Shares of Tricida (TCDA 4.59%) were jumping 11% higher as of 11:23 a.m. EST on Tuesday. The solid gain came after the company announced that it had entered into definitive agreements to sell stock and warrants that will generate gross proceeds of around $42 million.
It's par for the course for drugmakers to raise additional capital through issuing new shares and/or warrants. What's unusual is for a biotech stock to rise on the news instead of fall. Selling additional shares and warrants leads to dilution in the value of existing shares, which isn't good news for shareholders.
So why did Tricida's shares move higher today? Investors are likely encouraged because the price of the offering was well above the 30-day volume-weighted average share price of $4.69 and the closing price of $5.46 on Friday. This indicates that the buyers of the new shares and warrants (who have already been lined up) are quite bullish about the company's prospects.
Of course, there's also the fact that Tricida will have more money to fund its clinical programs. The company said that it intends to use part of the funds to continue testing its experimental drug veverimer in a study targeting chronic kidney disease.
Tricida expects to report top-line results from its renal outcomes clinical trial of veverimer in the third quarter of 2022. The company thinks that the proceeds from its stock and warrant offering will fund operations for around six months afterward.