Ironwood Pharmaceuticals, a company whose drug research yielded a blockbuster gastrointestinal disorder drug, has struck a $1 billion deal to acquire VectivBio, a biotech whose lead program brings blockbuster potential in yet another intestinal indication.

Under the deal, Ironwood will pay $17 cash for each share of VectivBio. That’s the same price VectivBio set for its shares when it went public two years ago, but the company’s stock price has since fallen along with the rest of the biotech sector amid challenging financial conditions. The purchase price announced Monday represents a 45% premium to VectivBio’s closing stock price last Friday and an 80% premium to VectivBio’s average share price over the past 90 trading days.

Ironwood’s current blockbuster product is Linzess, a drug with approvals in irritable bowel syndrome and constipation. Boston-based Ironwood brought Linzess to the market through a partnership with AbbVie. The North Chicago-based pharma giant reported more than $1 billion in revenue from the drug in 2022. The partners share equally in U.S. profits and AbbVie pays Ironwood royalties from sales of the drug in other markets. Most of Ironwood’s revenue comes from Linzess, but U.S. patents on the drug begin expiring starting next year. Basel, Switzerland-based VectivBio brings a drug that could offset the expected decline in Linzess revenue.

VectivBio’s lead drug, apraglutide, is an analog of glucagon-like peptide-2 (GLP-2), a peptide already in the body that brings beneficial effects to intestinal function. The biotech is developing its version of the peptide as a treatment for short bowel syndrome with intestinal failure (SBS-IF), a condition in which the intestine is unable to absorb fluid and nutrients.

SBS can already be treated with a GLP-2 drug. Takeda Pharmaceutical’s teduglutide, marketed as Gattex in the U.S., was approved by the FDA in 2012. But that drug’s short half-life means it must be administered as a once-daily injection. VectivBio describes apraglutide as a next-generation, long-acting GLP-2 analog. In addition to a longer half-life that could offer once-weekly dosing, this peptide could enhance nutrition absorption in the small intestine. A Phase 3 test of the VectivBio drug is expected to report preliminary data by the end of 2023.

Apraglutide is also in development as a treatment for acute graft versus host disease, a transplant complication in which donor immune cells attack the host’s cells. The gastrointestinal system is one part of the body commonly affected by graft versus host disease. In this indication, apraglutide has reached mid-stage clinical development. In the announcement of the acquisition agreement, Ironwood CEO Tom McCourt described VectivBio’s drug as a strategic fit with his company.

“We are confident that with our GI expertise, commercial capabilities, and robust balance sheet, we are well-positioned to continue developing apraglutide, with the goal of getting it into the hands of the patients who need it the most and potentially generate significant and sustainable value for shareholders,” he said.

The boards of directors of both companies have approved the acquisition, but the deal is a tender offer that’s contingent on Ironwood being able to acquire more than 90% of VectivBio’s total outstanding shares. Orbimed, Forbion and Versant Ventures, and VectivBio’s directors and officers which together represent 28.6% of VectivBio’s shares have agreed to tender their shares. VectivBio has scheduled a June 26 shareholder meeting to obtain additional shareholder approvals for the Ironwood acquisition.

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