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Why Kodiak Sciences Stock Is Jumping Today

By Keith Speights – Dec 4, 2019 at 11:28AM

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Momentum continues from the drugmaker's royalty deal announced earlier this week despite a big public stock offering.

What happened

Shares of Kodiak Sciences (KOD -1.41%) were jumping 17.3% higher as of 11:16 a.m. EST on Wednesday following the drugmaker's announcement after the market closed Tuesday of the specific pricing of a public stock offering. Kodiak plans to sell 6 million shares at a price of $46 per share -- well below its closing price on Tuesday.

Most biotech stocks fall when public stock offerings are announced at a lower share price. However, investors remain enthusiastic about an announcement Kodiak made on Monday about a royalty deal with Baker Bros. Advisors (BBA) for experimental eye-disease drug KSI-301.

An image of an ascending bar chart and upward-sloping line over a man's palm.

Image source: Getty Images.

So what

Kodiak's pricing for its public stock offering reflected the strong position the company is in. The sale of 6 million new shares represents more than 16% of outstanding shares. However, Kodiak's offering price of $46 per share was only 6.5% lower than its Tuesday closing price.

Investors are clearly optimistic that buying the stock at $46 per share will lead to significant returns. With the level of interest in KSI-301, as evidenced by the BBA royalty deal, that optimism could be well founded.

Now what

The public stock offering is imminent: Kodiak expects to close the transaction by Dec. 6, 2019. The company should also receive $100 million up front from BBA by early January 2020, with another $125 million payable upon the achievement of specific milestones.

Keith Speights 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.

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