Why MorphoSys Stock Sank This Week

Shares of MorphoSys (NASDAQ: MOR) sank 11.5% this week as of the market close on Thursday. The decline stemmed from the German drugmaker's announcement on Wednesday that it plans to acquire Constellation Pharmaceuticals (NASDAQ: CNST) for $1.7 billion. MorphoSys also said that it entered into a long-term strategic funding partnership with Royalty Pharma (NASDAQ: RPRX) in connection with its purchase of Constellation. 

Investors could be concerned that MorphoSys is overpaying for Constellation. The price tag of the deal represents a steep premium to the previous trading level for the small biotech stock. 

There's also some risk involved with the transaction. Constellation's lead pipeline candidate is in phase 3 testing, while its only other pipeline program is in phase 2 testing. It's possible that these clinical studies won't be as successful as MorphoSys is counting on.

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Source Fool.com