Here's Why Flexion Therapeutics Inc. Skyrocketed Today

By Brian Feroldi Markets Fool.com

What happened

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Shares of Flexion Therapeutics (NASDAQ: FLXN) rose by more than 33% at$26.28 in Thursday trading, in response to rumors that a takeover bid from Sanofi (NYSE: SNY) is looming.

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So what

According to a report by Fierce Pharma, Flexion has accepted a takeover offer from the French pharma giant Sanofi.This information comes from "a source close to the deal," and the bid is said to value the company's shares in the mid-$30s. If true, the deal could easily be worth more than$1 billion.

Flexion's stock ended Wednesday's trading session at $19.68, so if the terms of this deal are to be believed, shareholders would stand to earn a sizable premium. Traders bid up shares today on the hopes that an officialannouncement will be made soon.

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Now what

While it is hard to know what to make of this report, there are reasons this deal would make sense for both companies. Flexion's lead compound, Zilretta, is an extended-release formulation of triamcinolone acetonide that is designed to provide long-lasting relief to knee pain due to osteoarthritis.Currently, Zilretta is pending FDA approval and a decision is expected by Oct. 6, 2017.

This is a market that Sanofi knows well: The company has an injectable osteoarthritis treatment of its own, Synvisc. If Zilretta wins approval, Sanofi's relationships and resources could go a long way toward making the drug's launch a success.

Of course, without officialconfirmation from Flexion or Sanofi that this is a done deal, it is hard to know what to make of Fierce Pharma's report. Flexion's shareholders might want to simply enjoy today's gains and hang on to their shares until more information becomes available.

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Brian Feroldi has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.