Ironwood Pharmaceuticals said Monday it will buy VectivBio for $1 billion. The deal sent VECT stock flying, and IRWD stock turned around early losses.
Both boards have already signed off on the deal, which marries gastrointestinal-focused Ironwood with VectivBio, a company testing treatments for severe rare gastrointestinal conditions.
VectivBio's lead drug is in Phase 3 testing of people with short bowel syndrome with intestinal failure. In this condition, the body can't absorb enough nutrients from food because the small intestine is too short. VectivBio expects to have the results of that study before year-end.
On today's stock market, VECT stock catapulted 36.2% higher to end the day at 16.21. IRWD stock reversed an earlier drop and rose 3.6% to close at 10.85.
IWRD Stock: Paying A Premium
Under the terms of the deal, Ironwood will pay $17 in cash per share of VectivBio stock. The price tag represents an 80% premium to the volume-weighted average share price of VECT stock over the past 90 trading days.
Ironwood sells Linzess, a treatment for irritable bowel syndrome with constipation and chronic idiopathic constipation. It's also testing several gastrointestinal disease treatments in partnership with AbbVie and privately held Cour Pharmaceutical.
Tom McCourt, chief executive of Ironwood, says the addition of VectivBio's leading drug, known as apraglutide, is "an ideal strategic fit with Ironwood." But IRWD stock, which was closing in on its 50-day moving average on Friday, tumbled Monday, according to MarketSmith.com.
"We are confident that with our GI expertise, commercial capabilities and robust balance sheet, we are well-positioned to continue developing apraglutide, with the goal of getting it into the hands of the patients who need it the most and potentially generate significant and sustainable value for shareholders," he said in a written statement.
Highly Rated VECT Stock
The companies expect the deal to close in the second half of the year.
VECT stock is a highly rated biotech with a Relative Strength Rating of 98 out of a best-possible 99. This means shares rank in the top 2% of all stocks when it comes to 12-month performance, according to IBD Digital. IRWD stock has a lower RS Rating of 32.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
