Shares of pre-clinical biopharma Wave Life Sciences (WVE -4.51%) fell nearly 12% in early trading Wednesday after the company announced it will offer 4.2 million shares at $24 apiece. The net proceeds will be approximately $93.4 million and, as is usually the case for share offerings, there's a 30-day option for the underwriters to purchase up to an additional 625,000 shares that could bring in another bounty of $14.1 million in net proceeds.
The offering will pad a strong end-of-2016 cash position of $150 million and greatly aid the effort to advance the first drug candidates from the company's novel technology platform into clinical trials. As of 1:15 p.m. EDT, the stock had settled to a 12.3% loss.
There are a few reasons for the share offering. First, Wave Life Sciences has no debt on its balance sheet and there's no reason to start now. It's a young company with a relatively low number of shares outstanding and a strong stock price. Selling shares for cash at this point in the biopharma's life is hardly unexpected.
Second, and most importantly, the company is ramping up development of nucleic acid therapeutics targeting a wide range of rare genetic diseases. Despite their promise, nucleic acid therapeutics have struggled to advance in the clinic due to complex synthesis methods -- something Wave Life Sciences claims to have solved with its novel chemistry platform that focuses on rational design. Proof-of-concept studies have demonstrated the approach results in more stable, active, and specific therapeutic candidates than previous synthesis methods.
While the company has yet to enter a single clinical trial, it currently lists 23 specific disease targets of interest in the discovery phase of development and three drug candidates awaiting to be promoted to phase 1 studies. That includes two targeting Huntington's disease one targeting Duchenne muscular dystrophy. Additionally, last summer Wave Life Sciences partnered with Pfizer to advance nucleic acid therapeutics for rare genetic liver diseases. The collaboration also provides the upstart access to technology from the industry leader that can be applied throughout its pipeline.
Wave Life Sciences is a young, pre-clinical biopharma armed with proof-of-concept data and a story to tell. Wednesday's share offering will help it advance to the next stage of the development life cycle: clinical trials. There's a long and uncertain road ahead that will include additional future financing from share offerings or debt raises, and maybe more collaboration partners, but that's par for the course. Right now investors should be excited that the company is beginning the next part of its journey.