What happened
Ironwood Pharmaceuticals(NASDAQ: IRWD) is choosing to go the acquisition route to grow its business. On Monday, the company announced it has agreed to acquire clinical-stage biotech VectivBio Holding(NASDAQ: VECT). Investors were clearly warm to that move, as they subsequently traded up Ironwood stock by almost 4% on the day.
So what
Under the terms of the deal, Ironwood will pay roughly $1 billion in cash to become VectivBio's new owner. That shakes out to $17 per share, representing a hefty 42% premium over the latter's most recent closing stock price.
Both companies concentrate on treatments for gastrointestinal (GI) disorders, so the arrangement feels sensible and synergistic. In its press release touting the acquisition, Ironwood CEO Tom McCourt described his company's asset-to-be as "an ideal strategic fit" with its business.
It certainly bolsters Ironwood as a GI specialist. VectivBio is currently developing a drug, apraglutide, to treat short bowel syndrome-associated intestinal failure (SBS-IF). In Ironwood's view, apraglutide has clear potential to be a blockbuster drug.
VectivBio is also developing a treatment for severe inherited metabolic diseases. The drug is called CoMET.
Now what
Ironwood can also benefit greatly from a larger portfolio; at the moment, Linzess is its sole approved drug therapy for irritable bowel syndrome with constipation (IBS-C) and chronic idiopathic constipation (CIC).
The drug, which was developed in partnership with pharmaceutical sector mainstay AbbVie, was approved in mid-2021. It was responsible for nearly all of Ironwood's more than $104 million in revenue in the company's most recently reported quarter.
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