Shares of PTC Therapeutics (NASDAQ:PTCT) fell more than 12% after the company announced the pricing of a debt offering and a share offering. The business will sell up to $287.5 million in debt notes and up to $115 million in common stock for total gross proceeds of up to $402.5 million.
The transactions will pad a balance sheet that sported $363 million in cash at the end of June. PTC Therapeutics can certainly use it. The business reported operating cash outflow of $73 million in the first six months of 2019. That's likely to increase in the near future as the company launches two new products in Latin America, prepares to submit another product to regulators for approval, and expands the use of an important drug product following a recent thumbs-up from regulators.
As of 12:22 p.m. EDT, the stock had settled to a 12.2% loss. The growth stock has gained 315% in the last three years.
PTC Therapeutics has two marketed products for treating Duchenne muscular dystrophy (DMD): Translarna and Emflaza. They generated $138 million in revenue in the first six months of 2019, compared to $124 million in the year-ago period. That slow growth could accelerate soon, as Emflaza recently received approval from the U.S. Food and Drug Administration (FDA) to treat DMD patients between 2 years and 5 years of age. Those patients represent approximately 25% of all individuals with the disease.
That said, the expanded label won't immediately shore up the company's financial position. PTC Therapeutics reported an operating loss of $247 million and an operating cash outflow of $73 million in the first half of 2019. Operating expenses are expected to rise significantly in the near future to support growth efforts.
PTC Therapeutics plans to submit a new drug application (NDA) to the FDA for risdiplam as a treatment for spinal muscular atrophy (SMA) type 1, type 2, and type 3. If the drug earns marketing approval, investors can expect marketing expenses to increase during launch. Similarly, the company is about to launch Tegsedi and Waylivra in Latin America and is expanding its research efforts in gene therapy, which is an inherently expensive area of medicine.
Today's stock move is pretty straightforward: Investors are simply adjusting the company's market cap to account for dilution from the stock offering. Of course, the business had to raise outside cash to continue funding operations and expansion. It's going to take more than a few quarters for PTC Therapeutics to achieve operating profits, but the company can now focus its bandwidth on execution instead of financing.