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Shares of VBI Vaccines Tumble on Public Offering

By Maxx Chatsko – Apr 22, 2020 at 12:23PM

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The vaccine developer was forced to raise cash at a relatively low offering price, which will result in a significant amount of dilution.

What happened

Shares of VBI Vaccines (VBIV -3.98%) fell more than 32% today after the company announced the pricing of a public offering of common stock. The vaccine developer will issue up to 52.3 million shares of common stock at $1.10 apiece. If all shares are purchased, the offering will raise up to $57.5 million in gross proceeds. 

The tumbling stock price is a reaction to the offering price of just $1.10 per share. Not only is that much lower than recent highs, but it also forced VBI Vaccines to issue a significant number of shares to raise the targeted $50 million (the gross transaction value before accounting for the customary 15% allotment granted to underwriters). The offering could increase the number of shares outstanding by 29% -- roughly aligned with the magnitude of the stock price decline. 

As of 12:06 p.m. EDT, the small-cap stock had settled to a 26.9% loss.

A steadily rising chart on a chalkboard that shows a sudden decline.

Image source: Getty Images.

So what

A fundraising transaction was all but inevitable for the company in 2020. VBI Vaccines reported a cash balance of $44 million at the end of 2019, but it also reported a full-year 2019 operating loss of $52 million. 

The business has struggled to monetize research and development efforts and launch a commercial product with broad market opportunities. However, VBI Vaccines has several promising experimental therapies in development, including a vaccine candidate for hepatitis B. The company expects to submit regulatory approval applications starting in the second half of 2020. 

VBI Vaccines is also working to develop a multivalent coronavirus vaccine candidate, which means it will be designed to protect against multiple coronaviruses including SARS-CoV-1, MERS, and SARS-CoV-2. Clinical trials could begin before the end of this year or in early 2021. 

Now what

Investors have become accustomed to volatility with this biotech stock. If the company can continue to deliver promising results from its pipeline and pare operating losses, then it could get on the path to becoming a sustainable business. However, at a market cap of about $250 million, VBI Vaccines is certainly a high-risk investment. Investors should probably watch it from afar for now.

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.

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