Corium International (NASDAQ: CORI) is down 11% at 11:58 a.m. EST after announcing that it priced $100 million of 5% convertible senior notes with an initial conversion price equivalent to approximately $17.22 per share, which is 32% higher than yesterday's close.
The biotech also said that the Food and Drug Administration completed a preliminary review of its pilot bioequivalence study comparing its once-weekly transdermal patch, Corplex Donepezil, to oral Alzheimer's disease drug Aricept and concluded that it "may, on their face, suffice as the sole basis for demonstrating bioequivalence." Corium is just changing the mode of delivery, so it only needs to prove bioequivalence to get approved.
It's hard to know which event is really affecting the stock. Neither is terribly negative nor hugely unexpected.
Corium ended 2017 with $45.2 million in the bank, and with the company losing about $13 million per quarter on a GAAP basis, raising additional cash was a given. The interest rate and conversion price aren't great, but they're reasonable for an unprofitable biotech.
The FDA guidance on the pilot bioequivalence study is arguably positive, but may be too little, too late to be useful for Corium. The company is already running a pivotal bioequivalence study -- meaning it was designed to be used for approval -- with top-line results expected in the second quarter of this year.
If the FDA is only at "may" suffice as the only trial required, Corium might be better off just waiting a few months for data from the pivotal study. Some of the decline today may be because investors are worried that the company might take the shortcut, submitting the pilot data now, which would be a good move if it works, but it'll result in a longer delay if the FDA's "may" turns into a "no" and Corium needs to resubmit after that.
The senior notes don't need to be repaid until 2025, giving Corium plenty of time to get Corplex Donepezil approved and start to turn a profit.
Investors should keep an eye out for Corium's final decision about which bioequivalence study it plans to submit. If it chooses to wait for the pivotal study, the FDA's guidance on the pilot study won't be a complete waste because it should give investors confidence that the company is on the right track with the pivotal study.