Shares of LianBio (LIAN -5.77%) were skyrocketing 132.4% higher as of 11:11 a.m. ET on Tuesday. The huge gain came after the company announced that it entered into an agreement to hand over exclusive rights to market cardiomyopathy drug mavacamten in mainland China, Hong Kong, Macau, Singapore, Taiwan, and Thailand to Bristol Myers Squibb (BMY 0.34%).
LianBio secured the commercialization rights for mavacamten in China and other Asian markets from MyoKardia in August 2020. Less than two months later, Bristol Myers Squibb announced its plans to acquire MyoKardia.
Why did LianBio strike a deal with Bristol Myers Squibb?
It makes sense why Bristol Myers Squibb (BMS) would want to own the rights to mavacamten in China and other key Asian markets. The big drugmaker already has the rights to the medicine in the U.S., Europe, and other major markets.
But why did LianBio strike this deal? The company will receive a one-time payment from BMS of $350 million. That's a hefty return on investment considering that LianBio paid MyoKardia $40 million for the rights to mavacamten just three years ago. In addition, LianBio won't be obligated to pay any remaining milestone payments (of up to $127.5 million) under its original license agreement with MyoKardia.
Before the new licensing agreement with BMS was announced today, LianBio's market cap stood at close to $150 million. It's understandable why the company's management team and board of directors entertained a proposal that would reward shareholders so handsomely.
What should LianBio investors do now?
Mavacamten was the crown jewel in LianBio's lineup, but the company does have other pipeline candidates. In LianBio's second-quarter update in August, CEO Yizhe Wang said that it hoped to file for Chinese approval of TP-03 in treating inflammatory eye disease demodex blepharitis and kick off a pivotal study of infigratinib in treating gastric cancer over the next 12 months.
There could be more excitement for LianBio on the way. Its board is now undertaking "a comprehensive strategic review of the company" -- phrasing that often means it's looking for potential acquirers. The board anticipates providing an update on this strategic review in the first half of 2024.
My view is that investors should hold onto their shares of LianBio to see what happens with this review. Today's spike might not be the last one for this biotech stock.
