Shares of the gene therapy specialist Krystal Biotech (KRYS -2.94%) are down by 13.6% as of 1:38 p.m ET Wednesday afternoon. The biotech's shares are sinking today in response to a $200 million public offering.
More specifically, Krystal announced yesterday that it plans an offering of 2,666,667 shares of its common stock at $75 per share. This sizable capital raise follows in the wake of the company's late-stage trial success for its redosable gene therapy Vyjuvek as a treatment for the rare skin condition known as dystrophic epidermolysis bullosa (aka dystrophic EB).
Last Monday, Krystal's shares more than doubled in value on the back of this pivotal trial success for dystrophic EB. This massive uptick isn't surprising given that the company expects to file for Vyjuvek's approval for this rare condition in both the EU and U.S. sometime next year. What's important to understand is that Krystal may have a blockbuster product on its hands, depending on the therapy's price point. And if true, this $200 million capital raise will turn out to be a drop in the bucket compared to Vyjuvek's revenue stream.
Is Krystal's stock a buy on this double-digit pullback? Wall Street thinks this small-cap biotech stock still has an 80% upside potential remaining, even after Monday's enormous rally. While investors should always take analyst price targets with a huge grain of salt, there may be something to this stellar forecast. Vyjuvek, after all, is a truly unique therapy that would meet the needs of an underserved patient population. In short, aggressive investors may want to consider scooping up some shares on this dip.