Bristol-Myers Squibb (BMY) provides M&A therapy on Kosan Biosciences (KOSN)

It's a nice day for shareholders of Kosan Biosciences Inc. (NASDAQ: KOSN), which is a cancer therapeutics company. The stock price is up 230% to $5.44.

That is, Bristol-Myers Squibb Company (NYSE: BMY) has agreed to purchase Kosan for $190 million. The transaction will be structured as a cash tender offer.

Founded in 1995, Kosan has two key anticancer agents in clinical development -- heat shock protein 90 (Hsp90) inhibitors and epothilones. Some of the treatments include multiple myeloma and metastatic breast cancer.

Basically, Kosan didn't have the wherewithal to take these drugs to market (after all, the capital markets have been fairly skittish lately). So, a partnership with Bristol-Myers does make a lot of sense. Keep in mind that the company has a large oncology business.

Interestingly enough, the parties also announced a separate licensing agreement to market Kosan's epothilone compounds. The deal involves an upfront $25 million payment as well as milestone payments.

Although, the agreement is only triggered if the merger falls through. In other words, Kosan has a nice backstop on the transaction.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.