Ironwood IRWD announced a definitive agreement to acquire VectivBio VECT, a Switzerland-based biotech company, focused on the development of treatments for severe and rare gastrointestinal conditions.
Shares of Ironwood and VectivBio surged 3.6% and 38.6%, respectively, following the news.
The all-cash transaction is valued at approximately $1 billion. Ironwood will pay $17.00 per share, which is a premium of about 43% of VectivBio’s closing price of May 19.
This strategic move by Ironwood aims to strengthen its pipeline for gastrointestinal diseases. This is because VectivBio focuses on formulating medicines for severe rare gastrointestinal conditions.
VECT is developing its lead candidate, apraglutide, for treating short-bowel syndrome patients with intestinal failure. The candidate is in phase III clinical study with plans for a top-line readout by the end of 2023.
If apraglutide is developed successfully, it holds great promise as a next-generation GLP-2 analog with a potential to generate $1 billion in peak net sales. The candidate was granted orphan drug designation by the FDA for the treatment of adult patients with SBS-IF.
Approximately 18,000 adult patients in Europe, Japan and the United States suffer from short bowel syndrome with intestinal failure. Apraglutide can potentially address this issue.
The agreement has been approved by both companies' board of directors and is expected to be closed in the second half of 2023, subject to customary closing conditions.
Shares of Ironwood have plunged 9.8% in the year-to-date period against the industry’s 0.8% growth.
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The acquisition will add a promising treatment for digestive disorders to IRWD’s portfolio. It will also strengthen the company’s existing portfolio, which includes Linzess, a widely used and successful gastrointestinal treatment.
Ironwood, with partner with AbbVie ABBV, co-develops and co-commercializes Linzess in equal shares. Linzess is marketed by AbbVie in Europe and Canada under the brand name, Constella. Ironwood receives royalties on sales of Constella in Europe and Canada from AbbVie.
From a financial perspective, the acquisition is expected to support long-term profitability and cash-flow generation for Ironwood. The transaction is anticipated to benefit IRWD’s earnings, beginning 2026.
IRWD plans to finance the acquisition using its cash reserves and funds drawn through a four-year, $500 million revolving credit facility established in connection with the transaction.
Ironwood Pharmaceuticals, Inc. Price and Consensus
Ironwood Pharmaceuticals, Inc. price-consensus-chart | Ironwood Pharmaceuticals, Inc. Quote
Zacks Rank and Stock to Consider
Currently, Ironwood carries a Zacks Rank #3 (Hold).
A better-ranked stock for investors interested in the same sector is ADMA Biologics ADMA, carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Loss per estimates for ADMA have narrowed from 19 cents to 9 cents for 2023 in the past 60 days. Shares of ADMA have risen 6.7% in the year-to-date period.
ADMA Biologics’ earnings beat estimates in three of the trailing four quarters and met the mark in one, delivering an average surprise of 19.3%.
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