Biotech stock Imago BioSciences broke out and hit a record high Monday after Merck pledged to buy it for $1.35 billion.
Imago is working on treatments for bone marrow diseases. Its lead candidate is in midstage testing for a blood platelet disorder and two forms of cancer — in the bone marrow and blood. The move is a major departure from investors' expectations that Merck would put up $40 billion to buy cancer-focused Seagen.
"We continue to invest in our pipeline with a focus on applying our unique capabilities to unlock the value of breakthrough science for the patients we serve," Merck Chief Executive Robert Davis said in a written statement. "This acquisition of Imago augments our pipeline and strengthens our presence in the growing field of hematology."
On today's stock market, Imago shares catapulted 104.5% to 35.59. Earlier, the biotech stock hit its highest point since going public in the summer of 2021. Shares also broke out of a cup base with a buy point at 19.89, according to MarketSmith.com. Merck stock 1.3% to 105.61.
Biotech Stock: Targeting Bone Marrow Diseases
Under the terms of the deal, a Merck subsidiary will pay $36 per share of Imago stock. The all-cash deal is expected to close in the first quarter.
Specifically, Imago is working on myeloproliferative neoplasms, a group of diseases where the body makes too many red blood cells, platelets or white blood cells. These diseases can lead to bleeding problems, anemia, infection, fatigue, blood clots or cancer.
Imago's lead asset, bomedemstat, is in five studies, according to the company's pipeline. In addition to three studies of the drug alone, the company is also testing combinations using bomedemstat in myelofibrosis and small cell lung cancer.
Imago Chief Executive Hugh Rienhoff acknowledged the clinical benefits of combining with Merck as well as the value for the biotech stock's investors.
"This agreement leverages Merck's industry-leading clinical development expertise to maximize the therapeutic potential of bomedemstat while providing important value for shareholders," he said in a written statement.
Imago Has Middling Ratings
Imago shares have mostly trended sideways since falling with the broader market this summer. Earlier this month, the biotech stock retook its 200-day moving average.
But Imago has only middling ratings from IBD Digital. Shares have a Relative Strength Rating of 54. This puts the biotech stock barely above the bottom half of all stocks in terms of 12-month performance. A Composite Rating of 43 puts Imago stock in the bottom 43% of all stocks when it comes to fundamental and technical measures.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
