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Why scPharmaceuticals Stock Plunged Today

By Evan Niu, CFA – May 21, 2020 at 1:20PM

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The pharmaceutical company priced a secondary offering to raise capital.

What happened

Shares of scPharmaceuticals (SCPH) have plunged today, down by 22% as of 1 p.m. EDT, after the company announced the pricing of a public secondary offering. The deal priced at $8.65 per share, a roughly 20% discount compared to yesterday's closing price of $10.83.

So what

The pharmaceutical specialist sold nearly 5.8 million shares to the public at that price, which represents meaningful dilution to existing shareholders, as scPharmaceuticals had around 20.2 million shares outstanding at the end of the first quarter. Gross proceeds for the deal are expected to be approximately $50 million, before factoring in underwriting discounts and commissions. Furthermore, underwriters have an option to buy an additional 867,000 shares.

Gloved hand holding up syringe in front of patient's exposed arm

scPharmaceuticals is developing technology to deliver therapies that currently require intravenous injections. Image source: Getty Images.

Secondary offerings are often priced below current prices in order to encourage investors to buy shares through the offering, which raises capital for the issuing company.

Now what

scPharmaceuticals is researching proprietary ways to administer and deliver therapies that are currently limited to intravenous delivery. The company had approximately $75.5 million in cash at the end of the first quarter.

The drug development specialist does not currently generate revenue, so it relies on external capital raises to help fund research and development. Earlier this month, scPharmaceuticals said that it expects its net loss for 2020 to be lower than previously anticipated, and red ink for the year is now forecast in the range of $36 million to $40 million.

Evan Niu, CFA 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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