NEW YORK (TheStreet) -- Specialty drug company Endo International (ENDP) - Get Endo International Plc Reportannounced Thursday it was buying Auxilium Pharmaceuticals (AUXL) for $2.6 billion, an 18% premium to its previous bid of $2.2 billion offered in September.

While there will be complaints about how expensive this deal is given the 52% premium that Endo is paying, the deal should pay for itself in the next couple of years. And investors would be wise to buy these shares now because, with this deal, Endo has just turned itself into a top-tier global specialty health care leader.

Auxilium, which had a tax inversion deal on the table with Canadian biotech specialist QLT (QLTI) , couldn't pass up Endo's sweetened deal. Shareholders of Auxilium and Endo, who've been waiting patiently for healthy gains, won't have to wait much longer.

Auxilium investors are now 52% wealthier since Endo first made its bid on Sept. 16. Endo, whose shares are up 11.44% since we last discussed the company in August, should now commence a steady rise toward the $85 to $90 range after the merger synergies start kicking in. That's a premium of 20% to 25% in the next 12 to 18 months.

Rajiv De Silva, president and chief executive officer of Endo, continues his strategy of pursuing accretive deals that create value for his company and produce growth. He said of the deal, "We intend to leverage Auxilium's leading presence in men's health, as well as our R&D capabilities and financial resources to accelerate the growth of Xiaflex and Auxilium's other products."

Xiaflex is Auxilium's treatment option for Dupuytren’s contracture in adults with a palpable cord, a condition that curls one or more fingers toward the palm. The treatment is minimally invasive and is the only treatment of its kind that is approved by the Food and Drug Administration. Xiaflex revenue jumped 56% in the most recent quarter.

That, however, was the lone bright spot in Auxilium's second-quarter results, which produced a 17% overall decline in revenue. Still, the company has a strong product portfolio that specializes in areas like testosterone replacement and erectile dysfunction.

Competition from larger rivals like Abbott Labs (ABT) - Get Abbott Laboratories Report and Actavis (ACT) - Get AdvisorShares Vice ETF Report proved too overwhelming for Auxilium this time.

TheStreet Recommends

That said, Auxilium carries one of the best gross margins in the industry at 74%. Endo, which has strong capabilities in research and development, should have no problem leveraging its resources to capitalize on the growth of Xiaflex and Auxilium's advances in men's health.

Meanwhile, Endo's branded drug business has been under attack from generic competition. That segment posted a 40% decline in the most recent quarter. With Auxilium now coming onboard, Endo has addressed it pipeline situation with new products with strong long-term growth potential. And aside from the immediate accretive benefits of the deal, the cost synergies make Endo even more attractive now as an investment, given that this deal will yield annual cost savings of roughly $175 million.

That's money that will boost the bottom line.

At the time of publication, the author held no position in any of the stocks mentioned.

Follow @Richard_WSPB

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

TheStreet Ratings team rates ENDO INTERNATIONAL PLC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate ENDO INTERNATIONAL PLC (ENDP) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income and generally higher debt management risk."

You can view the full analysis from the report here: ENDP Ratings Report