There’s notable merger news today as pharmaceutical giant Eli Lilly (NYSE:LLY) entered into a definitive agreement to acquire Akouos (NASDAQ:AKUS). Clearly, Eli Lilly is looking to expand further into gene therapies. Yet, the focus right now is on AKUS stock, which flew higher this morning.
Akouos, with its market capitalization of less than $500 million, usually doesn’t get a lot of attention on Wall Street. The company is known for developing viral gene therapies. These are primarily intended to treat inner ear conditions, including those that result in hearing loss.
Akouos’s lead product candidate is called AK-OTOF. It’s a gene therapy intended to treat hearing loss due to mutations in the otoferlin gene. However, Akouos also has other clinical programs in its pipeline that address a variety of inner ear conditions.
So, why would Eli Lilly want to acquire Akouos? The press release states that the purpose is to accelerate gene therapies to restore, improve, and preserve hearing for patients with disabling hearing loss. But of course, Eli Lilly wouldn’t spend millions of dollars to buy out Akouos if the company didn’t expect to eventually generate substantial revenue from Akouos’s genetic medicine technology.
What’s Happening with AKUS Stock?
Even while LLY stock hardly moved on the buyout news, AKUS stock soared 85% this morning. This isn’t unusual since a smaller acquired company will typically get a much bigger share-price boost than the bigger acquiring company.
Still, an 85% move is quite notable. It just goes to show that merger news can have an outsized impact on low-priced stocks and occasionally create fast wealth for lucky or skilled traders.
As for Eli Lilly, the company will pay up to $610 million to buy out Akouos. Furthermore, Eli Lilly will acquire all of Akouos’s outstanding shares for $12.50 per share in cash, as well as one contingent value right of up to $3 per share.
The boards of directors of both companies have already approved the transaction, so it’s basically a done deal at this point. Meanwhile, AKUS stock investors are probably happy about the merger news, and even happier about the sudden windfall.
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.
