Shares of Dicerna Pharmaceuticals (DRNA) are up 17% at 1:53 p.m. EDT Friday after the company announced the pricing of its previously disclosed secondary offering, raising about $100 million for the biotech.
Of course, shares were down 18% yesterday after Dicerna let investors know it planned to sell more shares, so today's jump is likely just a sign that investors are relieved that pricing came in at $13.02, exactly where it closed yesterday.
It's common for secondary offerings to send shares down; how much and when is usually determined by how quickly and how good of a price the company's investment bankers can get from institutional investors.
Since the secondary buyers didn't try to take a discount on yesterday's closing price, they must have thought that was a fair-to-good price, which likely stoked today's rally. Shares haven't recovered to the price they were before the planned offering was announced, which seems reasonable since current investors are being diluted.
Some of today's buying may also be coming from institutional investors who couldn't get as many shares as they wanted in the secondary offering. Dicerna initially said it planned to sell 6,150,000 shares but ended up selling 7,680,492 shares, suggesting that secondary may have been oversubscribed. (It's also possible Dicerna was just low-balling the initial estimate and always planned to raise $100 million no matter what the price.)
Dicerna ended the second quarter with $42 million in the bank, which management estimated could get it through 2019. That runway will be extended substantially with the addition of $100 million or so -- there are fees that have to be deducted from that, but there's also the potential to sell more shares through the underwriter's 30-day option.
Earlier this week, Dicerna released promising interim phase I data for its lead drug, DCR-PHXC, in patients with primary hyperoxaluria type 1 and type 2. The company plans to start a trial to be used to support an FDA approval in the first quarter of 2019, but that'll put it behind Alnylam Pharmaceuticals (ALNY 3.90%), which is about to start a phase 3 study testing its drug, lumasiran, in patients with primary hyperoxaluria type 1. Hopefully, Dicerna can use some of its new capital to help accelerate enrollment in its trial to try to catch up to Alnylam.