Shares of several biotechs were falling today for the same underlying reason. Editas Medicine (EDIT 0.73%) stock was down 10% as of 11:07 a.m. EST on Thursday. Shares of Inovio Pharmaceuticals (INO -4.57%) were 6.4% lower. Dyne Therapeutics (DYN -2.76%) stock was plunging 15.4%. CytomX Therapeutics (CTMX -4.14%) shares were crashing 15.8% lower.
All four of these biotechs announced the pricing of public stock offerings after the market closed on Wednesday. Editas plans to issue 3.5 million shares at $66 per share. Inovio priced its offering of 17.7 million shares at $8.50 per share. Dyne intends to sell 6 million new shares at $28 per share. And CytomX stated that it plans to sell nearly 14.3 million new shares at $7 per share.
There's a simple explanation for why the stock offerings for these companies is resulting in each of the biotech stocks falling today. More new shares on the market for trading means that the values of existing shares will be diluted. Investors usually don't like dilution.
What investors do tend to appreciate, though, is an improved cash position. The good news for all of these companies is that their stock offerings will bring in a significant amount of capital.
Editas' stock offering is expected to generate gross proceeds of $231 million. Inovio thinks it will haul in gross proceeds of around $150.5 million. Dyne looks to generate $168 million from its offering. CytomX anticipates gross proceeds of $100 million.
The sell-off from these biotechs issuing new shares will probably only be temporary. The additional cash they'll receive from their stock offerings, though, will help the companies fund the advancement of their pipeline candidates and could provide long-term rewards.
What could cause these stocks to rebound? There's always the possibility of being acquired by a larger drugmaker. However, the key catalysts for all four companies going forward will probably be their clinical updates.
Editas has two gene-editing programs in early-stage clinical testing: EDIT-101 for treating rare eye disorder Leber congenital amaurosis type 10 and EDIT-301 for treating sickle cell disease. Inovio's lead pipeline candidates are COVID-19 vaccine INO-4800 and pre-cancerous dysplasia drug VGX-3100. Dyne's experimental therapies targeting muscular dystrophy are all in preclinical testing for now. CytomX has multiple candidates targeting cancer in phase 2 studies.