Shares of Inovio Pharmaceuticals (NASDAQ:INO), a clinical-stage biotech developing new cancer therapies, are sliding after the company announced pricing details for a convertible debt offering. Investors upset about the terms have beaten the stock 19.4% lower as of 11:30 a.m. EST on Thursday.
In January, Inovio Pharmaceuticals began a human proof-of-concept study with the first of what could be many new treatments that deliver encoded DNA to cells so they can create therapeutic antibodies on their own. Inovio's starting with INO-A002, which should help prevent Zika virus infection, and similar candidates that target oncology and inflammation could be next.
Inovio already has a candidate in late-stage testing and two more in midstage studies that will rack up serious development expenses. The precommercial biotech finished September with just $85.5 million in cash after losing $64.6 million during the first nine months of 2018. Rather than focus on a single candidate, Inovio's taking a more expensive shotgun approach that will burn through its cash cushion this year.
Inovio's private debt offering will probably add $82 million to Inovio's top line after bank fees. The notes mature in 2024, and they can be converted into Inovio stock at $5.38 per share in late 2023. That will boost the company's outstanding share count around 17%, which seems like a steep price to pay for less than a year's worth of operating expenses.
Inovio's also running a pair of 198-patient phase 3 studies with its lead candidate, VGX-3100, for the treatment of cancer and precancer associated with the human papillomavirus. We should get our first look at pivotal trial results this August, and success could push the stock much higher.
If VGX-3100 doesn't succeed, though, Inovio will still need more cash to fund development of a rapidly expanding clinical-stage pipeline. Over the past decade, Inovio's total market cap has grown 1,600%, but investors have seen their share prices rise just 95% over the same period. With more potential dilution ahead, it's probably best to avoid this risky stock for now.