Xenoport (XNPT) on Monday became the latest biotechnology company to be acquired, but the buyer wasn't a publicly traded drug behemoth but a privately held strategic.
Santa Clara, Calif.-based Xenoport announced May 23 that it would be acquired by Atlanta-based Arbor Pharmaceuticals for $7.03 per share in cash, or approximately $467 million.
The purchase price represents a 60% premium to Xenoport's share price before the market's open Monday. The share price jumped 56.6% to $6.89 per share following the announcement. Shares closed at $6.88.
"The acquisition price is a very good outcome for Xenoport shareholders," said analyst Michael Yee of RBC Capital Markets in a phone interview.
He added that the purchase price wasn't at the high end of his expected range----Yee hoped the company could sell for $10 per share----but he attributed that to the execution risk involved over the next few years for Xenoport's main drug, Horizant, which is used to treat alcoholism.
Yee also noted that Xenoport is using approximately $40 million per year to fund research and sales, which he said could have been another reason for a low purchase price.
Still, shareholders will see a 100% return over what Xenoport's shares were trading for last year, Yee said.
He suspects the company will likely de-list from the Nasdaq, but Xenoport officials couldn't be reached Monday to confirm that.
Yee said the company was preparing for quite some time to sell.
"Xenoport had gone through a cost-cutting effort over the past year," he said by phone. "They changed out the CEO and there were a lot of strategic things going to tighten up over the year."
According to Yee, Xenoport had been in deal talks with several larger companies.
In fact, many thought Xenoport would be bought by Dr. Reddy's Laboratories (RDY - Get Report) because in March the two entered into a licensing agreement for Xenoport's oral drug XP23829, which could be used to treat psoriasis or multiple sclerosis. Xenoport received $47.5 million in upfront consideration for the deal.
That deal, however, never materialized.
Officials from Alder and Neurocrine weren't immediately available for comment Monday.
"I think that what is interesting is that some of the late stage or nearing commercialization drug companies have all been discussed as in play over the next few months," Yee said. "All of the large pharma companies say they've been evaluating deals. The bid-ask spread just needs to come together."
Officials from Xenoport, which has a market cap of $437.7 million, couldn't be reached for comment Monday. Arbor executives also couldn't be reached.