Shares of ImmunoGen (NASDAQ:IMGN) fell 15.1% in June according to data provided by S&P Global Market Intelligence, following the biotech's announcement that it raised additional capital through a secondary offering.
ImmunoGen ended the first quarter with $218 million in the bank, so it didn't need to raise capital right now; management has indicated that its nest egg is enough to get the company into the fourth quarter of 2019.
But it's usually a prudent move for biotechs to do a secondary offering when the opportunity rises rather than wait until the cash is sorely needed. With shares trading at two-year highs, management jumped on the opportunity to raise approximately $173.3 million before discounts and offering expenses.
The secondary offering will allow ImmunoGen to still have cash in the bank if the phase 3 Forward I trial testing mirvetuximab soravtansine as a monotherapy in women with ovarian cancer fails next year. The drug has also posted robust data in combination with other cancer drugs, which serves as ImmunoGen's backup plan in the event the monotherapy doesn't work well enough to get approved. And if Forward I is successful, the additional cash could help accelerate testing the combinations, which will dramatically increase the potential population that mirvetuximab soravtansine can treat.
Unfortunately, the capital raise comes at a cost for investors. Now that there are an additional 15.755 million shares in circulation, each share of ImmunoGen entitles the stockholder to a smaller faction of the overall company.
Unfortunately dilution is just something biotech investors have to deal with. Considering ImmunoGen still needs cash to launch the drug if Forward I is successful, this might not even be the last capital raise we see from ImmunoGen -- especially if management decides to be aggressive with the development of combination therapies.