthy 49% as of 1:17 p.m. ET Thursday afternoon. The small-cap biotech's stock is roaring higher in response to a $1.1 billion buyout agreement with Danish drugmaker Novo Nordisk (NVO -1.93%).
Novo Nordisk has agreed to pay $20 a share for Forma Therapeutics in cash. This deal represents a 49.2% premium relative to Forma Therapeutics' closing price Wednesday afternoon. The two companies said in their shared press release that the transaction is expected to close in the fourth quarter of 2022.
So what
Through this deal, Novo Nordisk will gain access to Forma Therapeutics' experimental sickle cell disease candidate, etavopivat. The drug is currently in a combined phase 2/3 trial as a once-daily oral therapy for the rare blood disorder.
Forma Therapeutics is also developing etavopivat as a treatment for other rare blood disorders such as thalassemia. Across its clinical pipeline, the drug is targeting indications worth several billion in annual sales.
That being said, there's already one orally administered therapy for sickle cell disease approved by the Food and Drug Administration, and thalassemia could become a jam-packed indication by the middle of the decade. In other words, it's not entirely clear whether Novo Nordisk is getting a bargain or overpaying for this clinical-stage biotech.
Now what
Investors should expect a flurry of similar deals in biotech and biopharma in the coming weeks. Big pharma is flush with cash from the COVID-19 pandemic and most of these companies are facing key patent expirations in the back half of the decade.
What's more, valuations across the space have become far more attractive this year as a result of the ongoing bear market. This Novo Nordisk-Forma Therapeutics tie-up, in short, is likely a harbinger of things to come for the industry at large.