What happened

Shares of Inovio Pharmaceuticals (NASDAQ:INO), a clinical-stage immunotherapy company, fell by an unsightly 26% last month, according to data from S&P Global Market Intelligence. What event triggered this sell-off? 

Inovio's stock fell in response to a convertible debt offering halfway through the month. Investors apparently weren't pleased with either the terms of the debt offering or the fact that the initial purchasers decided not to buy the full allotment of additional notes.

Three red arrows smashing into the ground.

Image source: Getty Images.

So what

Inovio was attempting to raise $82.1 million in net proceeds with this convertible debt offering. However, the company walked away with only $75.8 million in total. While market conditions can dictate the interest from buyers in these types of offerings, Inovio's inability to sell the full allotment of additional notes seems to indicate that Wall Street isn't overly optimistic about the company's future. Biotech stocks, after all, are enjoying a strong resurgence this year and this capital raise wasn't particularly large for a company that sports a late-stage clinical asset.

Check out the latest earnings call transcript for Inovio Pharmaceuticals.

Now what

Capital raises -- even ones on unfavorable terms -- are part and parcel of the clinical-stage investing landscape. That's an inescapable drawback of investing in these types of equities. Thus, the market's overtly negative reaction to this offering is probably a bit overdone at this point. 

What really matters from an investing standpoint is that Inovio is now less than two years out from reporting top-line data for its lead vaccine candidate, VGX-3100. VGX-3100 is presently in a late-stage trial as a potential treatment for HPV-related cervical pre-cancer.

If this experimental vaccine scores a win in this ongoing trial, Inovio's share price should quickly return to form and then some. A failure, by contrast, will undoubtedly be greeted by another round of heavy selling. Given this binary outcome, capital raises shouldn't necessarily be a major point of concern for retail investors at this stage. The bigger deal is that Inovio has the funds necessary to complete its first-ever late-stage trial.