What happened
Shares of Prometheus Biosciences (RXDX) were skyrocketing 70% higher this week, as of the market close on Thursday, according to data provided by S&P Global Market Intelligence. The huge gain came after Merck (MRK -0.11%) announced on April 16, 2023 that it plans to acquire Prometheus for $200 per share in cash. That translates to a transaction size of around $10.8 billion.
So what
The magnitude of Prometheus' massive jump this week comes as no surprise. The biotech stock closed at $114.01 on the business day prior to Merck's acquisition announcement. The price tag for the buyout is roughly 75% higher than that price.
It's probably fair to say that the acquisition itself took many investors by surprise, though. Prometheus' share price was up only by a single-digit percentage before the news of the Merck deal.
Prometheus' lead candidate, PRA023, targets Crohn's disease and ulcerative colitis. The company announced positive results from phase 2 studies in both indications in December 2022.
Merck has a goal of diversifying its product lineup, which is currently heavily dependent on cancer immunotherapy Keytruda. CEO Robert Davis thinks the Prometheus deal could help in achieving that goal, stating that the acquisition "will accelerate our growing presence in immunology where there remains substantial unmet patient need."
Now what
Merck and Prometheus must still jump a few hurdles, including satisfying regulators and winning approval from Prometheus' shareholders. Assuming there aren't any problems on those fronts, the transaction should close in the third quarter of 2023. Meanwhile, Prometheus is moving ahead with its plans to advance PRA023 into late-stage clinical studies in treating Crohn's disease and ulcerative colitis.
