After the company announced the pricing of a planned $125 million secondary stock offering, shares of Translate Bio (NASDAQ:TBIO) tumbled 21% on Friday.
In collaboration with biopharma giant Sanofi (NASDAQ:SNY), Translate Bio has been investigating mRNA vaccine candidates for COVID-19 since March. On Tuesday, the companies announced they're expanding their relationship, with Translate Bio receiving upfront money, potential milestone payments, and royalties on future net sales in exchange for exclusive commercial rights to multiple vaccine candidates.
Specifically, Translate Bio is pocketing $425 million up front -- $300 million in cash and $125 million from shares it's selling to Sanofi at $25.59 per share. It can receive up to $1.9 billion more by hitting clinical, regulatory, and commercial milestones, including $450 million from prior collaborations with Sanofi. Sanofi also agreed to pay tiered royalties on sales. However, the companies didn't disclose the exact percentages of those royalty payments.
News of the expanded relationship sparked a significant rally in the biotech's shares this week, prompting management to announce a secondary stock offering to further bolster its balance sheet. Today, the market learned management will offer 12.5 million shares at $22 per share, including 6.8 million shares being sold by Takeda's Shire Human Genetic Therapies, an existing shareholder. Translate Bio won't make any money from Shire's shares, but it estimates it will receive $125 million, before fees, from the offering.
Translate Bio's mRNA approach is similar to that of Moderna (NASDAQ:MRNA), which already has its SARS-CoV-2 vaccine in phase 2 trials. The strategy is to tinker with our genetic code in a way that makes our cells create specific proteins that are also expressed by the novel coronavirus, allowing the body to develop antibodies to it.
Although Moderna is further along in the development timeline, Translate Bio believes it can have a vaccine in clinical trials in the fourth quarter, and generate data that could conceivably lead to a Food and Drug Administration approval sometime in 2021. The additional cash provided by the Sanofi deal and secondary offering should give it the financial resources necessary to execute on that goal, but there's no guarantee that its efforts will pan out.