Everyone Wins in This Big Pharma Buyout

Shares of Mallinckrodt were up 10% after the company announced that it's buying Cadence for $1.3 billion. Shares of Cadence performed even better, up about 25% on the buyout news.

The catalyst for the acquisition is painkiller Ofirmev, which was approved in 2010, but with roughly $100 million in trailing-12-month sales, it hasn't been a huge seller. Mallinckrodt believes it can double those sales, and in this video from Tuesday's Market Checkup, Motley Fool health-care analyst David Williamson says he thinks the company will need to reach that goal to fully justify this purchase.

If everything goes well, this purchase should be accretive this year, which is what had the market showing love to both of these companies on the news. Mallinckrodt is focused on growing its specialty pharma side, and already specializes in abuse-resistant painkillers. In the video, David gives investors the story on Mallinckrodt, and discusses why he now sees this spec pharma company as a possible acquisition target itself.