Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Immunomedics (IMMU) shares fell by more than 15% today after the company reported that it lost $0.12 per share during the fourth quarter and proposed an $85 million secondary convertible debt offering that could dilute current investors.
Source: Immunomedics
So what: It's not uncommon for clinical stage biotechnology companies to tap the markets for financing. According to the Tufts Center for the Study of Drug Development, the direct costs to bring a drug to market total an average of $1.4 billion.
The $85 million dollar offering will help provide stable funding for Immunomedics' R&D pipeline programs, which include the company's ongoing Phase 3 clinical trial for clivatuzumab tetraxetan as a pancreatic cancer drug, and the Phase 2 clinical trials for IMMU-132 and IMMU-130.
During the company's recently finished fiscal second quarter, total costs, including spending on these trials, totaled $12.5 million, up from $9.8 million the year before. During the first six months of the company's fiscal year, total expenses reached $26 million, up from $20.9 million a year ago. Given that rate of cash use and the fact that the company exited the quarter with $21.3 million in cash on the books, it's probably not surprising to learn of the proposed offering.
Now what: Assuming that the offering goes off without a hitch, the company will have more breathing room, but that still may not mean that it's a good bet for investors. Clivatuzumab tetraxetan is the company's most advanced product in development, and results from its phase 3 trial aren't expected until sometime in 2016. Since 93% of drugs entering phase 1 clinical trials for cancer end up in the waste bin and pancreatic cancer is a notoriously tough-to-treat cancer, I'm content to sit on the sidelines for now on this stock.
