Bristol-Myers Squibb ( BMY - Get Report) said Thursday it will buy Kosan BioSciences for $5.50 a share. The price works out to roughly $190 million after deducting Kosan's projected net cash balance as of June 30.

The acquisition will enhance Bristol's oncology drug portfolio, which includes Taxol, Spyrcel, Ixempra and Erbitux (a partnered drug with ImClone ( IMCL)).

Kosan's stock, which has traded as high as $6.49 in the last year, closed Wednesday at $1.65. Shares surged $3.79, or 230%, to $5.44 Thursday on the buyout news.

Kosan said in February that it would reprioritize to focus on drug candidates that represented the greatest therapeutic potential and commercial value in the near term. Then in May the Hayward, Calif.-based biotech company named a new CEO and announced a restructuring that involved a 37% workforce reduction.

The company's KOS-953 (a Hsp90 inhibitor) is in a phase III trial in combination with Takeda's Velcade for multiple myeloma, and in a phase II trial in combination with Genentech's Herceptin for HER2-positive metastatic breast cancer. Kosan also has an epothilone anticancer product candidate in early-stage development. Epothilones are a class of molecules that have potential as chemotherapy drugs and in neurodegenerative diseases.

Bristol and Kosan also said Thursday that they entered into a separate license agreement granting Bristol an exclusive worldwide license to Kosan's epothilone compounds and related intellectual property and data. Kosan will assign Bristol its epothilone investigational new-drug applications. In return, Kosan will receive an upfront payment of $25 million and is entitled to future milestone payments and royalties. The companies said this deal will remain in place should the merger fall through.

Both boards have approved the transaction, which is expected to close in the next 30 days.

Bristol has also worked to refocus recently. The New York-based drugmaker previously announced a strategic review of non-pharmaceutical assets -- which resulted in the sale of its medical imaging and ConvaTec unit and the proposed spinoff of Mead Johnson.

Bristol's shares were up 33 cents, or 1.5%, at $22.42.