Please ensure Javascript is enabled for purposes of website accessibility

Why BioCryst Pharmaceuticals Stock Is Bolting Higher Today

By George Budwell - Aug 2, 2018 at 2:40PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Investors are cheering the orphan drug specialist's decision to raise a nice chunk of capital via a public offering.

What happened

Shares of the orphan drug specialist BioCryst Pharmaceuticals (BCRX 2.68%) gained as much as 14.4% on sky-high volume in early morning trading on Thursday. The catalyst?

BioCryst's shares are responding positively to a planned secondary offering that reportedly stands to generate $50 million in gross proceeds for the company. In addition, the company noted that the underwriters behind this offering have a 30-day option to purchase up to another $7.5 million worth of common stock. As of 1:35 p.m. EDT, BioCryst's shares were still up by a healthy 11.2% in the wake of this news. 

A man in a business suit drawing an upward trending curve with his index finger.

Image Source: Getty Images.

So what

Normally, biotech stocks crater after a sizable secondary offering like this one. BioCryst, however, is proving to be a noteworthy exception to this general trend. That's because investors are apparently relieved that the company is raising the capital necessary to move away from the idea of merging with other struggling biotechs, and instead, taking a go-it-alone approach.

Last month, after all, BioCryst's shareholders voted against a proposed merger with fellow small-cap drugmaker Idera Pharmaceuticals (IDRA 1.22%). This capital raise was therefore the obvious next step for BioCryst after its shareholders nixed the merger with Idera. 

Now what

Capital raise aside, BioCryst's shares are still an ultra-high-risk investment. The company's lead clinical candidate BCX7353 -- an oral drug to treat hereditary angioedema (HAE) -- doesn't appear to have much of a chance at carving out a profitable niche in this increasingly crowded space, after all.

BioCryst lacks an obvious star in its current clinical pipeline, which is one of the main reasons management was interested in merging with Idera in the first place. This capital raise also won't give the company the financial flexibility necessary to add any assets to its pipeline. As such, investors may want to steer clear of this speculative biotech for the time being. 

 

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

BioCryst Pharmaceuticals, Inc. Stock Quote
BioCryst Pharmaceuticals, Inc.
BCRX
$8.80 (2.68%) $0.23
Idera Pharmaceuticals, Inc. Stock Quote
Idera Pharmaceuticals, Inc.
IDRA
$0.60 (1.22%) $0.01

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
322%
 
S&P 500 Returns
116%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.