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Here's Why Stemline Therapeutics Doubled Overnight

By Brian Orelli, PhD – May 4, 2020 at 12:44PM

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The ultimate binary event caused the biotech's shares to jump.

What happened

Shares of Stemline Therapeutics (STML) are up 153% to $12.02 at 1:11 p.m. EDT after the company announced it is being acquired by a privately held Italian pharmaceutical company, Menarini. Investors will get $11.50 per share when the deal closes and a contingent value right that will pay an additional $1 per share when Stemline's Elzonris is sold in any of the EU5 countries: France, Germany, Italy, Spain, or the U.K.

So what

Stemline launched Elzonris last January for the treatment of blastic plasmacytoid dendritic cell neoplasm (BPDCN). BPDCN is a fairly rare type of cancer -- there were only 534 patients identified in the U.S. in 2018 -- and sales of Elzonris have been lackluster, coming in at just $11.8 million in the fourth quarter of 2019.

Fortunately Elzonris has potential beyond BPDCN because it targets CD123, a protein involved in many blood cancers. Stemline is currently testing the drug in patients with chronic myelomonocytic leukemia, myelofibrosis, and acute myeloid leukemia, the potential for which justifies Menarini's willingness to pay double what investors were valuing Stemline at on Friday.

Business men shaking hands.

Image source: Getty Images.

Now what

With shares trading higher than the $11.50 base acquisition price, investors are clearly betting there's a good chance that Elzonris is approved by EU regulators by the Dec. 31, 2021 deadline and eventually sold in the EU5, triggering the additional $1-per-share payment. The marketing application in Europe is already under review, so the deadline appears well within reach as long as regulators don't request any additional clinical trial data.

The transaction is expected to close this quarter.

Brian Orelli and The Motley Fool have no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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