Shares of cancer drugmaker Mersana soar 200% on news of acquisition by Day One Bio
Shares of Mersana Therapeutics, a micro-cap company developing "smart bombs for cancer," soared 209% yesterday, November 13. Mersana unexpectedly reported to investors that it would be acquired at a premium by Day One Biopharmaceuticals, a biotech that also develops therapies for cancer. Against this backdrop, several analysts withdrew their "buy" recommendations on Mersana shares.
Details
Mersana shares rose 209% to $27.43 per share on the Nasdaq yesterday. That marked its best close since January, and the company’s market capitalization reached $136.9 million. Trading volume exceeded 3.1 million shares, which is 53.4 times the average daily figure for the last year, according to Yahoo Finance data.
Investors were reacting to the news that Mersana would be acquired by its small-cap rival Day One Bio in a transaction valued at about $285 million. The acquirer will pay $25 per share, or about $129 million in total upfront consideration, representing a premium of 182% to the November 12 closing price, the day before the deal was announced.
The consideration could increase by an additional $30.25 per share upon the achievement of certain clinical, regulatory, and commercial milestones related to the company’s core asset Emi-Le, which is in phase I clinical trials. One of the milestones is Breakthrough Therapy Designation for Emi-Le from U.S. regulators, Day One Bio noted. That would accelerate the drug’s registration timeline.
What analysts say
Following the news of the transaction and the ensuing rally, several analysts immediately downgraded the company’s shares, with Wedbush, Guggenheim, and Truist going to "hold," according to MarketScreener. Mersana has seven neutral ratings, and only one analyst still has a "buy," MarketWatch data shows. Three months ago, the situation was eight “buy” ratings versus one “hold." The current average target price of $32.67 per share implies upside of 19% to the last close, even after the huge gains yesterday.
Day One Bio shares fell 14.4% to $8.85 apiece. However, Wall Street remains upbeat on the stock's outlook broadly: eight analysts rate Day One Bio a "buy," versus only one "hold." The average target price is $22.25 per share, which is 2.5 times the last close.
About the company
Mersana develops novel therapies for cancer. Its lead asset, Emi-Le, is described on Investors.com as a type of “smart bomb” that attacks cancer cells. It links a toxic payload to an antibody, targeting cancer cells selectively while limiting damage to healthy tissue.
The company is evaluating Emi-Le across several indications. One of them is a subtype of breast cancer that does not respond to standard treatments. Another potential indication is adenoid cystic carcinoma, a rare cancer that most often affects the salivary glands and has very few therapeutic options. The deal with Day One Bio will help fund further development of the drug for this indication.
The AI translation of this story was reviewed by a human editor.
