It’s a newsworthy morning as Novo Nordisk (NYSE:NVO) just announced that it will acquire Forma Therapeutics (NASDAQ:FMTX). This is a $1.1 billion deal that will allow Novo Nordisk to expand its portfolio of blood disorder treatments. As traders absorb this development, FMTX stock is rocketing higher.
Massachusetts-based Forma Therapeutics has a comparatively small market capitalization of around $1 billion. It’s a clinical-stage biopharmaceutical company focused on developing and commercializing treatments for rare hematologic (blood) diseases and cancers.
Meanwhile, Novo Nordisk is a Danish multinational pharmaceutical giant with a market cap of $240 billion. So, today’s news is a typical example of a big fish acquiring a little fish. Both companies will probably benefit from this acquisition, though.
Novo Nordisk made it crystal-clear why it’s buying out Forma Therapeutics:
We have an ambition to build a leading portfolio with standalone and combination treatments to tackle the complications and underlying causes of sickle cell disease.
What’s Happening With FMTX Stock?
When a bigger company expresses its plans to buy out a smaller company, the bigger company’s stock will often decline initially. Thus, NVO stock sank 1.6% early today.
However, it’s a different story for small companies that are about to be acquired. Oftentimes, their share prices move higher. That’s certainly the case with FMTX stock, which climbed nearly 50% and threatened to break through the previously unimaginable $20 level.
Still, both companies have reasons to be bullish about this acquisition. Novo Nordisk is known for its diabetes treatments, but now it can venture into treatments for blood diseases without having to build a new business segment from the ground up. Interestingly, Novo Nordisk said it would pay $20 per share for Forma Therapeutics, which happens to be pretty close to today’s share price.
In any event, right now Wall Street is fixated on the jaw-dropping price action of FMTX stock. It’s days like this that make pharmaceutical stocks fly and the short sellers cry.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.