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 of the developmental stage DNA vaccine maker Inovio Pharmaceuticals (NASDAQ:INO) plunged today by over 17% on exceptionally high volume. The apparent catalyst behind this drop was a large secondary offering of 9,500,000 shares of common stock priced at $8.00 per share -- $0.54 below where the stock finished trading yesterday. 

Per the press release, Inovio will gain about $76 million in gross proceeds from the offering, which it reportedly plans to use for general corporate expenses, such as clinical trials and administrative expenses, among others. 

So what: Dilution via secondary offerings is unfortunately a normal turn of events in the clinical-stage biotech game. That said, I think investors should brace themselves for an unusually large number of secondaries across the industry right now.

Biotech stocks have been falling recently, suggesting that the industry's massive run upwards may be coming to an end. And the fact that Inovio decided to execute a fairly large offering right now, even though management recently stated that the company had a cash runway through 2017, makes me believe that biotechs are getting nervous about their prospects to raise cash in the future. 

Now what: Inovio is gearing up for a pivotal late-stage trial for its lead product candidate VGX-3100, indicated for cervical dysplasia, that is set to start in 2016. And my guess is that a fair chunk of this money is going to go toward funding this trial. So the good news is that the company should now have the funds necessary to further VGX-3100's development.

Whether or not you think today's drop represents a buying opportunity, though, depends on how you view the vaccine's midstage results. Since I personally found them to be "middling to fair" at best, I'm content watching this speculative biotech safely from the sidelines. 


This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.