On Friday, Jan. 10, the stock of Sorrento Therapeutics (NASDAQ:SRNE) shot up dramatically as the company revealed it received an unsolicited and non-binding buyout offer from an undisclosed private equity firm on Jan. 9. The offer was priced at $7 a share, more than double the company's recent share price of $3.41.

So far, the stock has run up to $4.81 a share, a substantial gain. On the other hand, there's still quite a bit of distance between the current share price and the offer, suggesting that there is some doubt in the market as to the seriousness of the offer, or whether the acquisition will really take place.

big fish eating little fish

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Sorrento Therapeutics is a $743 million biotech focused on drugs for cancer and pain management. It also has an animal health division. The company has one marketed drug, ZTlido (lidocaine) for pain. It has multiple drugs in clinical trials, including a phase 2 drug, CEA CAR-T, for metastatic liver cancer, and another phase 2 drug, Seprehvir, for solid tumors. Its pain drug for animal cancer, Neuroclastin, is about to enter phase 3 trials.  

Sorrento is currently unprofitable and is $316 million in debt. The company had its initial public offering in March 2007, priced at $40 a share. It reached an all-time high of $137.50 a share on April 16, 2007.  Back in 2015, billionaire Patrick Soon-Shiong acquired 19% of Sorrento as part of a drug acquisition. Last year, the biotech sued Soon-Shiong, claiming the acquisition was a fraud and his company had no plans to develop the company's cancer drug.         

The company's board of directors is evaluating the deal.