Shares of Moderna (NASDAQ:MRNA) are down 11% at 12:39 p.m. EST after the company priced its secondary offering at $19 per share, allowing the biotech to raise approximately $500 million. The company could get an additional $75 million or so if the underwriters exercise the 30-day option to purchase additional shares.
Shares of Moderna closed at $21.35 yesterday, so it's not surprising that they would take a hit today. Buyers of secondary offerings typically seek a discount to the current price because selling the additional shares results in dilution.
With shares well off their lows of last year, it's a fairly good time for the biotech to raise additional capital, considering the company's pipeline is only in the very early stages of the drug-development marathon. Management was shooting for having $1.2 billion in the bank at the end of last year -- it hasn't released fourth-quarter financials yet -- but that won't be enough to get it to the finish line since its burn rate is likely to increase as the pipeline progresses.
Earlier this week, Moderna moved its seventh drug into the clinic, starting a clinical trial for mRNA-3704 in patients with a rare genetic disease called isolated methylmalonic acidemia, which is typically caused by a mutation in a gene called mitochondrial enzyme methylmalonic-CoA mutase (MUT). Like Moderna's other drugs, mRNA-3704 is an mRNA that allows the cells to express a needed protein -- in this case MUT.
Dilution is never fun for investors since it results in each share representing a smaller piece of the pie. But the additional capital should help Moderna grow the size of the pie, ultimately rewarding investors for their patience.