- Publicly traded biotech companies, in the spotlight as the world hopes for progress on drugs to curb the coronavirus pandemic, are capitalizing on the newfound attention and raising money as sector stock indices hit new highs for the year.
- In a flurry of financing activity Monday evening, eight drugmakers, including Moderna and Bluebird bio, announced plans to raise a combined sum of nearly $3 billion dollars via offerings of new stock and debt.
- Almost half of that total came from Moderna, which said it expects to raise $1.34 billion from a sale of nearly 18 million new shares. The company announced the stock offering less than 9 hours after disclosing the first data from a Phase 1 study of its experimental coronavirus vaccine, news of which pushed the broader stock market higher.
The preliminary results Moderna announced Monday were a positive first step for the biotech's vaccine candidate, but offered few definitive answers to the many pressing questions facing the company and its technology.
While the vaccine appears to be triggering an immune response in a handful of healthy volunteers, there's no guarantee that will prove protective against infection by the new coronavirus. Safety concerns remain, and the company disclosed no specific data, making more in-depth interpretation challenging.
But those qualifications didn't lessen the surging enthusiasm shown by investors, who pushed shares in Moderna roughly 20% higher Monday — good enough to add $5 billion to the company's now swelled valuation. The spike also drove higher the SPDR S&P Biotech Exchange Traded Fund, a sector index of which Moderna is a part, as well as the broader stock market.
"Without a doubt, Moderna's news helps everyone," said Brad Loncar, CEO of Loncar Investments and a biotech investor, in comments to BioPharma Dive. "Biotech is on the front page of every news site and everybody is hearing about it. Other companies definitely ride the coattails of that."
Taking advantage of the run-up in share prices, Moderna quickly announced plans to issue millions of new shares, adding to its sizable cash position at the cost of diluting existing investors. The company already boasted $1.7 billion in cash, cash equivalents and investments, as well as nearly half a billion dollars in federal funding to quickly advance its coronavirus vaccine candidate.
Offering new stock on the heels of clinical trial data is a well-worn path in biotech, which typically features companies with high cash burn rates and years of accumulated deficits.
"[The biotech] sector is the strongest in the stock market, yet on a fundamental level biotech companies are going through disruptions like all other industries," said Loncar. "It's only smart to raise some cash to help cushion the turbulence."
A good number of Moderna's peers took advantage of rising share prices, too, making Monday an unusually active day for secondary offerings from public biotechs. Even Pfizer, the industry's staid leader, got involved, announcing plans to raise $4 billion in new debt.
Gossamer Bio, along with offering $125 million in new shares, also priced $200 million in convertible debt Monday.
Not all investors appeared to appreciate the dilutive effects of the planned capital raises, however. Shares in five of the eight drugmakers which offered new stock Monday were trading below the offering price Tuesday morning.
Stock offerings by biotech companies on May 18, 2020
|Company||Shares offered||Price per share||Approx. gross proceeds, millions|
|Turning Point Therapeutics||5,416,667||$60.00||$325|