Shares of Translate Bio (NASDAQ:TBIO) fell over 10% today after the company announced and priced a stock offering. The small-cap biopharma will raise up to $103.5 million in gross proceeds through the sale of up to 10.35 million shares of common stock. The business exited June with $147 million in cash.
Considering the transaction will increase the number of shares outstanding by roughly 20%, investors might have expected the stock price to move by a similar amount. Investors are either cautiously optimistic about the company's future or weary over a return of negative 13% for the pharmaceutical stock since its initial public offering.
At 1:19 p.m. EDT, the stock was down 8.5%.
Translate Bio is a clinical-stage biopharma developing a technology platform around messenger RNA (mRNA). If you need a biology refresher, mRNA encodes the instructions for building proteins. When the code is faulty, the resulting protein is faulty, which can cause disease. Therefore, the idea is that engineering healthy mRNA and efficiently delivering it into target cells could treat, reverse, or stop the progression of diseases.
The idea looks great on paper, but making effective mRNA medicines has proven difficult. That hasn't stopped Translate Bio from trying. The company is conducting a phase 1/2 clinical trial in cystic fibrosis (admittedly a good target for mRNA medicines) and recently received the green light from regulators to move a second program into clinical development.
Preparing assets for clinical trials has been expensive. Translate Bio reported an operating loss of $62 million and an operating cash outflow of $41 million in the first half of 2019. Investors can expect both to increase significantly as the company advances more programs.
Today's news is pretty straightforward for investors: Translate Bio needs a lot of external financing to fund operations as a clinical-stage biopharma. Management wisely took advantage of a rising stock price to raise cash through a stock offering. The business is now relatively well-funded to execute on near-term operational targets, including advancing pipeline assets and supporting manufacturing efforts. That said, it remains a risky investment that doesn't have much to offer individual investors just yet.