Biotech stock Prometheus Biosciences opened 70% up today: here’s why

Prometheus Biosciences Inc (NASDAQ: RXDX) opened about 70% up on Monday after Merck & Co Inc (NYSE: MRK) said it will buy the biotechnology company for $10.8 billion.

What’s in it for Merck & Co?

The all-cash agreement values each share of Prometheus Biosciences at $200 – over a 75% premium on the price at which the biotech stock ended last week.

With the said acquisition, Merck hopes to expand its footprint in immunology. According to its CEO Robert M. Davis:

The pharmaceutical giant has picked Morgan Stanley as its financial advisor for this deal. Merck shares are slightly in the red today.

What’s in it for Prometheus Biosciences?

The announced transaction will close in the third quarter of the current year as long as it receives approval from the shareholders and meet other closing conditions. In the press release, Prometheus’ CEO Mark McKenna said:

PRA023 – its treatment for ulcerative colitis and Crohn’s disease is currently under development.

In February, Prometheus Biosciences reported a slightly narrower-than-expected loss for its fiscal fourth quarter. Its revenue, though, came in shy of the Street estimates.