Shares of Kala Pharmaceuticals (NASDAQ:KALA) fell nearly 18% today after the company announced the pricing of a common stock offering. The development-stage pharma will sell up to 8.625 million shares at a price of $8.25 per share, which is expected to generate up to $71.1 million in gross proceeds. Considering the offering will increase the number of shares outstanding by up to 35%, the stock's 18% plunge is relatively mild.
That could be because the share offering is the second infusion of cash announced in October. Kala Pharmaceuticals recently announced it will receive up to $110 million in debt financing from Athyrium Capital Management, LP. The first $75 million is already in the bank, while the remaining $35 million is payable upon certain milestones in the company's pipeline.
As of 11:44 a.m. EDT, the stock had settled to a 16.5% loss.
The business is about to be swimming in cash. It exited June with $91 million in cash on hand. Throw in gross proceeds of about $71 million from the share offering and $75 million from the first tranche of the credit facility provided by Athyrium Capital Management, and Kala Pharmaceuticals should have around $200 million in cash at its disposal. It's going to need every penny for commercialization and development activities.
While Kala Pharmaceuticals stock has lost nearly 60% of its value since going public a little more than a year ago, the company recently received U.S. Food and Drug Administration marketing approval for Inveltys for the treatment of postoperative pain and inflammation following eye surgery. It's the first market validation for the company's novel technology platform, which is based on a simple idea.
All eye drugs must travel through the eye's mucus layer, which acts as a protective barrier against foreign objects. However, existing treatments are typically formulated as microparticles and, although small, they're actually too big to efficiently diffuse through the mucus barrier. That's why Kala Therapeutics is formulating its drugs as nanoparticles -- up to 1,000 times smaller than existing drug particles -- which should result in greater efficacy and require fewer applications for patients.
Case in point: Inveltys only needs to be applied twice per day, compared to four times daily for existing treatments. Then again, the platform has demonstrated mixed results.
The recent cash infusions will help Kala Pharmaceuticals hit the ground running in Inveltys commercialization efforts. Additionally, the company will be able to advance its dry-eye drug (currently in its third phase 3 trial with results expected at the end of 2019) and an early-stage asset for various retinal diseases. Considering the business lost more than $25 million from operations in the first half of 2018, it needed a lot of cash to keep moving forward. With finances taken care of, now the business needs to execute.