Please ensure Javascript is enabled for purposes of website accessibility

Here's Why Translate Bio Dropped Today

By Maxx Chatsko – Sep 18, 2019 at 2:25PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The company announced a stock offering to raise cash, but today's drop could've been much worse.

What happened

Shares of Translate Bio (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%.

A researcher in the lab with a disappointed look on his face.

Image source: Getty Images.

So what

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. 

Now what

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.

Maxx Chatsko has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Translate Bio, Inc. Stock Quote
Translate Bio, Inc.
TBIO

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
332%
 
S&P 500 Returns
104%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/30/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.