Shares of Inovio Pharmaceuticals, Inc. (INO 1.21%), a clinical-stage biotech with a focus on cancer and infectious diseases, fell 13.4% during Wednesday's session. An announcement on Tuesday that outlined an upcoming share offering didn't sit well with the market.
Without any approved drugs to sell, Inovio needs to fund its operations with debt or equity. Although there wasn't any long-term debt on the company's balance sheet, it decided to visit the equity tap once again. The company intends to raise a combined $88.25 million from the public and the offering's underwriters, which at today's closing price, would raise its outstanding share count roughly 17% higher.
Raising equity to fund new drug development is standard practice in this industry, but Inovio has been doing it for a long time. Inovio's share count has risen about 580% over the past decade, which means long-term shareholders' slice of any future profits has been reduced to a tiny sliver.
Inovio sparked a rally in May after announcing positive early-stage results for its experimental HIV vaccine. More recently, news that the FDA would allow the company's only late-stage clinical trial to continue lifted the stock a bit further.
Beyond these two, the company has more candidates in clinical-stage development than most biotechs several times its size, which isn't cheap. Inovio recorded research and development expenses of $24.5 million during the first three months of the year alone.
The company received about $10.4 million in the form of grants and collaboration revenue, but it still burned through $23.1 million during the first quarter. Adding the likely proceeds of this upcoming share offering to whatever remains of the $100.7 million in cash and short-term investments on its balance sheet at the end of March will lengthen its runway somewhat. Until Inovio has an application ready to submit to the FDA, though, investors should remain braced for more share offerings ahead.