What: Shares of Sarepta Therapeutics (NASDAQ:SRPT), a clinical-stage biopharmaceutical company focused on finding a cure for Duchenne Muscular Dystrophy, or DMD, dropped by 13% in early trading today after the company announced that it would be raising additional capital to fund its operations from a public stock offering.
So what: The company will be selling 3.25 million shares of its common stock to the public at a price of $39.00 per share, which after deducing costs should add roughly $127 million to its balance sheet. An additional 487,500 shares may be sold to the underwriters of the deal as well, and if they exercise their option another $19 million could be added to the total.
Sarepta stated that it intends to use the proceeds from the deal to continue its product and commercial development efforts.
Now what: At the end of the most recently completed quarter, the company reported a non-GAAP net loss of about $36 million and held $158 million in cash on its balance sheet. Given that the company could be ramping up its commercial actives in the next year if all goes well with its FDA submission, raising capital now was probably a good idea.
The pricing of the deal appears to be favorable, as Sarepta stock has been on an absolute tear this year. Even after factoring in today's downward price movement, shares of the company are still up more than 150% year to date.
Sarepta remains in a close race with BioMarin Pharmaceuticals to be first to market with a DMD treatment, and both companies are looking at potentially expensive drug launches quite soon if they receive FDA approval.
Considering that a capital raise was inevitable, today's announcement is probably good news for long-term investors, but given the uncertainty about which company will ultimately capture the lion's share of the DMD market, I'm more than content to watch this story unfold from the sidelines.