Shares of Imago BioSciences IMGO skyrocketed 104% on Nov 21 after the company announced that it has signed a definitive agreement with Merck MRK. Imago would be acquired by Merck for $36 per share in cash, amounting to $1.35 billion.

A clinical-stage pharmaceutical company, Imago is engaged in developing new therapies targeting myeloproliferative neoplasms (MPNs) and other bone marrow diseases. Imago is evaluating its lead pipeline candidate, bomedemstat (IMG-7289), an oral LSD1 inhibitor, in multiple mid-stage clinical studies for treating bone marrow diseases like essential thrombocythemia (ET), myelofibrosis (MF) and polycythemia vera (PV).

Shares of Imago have surged 50.1% in the year against the industry's 19.7% decline.

Image Source: Zacks Investment Research

Per the terms of the acquisition, Merck, through a subsidiary, will initiate a tender offer to acquire all the outstanding stock of Imago BioSciences. After the Merck subsidiary completes the tender offer, it will merge with IMGO. The transaction, expected to be completed by first-quarter 2023, is also subject to customary closing conditions and clearance from the regulatory authorities.

Imago currently lacks a steady stream of revenues due to a lack of approved drugs. An acquisition by a big pharma giant like Merck, which has high reserves of cash flow, would allow the company to advance the development of its pipeline. Once the pipeline candidates are approved for marketing, Imago will have access to Merck's larger and well-established commercial supply chain and network distribution.

Once the acquisition is completed, Merck will add bomedemstat to its pipeline. Merck believes adding of an LSD1 inhibitor like bomedemstat, which offers a new mechanism for treating blood cancers, will enable it to strengthen its hematology pipeline.

Imago BioSciences, Inc. Price

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Zacks Rank & Stocks to Consider

Imago BioSciences currently carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the biotech sector include Angion Biomedica ANGN and Vertex Pharmaceuticals VRTX. While Angion Biomedica sports a Zacks Rank #1 (Strong Buy), Vertex Pharmaceuticals carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

In the past 60 days, estimates for Angion Biomedica's 2022 loss per share have narrowed from $1.64 to $1.54. During the same period, the loss estimates per share for 2023 have narrowed from $1.54 to $1.48. Shares of Angion Biomedica have plunged 70.7% in the year-to-date period.