What happened
One of the steepest decliners in the biotech sector Thursday was Epizyme (EPZM +0.00%). The cancer-focused biotech saw its shares plummet 44% in value that day, on news of a dilutive secondary stock issue.
So what
Epizyme announced that it is floating nearly 56.7 million shares of its stock, which will be sold in a public offering at $1.50 per share before underwriting discounts. The underwriting syndicate of the offering, which is led by Jefferies and Barclays, has been granted a 30-day option to collectively buy up to 8.5 million additional shares at the same price.
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Much of that anticipated $85 million in raised funds, combined with Epizyme's existing cash, cash reserves, and marketable securities, will be funneled into its only commercialized drug, Tazverik. The monies will be used for the drug's ongoing and planned clinical trials for several indications for which it does not yet have authorization or approval. The company will also use its capital to fund other current clinical programs.
Now what
That's a sensible goal, but investors were put off by the offering price since it's 21% below Wednesday's close for the stock. The significantly steeper decline of Epizyme shares on Thursday indicates deep concern with shareholder dilution, as the biotech company has fewer than 104 million shares outstanding, according to data compiled by Yahoo! Finance.
In a business update issued earlier this month, Epizyme said that its preliminary results indicate Tazverik's commercial net sales in Q4 should land at $7 million to $7.5 million, representing roughly 35% growth year over year. Perhaps tellingly, though, the company didn't proffer any profitability figures for the quarter, or for full-year 2021 (although it did say its cash runway was long enough to last into Q4 2022).
