What happened

Shares of ArQule (NASDAQ:ARQL) were skyrocketing 103.4% as of 10:57 a.m. EST on Monday. The huge jump came after Merck (NYSE:MRK) announced plans to acquire ArQule for $2.7 billion.

So what

Merck liked what it saw with ArQule's promising pipeline candidate ARQ 531. The experimental drug is currently in a phase 2 clinical study targeting the treatment of B-cell malignancies. Merck Research Laboratories president Roger Perlmutter said that the acquisition of ArQule "strengthens Merck's pipeline" and especially noted the potential of ARQ 531.

Rocket soaring over a red line trending upward

Image source: Getty Images.

But Merck won't just get ARQ 531 with its buyout of ArQule. The clinical-stage biopharmaceutical company also has three other drugs in its pipeline. Basilea Pharmaceutica and Roivant Sciences own the rights to bile duct cancer drug derazantinib. However, ArQule owns the rights to its two other candidates, miransertib and ARQ 751. 

The addition of ArQule's pipeline drugs appears to be a great fit for Merck. While the big drugmaker has enjoyed massive success for immunotherapy Keytruda in treating solid tumors, it hasn't made nearly as big a splash in the hematology-oncology arena thus far.

Now what

Investing in biotech stocks can lead to big days when a small company has a pipeline that's attractive to a big pharma company. It's not quite a done deal yet, though.

Merck intends to initiate a tender offer to acquire all of ArQule's outstanding shares through one of its subsidiaries. There's also a waiting period under the Hart-Scott-Rodino antitrust act. However, those will likely only be formalities. Look for ArQule to become part of Merck in early 2020.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.