Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What's happening: Shares in the clinical stage biotech Celldex Therapeutics (NASDAQ:CLDX) jumped by as much as 10% earlier today following news that it had closed on its secondary offering at a price of $24 per share.
Why it's happening: According to Tufts Center for the Study of Drug Development, it costs $1.4 billion to usher new medicines through clinical trials to market. As a result, it's common to see clinical stage biotech stocks like Celldex tap equity investors for additional money to fund promising R&D activity.
In Celldex's case, the company's secondary offering of 7.25 million shares is expected to generate net proceeds to the company of $164.2 million. Since investors agreed to purchase an additional 1.09 million shares that were offered through its over-allotment program, Celldex also expects to receive an additional $24.7 million.
That cash will go a long way to bolstering Celldex's balance sheet. Exiting December, Celldex had $201 million in cash and equivalents. In its fourth qaurter earnings conference call, the company had indicated that would be enough to get it through 2016. Since Celldex's cash burn was $23.1 million in the fourth quarter, the influx from this secondary offering should provide it with at least another 1 to 2 years of financial breathing room.
That financial flexibility will be important given that Celldex's gene targeting immunotherapy pipeline is maturing. The company's most advanced drug is Rintega, formerly known as rindopepimut, for the treatment of a genetic mutation that occurs in roughly 30% of glioblastoma patients. The company is conducting an ongoing phase 3 study of that drug that should have interim data results by midyear. If those results are solid, the company will continue to ramp up its investments ahead of a potential FDA filing and commercialization. The company's other promising pipeline candidates include therapies for other cancers, including breast cancer, lung cancer, and lymphoma.
Todd Campbell has no position in any stocks mentioned. Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may or may not have positions in the companies mentioned. The Motley Fool recommends Celldex Therapeutics. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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