Auxilium Pharmaceuticals Inc.'s shares (NASDAQ:AUXL) rose 44.8 percent, or $9.65, to close at $31.17 Wednesday following Endo International plc's unsolicited $2.2 billion bid for the company, a development that could throw a wrench in Auxilium's plans to merge with Canada's QLT Inc. but could offer its shareholders an irresistible path to profit.

As it reviewed the offer, Auxilium's board adopted a one-year stockholder rights plan, or poison pill, to reduce "the likelihood that any person or group would gain control of Auxilium through open market accumulation or other coercive tactics without appropriately compensating Auxilium's stockholders" or giving the board enough time to consider the offer.

Endo claimed it could drive increased adoption of Auxilium's Xiaflex (collagenase clostridium histolyticum), an FDA-approved therapy for men with Peyronie's disease and people with Dupuytren's contracture, as well as accelerate development of the product in potential new indications such the treatment of skin-dimpling due to cellulite and frozen shoulder and optimize Auxilium's portfolio of 12 FDA-approved products in men's health, orthopedics and other areas. (See BioWorld Today, Dec. 9, 2013.)

Rajiv De Silva, Endo's president and CEO, said during a conference call that the combination would expand the R&D capabilities of both companies and could at least double the $75 million in savings Auxilium said it expects to realize in addition to restructuring efforts announced last week. The combined company would have enhanced flexibility as well, he said. Endo did not respond to an interview request.

Endo, a Dublin-based specialty pharma known for its pain management franchise, earned the majority of its 2013 revenue from Lidoderm, Opana ER and Percoset, but revenue from each has declined in the face of threats from generic competitors. Adding Auxilium's Xiaflex and other therapies to its lineup could have significant upside, the company said.

In a letter to employees, De Silva said that "the combined company would have one of the broadest ranges of therapies in men's health, and will be well positioned to drive organic growth and to capitalize on additional future strategic M&A opportunities."

Under the terms of the proposal, the consideration would include an equal mix of cash and Endo stock. Endo intends to fund the transaction through a combination of existing cash on hand and debt financing. At Endo's share price Sept. 16, its $28.10 per share cash-and-stock proposal represents a premium of 31 percent to Auxilium's closing price on Sept. 16 and a 40 percent premium to the average closing price of Auxilium shares for the 30 days prior to that.

RBC Capital Markets analyst Michael Yee told clients the firm likes Endo's offer but that it "may just be a starting point" and that RBC believes fair value for Auxilium could rise as high as $30 to $35 per share when value attributed to Xiaflex label expansions and Stendra (avanafil) are fully accounted for.

A consideration is Auxilium's pending all-share merger with Vancouver, British Columbia-based QLT. Endo made clear in its proposal that it sees its offer as "superior" to Auxilium's agreement with QLT. More importantly, after Endo's 2013 acquisition of Paladin Labs Inc., its headquarters are already in tax-advantaged Dublin, giving it little reason to buy QLT to duplicate that benefit. (See BioWorld Today, Nov. 6, 2013, and June 27, 2014.)

The boards of both Auxilium and QLT reaffirmed their support for their planned deal in the wake of Endo's offer, a reasonable move given the $28.4 million breakup fee Auxilium could owe QLT if the deal falls through.

Analysts don't expect the deal to stand if Endo's offer is successful, something that still requires a vote of support from Auxilium shareholders. "Given that shareholder votes often take place weeks before a transaction's expected closing date," wrote Joseph Schwartz, an analyst with Leerink Partners LLC, "it appears there is sufficient time for AUXL to negotiate with ENDP before a definitive call is made on the QLT transaction."

QLT's stock (NASDAQ:QLTI) fell 13 percent, or 81 cents, to close at $5.39 Wednesday. Endo shares (NASDAQ:ENDP) rose $3.08, to close at $68.25.