Here's What The Deal Means For Innocoll Holdings PLC (NASDAQ:INNL)

Innocoll Holdings PLC (NASDAQ:INNL) is a big winner early this week on the news that the company is set to be bought out by a healthcare investment fund. We don't like to blow our own trumpet here at Insider Financial, but with this one, we'll say it – we called it.As we noted last time, any such buyout deal (of the type that was just announced) would likely please some holders and frustrate others. With this in mind, let's look at the terms of the deal, and see which side the majority is likely to settle on.For those new to the company, Innocoll is a biotech stock that has a portfolio of approved products, the lead of which is a post operative collagen film called CollaGUARD, and a pipeline of other collagen based therapeutics that it's spend the better part of the last half decade trying to bring to market.We emphasize trying here, because it's not had too much look with its efforts.The two lead development assets are called Xaracoll and Cogenzia.Xaracoll is a sort of post surgical pain collagen mesh product, and the company picked up a Refusal to File (RTF) on an October NDA submission from from the FDA in December. Basically, the FDA ruled that the asset be classed as a drug device combination (as opposed to the solo drug application that the company had submitted) and that as a result of the combo assignment, fresh data was required. We got a bit of an update on this at the end of March, with the company reporting a path forward for the new combo submission, and it looks like there's going to be a reformatted NDA in the works for end-2017. Of course, it's now not going to be Innocoll that submits this (at least not in its current iteration).Cogenzia is a sponge type collagen product with which Innocoll is targeting a diabetic foot ulcer indication. This one, again, tripped up at the end of last year, when it missed its endpoints in two phase III studies – studies that would have been sufficient to warrant an NDA and a likely approval in a big unmet need indication, if they'd have hit press as positive. The forward path for this one is relatively unclear right now.Anyway, to the offer.The company just announced that the above mentioned healthcare investment fund, called Gurnet Point LP, has agreed to acquire Innocoll for $1.75 per share in cash, and up to $4.90 in cash from a contingent value right (CVR), for a total potential per share value of up to $6.65 or up to approximately $209 million in aggregate. That's a 120% premium on the company's March 10 close (the day this company started to move in a fashion now being referred to as 'anomalously'), and a nearly 30% premium to the March 15 close. These premiums, of course, are based on the initial cash consideration, not the added aggregate from the CVR.Why this convoluted structure? Well, it's a risk ring-fence from Gurnet. Basically, the latter is offering $1.75 a share, and then the extra (the CVR) based on how well Xaracoll does subsequent to the resubmitted NDA.So what does the deal look like from a shareholder perspective?In our eyes, it's a solid outcome. The company would have needed $100 million to fund the resubmission and keep the doors open through end 2018 (the point at which it would likely start seeing revenues come in from a Xaracoll approval). That's a lot of dilution. With the Gurnet deal, there's a premium being paid (and some short term run gains on the rumors that came with it for the flippers) and the risk of a Xaracoll decline is basically removed from the equation.We will be updating our subscribers as soon as we know more. For the latest updates on INNL and to receive our top biotech picks, sign up below!Disclosure: We have no position in INNL and have not been compensated for this article.