Monster Digital Inc. has signed a definitive merger agreement with privately held Innovate Biopharmaceuticals Inc., prompting 160 percent gain in its stock price Monday.

Under terms of the deal, Simi Valley-based Monster Digital, which makes digital cameras, will merge with Innovate in Raleigh, N.C., which is working on a drug for celiac disease. After the transaction, Innovate shareholders will own about 90 percent of the combined company and Monster shareholders will control about 9 percent.

Innovate will use the deal to access public markets in order to finance clinical trials and commercialization of its pipeline drug. Innovate Chief Executive Christopher P. Prior will lead the company going forward.

It’s not clear what will become of Monster Digital’s business assets. Monster Chief Executive David H. Clarke said in a statement that “a proxy statement providing further information on the merger for shareholders will be filed with the SEC in coming weeks. The proxy will enable shareholders to vote on the merger."

Shares of Monster Digital (MSDI) closed Monday up 78 cents, or 160 percent, to $1.27 on the Nasdaq.