Shares of the cancer immunotherapy and vaccine company Agenus (NASDAQ:AGEN) fell by as much as 16.7% on nearly five times the average volume today, before ultimately ending the day down by only 5.1%. This sizable move lower was triggered by a $250 million mixed shelf offering that the company plans to use for general corporate purposes.
According to the accompanying prospectus, general corporate purposes may include "working capital, capital expenditures, repayment and refinancing of debt, research and development expenditures, clinical trial expenditures, acquisitions of additional companies or technologies and investments."
A $250 million shelf offering is nothing to sneeze at in any case -- especially for a company with a current market cap of only $443 million. However, this massive shelf registration makes a lot of sense for Agenus.
Agenus' early-stage checkpoint-modulator pipeline won't produce a regulatory filing until at least late 2020, according to the company's latest investor presentation. So until 2021, or perhaps even longer, Agenus is almost certainly going to be heavily dependent on stock offerings to stay afloat.
Another important point to consider is that Agenus doesn't have to tap this offering in its entirety, and it probably won't unless circumstances dictate otherwise. Long story short, this double-digit sell-off probably wasn't warranted, for the most part.
Secondary offerings, after all, are par for the course when it comes to clinical-stage biotechs. Moreover, there's no compelling reason to think Agenus' management would roll out the common-stock portion of this shelf registration in a manner that would significantly harm its current shareholder base via dilution.
The bottom line is Agenus' future success -- or failure -- is going to depend on the fate of its diverse anti-cancer platform. If the company strikes gold with one or more of its immune modulators, this shelf registration won't really matter in the larger scheme of things. And the same probably can be said in the event that its checkpoint-inhibitor pipeline turns out to be a dud.