Shares of Sorrento Therapeutics (SRNE.Q -6.19%) were skyrocketing 48.4% higher as of 10:50 a.m. EST on Monday. This huge gain came after Sorrento announced that its board of directors unanimously rejected an unsolicited offer from two unnamed biopharmaceutical companies to buy Sorrento for between $3 and $5 per share in cash.
There are two key things to know about this unsolicited offer to buy Sorrento. First, the low end of the proposed offer range represented a premium of nearly 88% above Sorrento's closing price on Friday, and the high end of the range represented a premium of nearly 213%. Second, Sorrento's board rejected the offer because it "determined that the offer significantly undervalued Sorrento and was not in the best interest of the Company's stockholders."
Why would the board think that an offer that could easily double or even triple the value of Sorrento wasn't enough? Sorrento is currently in discussions with several top drugmakers about licensing and collaboration deals for its immuno-oncology products. It's quite possible that these deals could make Sorrento more valuable than the unsolicited offer that was on the table.
Investors reacted enthusiastically to today's news because it reinforced the view that Sorrento has plenty of room to run. And a positive development was welcome, with the stock coming into this week down 33% year to date.
It's not unusual that deals and rumors of deals -- and even rejection of these deals -- can cause pharmaceutical stocks to jump. The important thing for investors to watch with Sorrento now, though, is whether it can close a major licensing deal for its promising pipeline programs. Sorrento cautioned in its press release announcing the rejection of the unsolicited offer that "there is no guarantee or certainty...that the Company will complete any pending licensing or collaboration transaction" for its immunotherapy programs.