Shares of AC Immune (NASDAQ:ACIU) rose nearly 22% today after the clinical-stage biopharma announced the pricing of three separate offerings of common stock. In all, up to 10 million shares will be sold at a price of $11.75 apiece, which will raise up to $117.5 million in gross proceeds if all shares are purchased. There were only 57 million shares outstanding prior to the offering, so the dilution will work out to nearly 17%.
The Swiss-based company ended March with $110 million in cash and cash equivalents, so the offerings will nearly double the cash available to plow into research and development activities. That's an important consideration, especially after recent events lifted the fortunes of AC Immune's lead drug candidate.
As of 1:43 p.m. EDT, the stock had settled to a 13.8% gain.
So, um, why would a company's stock pop after it announces massive dilution? Well, earlier this month AC Immune shares jumped nearly 70% in a span of a few days, following impressive results from a phase 2 trial for Biogen and Eisai in Alzheimer's disease. The pair are investigating a humanized monoclonal antibody that takes aim at beta amyloid plaques that accumulate in the brain and are thought to play a role in the neurodegenerative disease.
Investors were quick to draw comparisons to AC Immune's lead drug candidate, crenezumab, which is a humanized monoclonal antibody in phase 3 trials (licensed by Genentech) as a potential treatment for Alzheimer's disease. It's thought to have a similar mechanism to the Biogen-Eisai drug candidate.
The share offering priced today is simply management wisely taking advantage of an elevated stock price to raise capital for its robust development activities.
While Biogen and Eisai reported positive phase 2 results from their humanized monoclonal antibody, the data were also a little surprising. That's because the drug had failed to deliver results as recently as December 2017.
Although this could be the real deal this time around, AC Immune investors shouldn't expect crenezumab to be a slam dunk for achieving positive results in the ongoing late-stage trial. However, the extra cash from the recent offering will help to fund development activities, and it's not every day a company gets to double its cash position with little immediate downside.