What happened?
Shares of Kezar Life Sciences (KZR +1.61%) are down by 11.7% as of 3:12 p.m. EDT on Tuesday, following the company's announcement of the pricing of a public offering of common stock. Kezar Life Sciences made this announcement after the market closed on Monday.
So what
Kezar Life Sciences -- whose stock price was above $6.20 at the close of market on Monday -- has priced its public offering of 7,590,909 common shares at $5.50 per share. Further, the company is issuing 909,091 shares of its common stock to holders of pre-funded warrants at $5.499 per underlying share; pre-funded warrants provide their holders with the right to purchase shares of a company at a later date. Kezar Life Sciences is hoping to raise approximately $46.7 million from this public offering, which will close on Jun. 11.
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The company expects to use the proceeds from this round of fundraising to "fund the research and development of its product candidates, acquire or license products or technologies that are complementary to its own ... and for working capital and general corporate purposes." With this public offering of common stock set to dilute Kezar Life Sciences' existing shareholders' equity, no wonder investors aren't thrilled.
Now what
Kezar Life Sciences recently released results from a clinical trial evaluating the safety and tolerability of KZR-616 in patients with systemic lupus erythematosus (SLE) with and without nephritis. The results from this trial were positive. According to a company statement, "Overall, improvements were seen across seven measures of disease activity, and two of two patients with lupus nephritis (LN) experienced a greater than 50% reduction in proteinuria, a biomarker of disease severity."
Still, Kezar Life Sciences is a clinical-stage biotech company with no products currently on the market. The company reported no revenue during the first quarter, a $10 million net loss, and it had $123.4 million in cash and cash equivalents as of March 31. Given these factors, it isn't too surprising that the company decided to conduct a public offering of common stock.
