Shares of Neoleukin Therapeutics (NASDAQ:NLTX) fell nearly 18% today after the company announced the pricing of a public offering of common stock and a separate offering of warrants to purchase common stock. The development-stage drug developer agreed to sell up to 5.75 million shares of common stock, including warrants, for $15.25 apiece.
The combined offerings could raise up to $87.7 million in gross proceeds. Neoleukin Therapeutics ended March with $139 million in cash and reported an operating cash outflow of only $6.4 million during the first quarter of the year. However, investors can expect operating expenses to grow as pipeline assets transition to clinical trials.
As of 12:18 p.m. EDT, the small-cap stock had settled to a 17.7% loss.
Neoleukin Therapeutics claims its lead asset, NL-201, is the world's first computationally designed "de novo" (meaning designed from scratch) protein therapeutic. The asset was designed to increase the tumor-fighting, immune system-modulating effects of interleukin-2 (IL-2) while significantly reducing its toxicity.
The asset has yet to enter clinical trials, although the company expects to file an investigational new drug (IND) application with the U.S. Food and Drug Administration (FDA) by the end of 2020.
So, why raise cash in July 2020? It appears to be a matter of timing. Shares of Neoleukin Therapeutics are trading at their highest level since 2017. Management is wise to raise cash now, even if the funds can't be put to productive use for several more quarters, and limit dilution for shareholders.
The next big milestone on the radar of investors is the filing of the IND application for NL-201, which should be followed by the initiation of a phase 1 clinical trial. Aside from that, Neoleukin Therapeutics is likely to present additional data for other preclinical assets in the pipeline, but it's going to be a slow second half of the year as the company transitions to the clinic.