Transgenomic Inc (NASDAQ:TBIO) Might Be Just About To Announce Its Merger Close

Transgenomic Inc (NASDAQ:TBIO) is running up at the moment, despite no real fundamental developments, and currently sits more than 130% up on its November lows. There can only be one real reason that the company is gaining strength, and it's that markets are loading up ahead of a proposed merger closing.Here's what's important.Transgenomic is a biotechnology company that focuses on the advance of personalized medicine in the detection and treatment of cancer, as well as s number of inherited diseases. It's lead product is a cancer biomarker test called ICEme. It basically takes a sample assay and runs a test on it that sequences the genome associated with the assay. The sequence highlights any mutations, and this highlighting can be used to detect (and forecast chances of) cancer development. There are a number of other elements to its operations outside of the ICEme, but we can't really go in to these in too much detail, since they are case by case. Basically, a company comes to Transgenomic and the two entities put together a program within which the client company uses Transgenomic's technology to underscore its trial protocol.Revenues for the company came in at $457K during the third quarter of this year, up on the $330K recorded during the same period in 2015. Gross profit for the period hit $27K, a shift from a gross loss of $115K a year earlier.That's not overly important right now, however.What markets are focusing on, and what is driving the action we've seen as late, is an October 13 announcement that Transgenomic is set to merge with a privately held diagnostics company called Precipio Diagnostics. The terms are a bit convoluted, but basically, Precipio will become a wholly owned subsidiary of Transgenomic, and Transgenomic will be renamed Precipio, and the ticker of the combined entity will change to PRPO on closing. Also on closing, the entity will receive $7 million investment by way of a syndicate led by BV Advisory Partners, and by way of preferred convertible securities issue, and $3 million of debt from each entity (pre merger) will be converted into the same type of convertibles.Here's the thing however.Transgenomic is set to be delisted from NASDAQ, and this merger won't go ahead if it is. Before the merger closes, however, the company wants to undertake a reverse split. So we've got around $13 million of freshly issued convertibles hitting, and then a reverse split. Shareholders are – understandably – not happy about this side of the equation.On the other side, the merger looks like a promising step forward. If it closes, it will allow Transgenomic holders to maintain their stake in a NASDAQ listed entity, and one with no debt and the opportunity to move forward with twice the fire power of its previous incarnation.So there's the dilemma. Transgenomic has asked NASDAQ to extend its listing to the end of the year, so the deal can close. Shareholders want the merger to close, but not the split to take effect. Management wants the split, and not the delisting.We think that shareholders are going to have to take the split on the chin, and hope that the closing of the merger raises the value of the combined entity to a point where it negates any dilution. Without the split, Transgenomic can't close on the merger and gets delisted. It's a tough situation for everyone involved, but there's only one real viable resolution. The recent activity suggests that markets are ready to look favorably on a merger closing, and that this closing could be just around the corner.We will be updating our subscribers as soon as we know more. For the latest updates on TBIO, sign up below!Disclosure: We have no position in TBIO and have not been compensated for this article.