Pandion Therapeutics (PAND) stock blasted to a record high Thursday on Merck‘s (MRK) plan to buy the IPO stock for $1.85 billion.
Biotech company Pandion only wrapped its initial public offering seven months ago. But Merck is planning to take over the fledgling company for $60 per share. That represents a roughly 130% premium to the IPO stock’s share price, SVB Leerink analyst Geoffrey Porges said in a report to clients.
Porges called the deal “an outsized outcome for Pandion’s shareholders given the company’s early stage of development.” Pandion’s lead asset is in Phase 1 testing to treat ulcerative colitis and a form of lupus.
“This transaction also validates the notion that investors in recently public and early stage biopharma companies can still be tempted by the possibility by an early huge return from a large transaction at a high premium,” he said. “This transaction seems likely to contribute to a sustained buoyancy in the appetite for emerging biopharma equity offerings in the public markets.”
IPO Stock Surges On Buyout
On the stock market today, IPO stock Pandion soared 133.4% to 59.81. Merck stock rose a fraction to 74.62.
Under the terms of the deal, Merck will acquire IPO stock Pandion through a subsidiary. Dr. Dean Y. Li, Merck Research Laboratories president, noted Pandion’s work in creating drugs that attempt to “re-balance the immune response.” This could be key to treating some autoimmune diseases.
“This acquisition builds upon Merck’s strategy to identify and secure candidates with differentiated and potentially foundational characteristics,” he said in a written statement.
Lead Drug Shows Promise
Earlier this year, Pandion reported its lead drug showed proof of concept, SVB Leerink’s Porges said. But the drug remains in early-stage clinical testing. The first patient was dosed in a further Phase 1 study on Wednesday. That led the IPO stock to pop more than 2%. A second drug in preclinical testing also targets inflammatory diseases.
“This data, plus the other data for the platform, no doubt attracted Merck’s attention,” he said. “They were probably also motivated by the prior acquisition of SynThorx by Sanofi (SNY), which has contributed at least one active program to Sanofi’s pipeline.”
IPO stock Pandion began trading in July at 18. Shares recently broke out of a cup base with a buy point at 23.56, according to MarketSmith.com. The news Thursday sent the IPO stock well above that entry.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
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