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: Shares in Advaxis, (NASDAQ:ADXS) fell by 10% earlier today after the company priced a $53 million public offering that will dilute current investors.
So What: According to the Tufts Center for the Study of Drug Development, it costs roughly $1.4 billion to successfully usher a drug through clinical trials to commercialization. Since drug development is so expensive, it is common for clinical stage biotech companies like Advaxis to tap equity markets in order to finance their R&D efforts.
In the case of Advaxis, the company is offering 2.8 million shares to the public at a price of $19 per share. Advaxis is also making an additional 420,000 shares of stock available to investors through an over-allotment program. If Advaxis offering goes as planned, the company's gross proceeds will total $53.2 million.
Now What: Advaxis will need to pay fees and commissions on its offering, so it won't collect the entire $53 million, but it will still pocket a handsome sum that it can use to fuel its current development projects, including ongoing trials for ADXS-HPV and adjunct therapy trials which are evaluating ADXS-PSA alongside Merck & Co's Keytruda.
ADXS-HPV is an immunotherapy drug being studied as a treatment for a rare form of anal cancer that is caused by the HPV virus. In April, the company reported that a phase 2/3 trial of ADXS-HPV in anal cancer will commence soon. Additionally, ADXS-HPV is is also being evaluated as a treatment for other HPV cancers, including cancer of the head and neck, and cervical cancer.
Advaxis also announced in April that it has kicked-off a phase 1/2 trial of ADXS-PSA for use alongside Merck's Keytruda in advanced prostate cancer patients.
Given the pick-up in expensive clinical stage trials, investors may want to look beyond the short-term drag of a dilutive offering and instead focus on the longer term opportunity for immunotherapies like those being studied by Advaxis. Immunotherapies could offer a much more robust and less toxic cancer treatment regimen and in the process, reinvent how doctors treat cancer patients. That said, Advaxis is a clinical stage company and trial failures in oncology are common. That makes Advaxis suitable only for the most risk tolerant investors.