Pandion Therapeutics (PAND) Shares hit a record high on Thursday Merck(MRK) plans to buy the IPO shares for $ 1.85 billion.
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Biotechnology company Pandion closed its initial public offering just seven months ago. But Merck is planning to acquire the fledgling company for $ 60 a share. This represents a premium of about 130% to the IPO’s share price, said SVB analyst Leerink Geoffrey Porges in a report to clients.
Porges called the deal “a disproportionate result for Pandion’s shareholders, given the company’s early stage of development”. Pandion’s main asset is in Phase 1 tests to treat ulcerative colitis and a form of lupus.
“This transaction also validates the notion that investors in newly opened and early stage biopharmaceutical companies may still be tempted by the possibility of a large initial return on a large transaction with a high premium,” he said. “This transaction is likely to contribute to a sustained boost in appetite for emerging offers of biopharmaceutical stocks in public markets.”
Increase in IPO shares on purchase
In the morning trading on today’s stock market, the IPO Pandion share rose 131.9% close to 59.40. Merck’s shares fell a fraction close to 74.20.
Under the terms of the agreement, Merck will acquire shares in the initial public offering Pandion through a subsidiary. Dr. Dean Y. Li, president of Merck Research Laboratories, noted Pandion’s work on creating drugs that try to “rebalance the immune response”. This can be instrumental in the treatment of some autoimmune diseases.
“This acquisition is based on Merck’s strategy to identify and protect candidates with differentiated and potentially fundamental characteristics,” he said in a written statement.
Lead drug shows promise
Earlier this year, Pandion reported that its main drug showed a proof of concept, said Porges of SVB Leerink. But the drug has only started clinical trials – the first patient was medicated on Wednesday. This caused the IPO’s shares to burst by more than 2%. A second drug in preclinical tests also targets inflammatory diseases.
“This data, plus the other data on the platform, undoubtedly caught Merck’s attention,” he said. “They were probably also motivated by the previous acquisition of SynThorx by Sanofi (SNY), who contributed at least one active program to the Sanofi pipeline. “
IPO Pandion shares started trading in July at the age of 18. The stock recently came out of a canopy base with a buying point of 23.56, according to MarketSmith.com. Thursday’s news sent the IPO’s shares well above that entry.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
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