What: Shares of Genocea Biosciences (NASDAQ:GNCA), a biotech company with a focus on vaccines and immunotherapies, fell more than 10% today before moderating back to a 7% loss after the company announced the pricing of its recently announced $50 million public offering.
So What: Genocea is selling 3.85 million shares of its common stock at a price of $13 per share, plus it is granting its underwriters the option to purchase an additional 577,500 shares at the same price. The company plans to use the proceeds of the offering to support the clinical development of GEN-003 and GEN-004, which are both currently in phase 2 development as treatment options for genital herpes and pneumococcus, respectively.
The market didn't appear to be thrilled with the pricing of the new shares, especially when considering that the stock closed above $14.50 yesterday, and bid the stock down today accordingly.
Now What: Genocea has been quite active at tapping the markets to increase its cash position recently, as this is the second time the company has performed a secondary offering this year. The company had $84 million in cash on its balance sheet at the end of the first quarter, so after this secondary offering is completed it should have plenty of capital to keep the doors open for a few more years. While being diluted by 23% is never fun for current investors, I have a hard time calling the offering unwarranted given the company's likely future capital needs and considering that the stock is up more than 80% since January.
Genocea investors are banking on the continued clinical success of GEN-003 and GEN-004 to drive long-term returns, so as long as the company is able to put the capital raised today to good use and continue that effort, I think investors should probably just ignore today's price movement.
Brian Feroldi has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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.