In response to sharing the pricing details of a secondary common stock offering, shares of Paratek Pharmaceuticals (NASDAQ: PRTK), a clinical-stage biotech focused on next-generation antibiotics, fell 10% as of 3:15 p.m. EST on Thursday.
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Paratek announced on Wednesday that it wanted to raise $50 million through a common stock offering.
Investors learned on Thursday that the company succeeded in hitting that number by selling 3.2 million shares to the public. However, some quick math tells us that the company sold those shares for $15.63 each. That's not a great price for a company that closed Wednesday's trading session at $17.68.
Given the disappointing pricing, it isn't hard to figure out why traders are knocking down the company's share price on Thursday.
Short-term price movements aside, this company's future is in the hands of the success or failure of a compound called omadacycline. This next-generation antibiotic is currently undergoing a rolling submission to the FDA as a hopeful treatment for acute bacterial skin and skin structure infections (ABSSSI) and community-acquired bacterial pneumonia (CABP). The company said that this process should be completed by the end of the first quarter. Since the FDA has already granted the drug with Qualified Infectious Disease Product designation and Fast Track designation, the review time should be only six months or so (as opposed to the usual 10 months for a standard review).
The odds of success are tough to say, but data from a phase 3 study should give investors hope. What's more, the FDA is keenly aware of the on-going antibiotic-resistant bacteria crisis, so you can bet that they are hoping to be able to give this drug the green light.
If that happens, the upside could be huge for investors. Management likes to point out that this is a $9 billion addressable market for the drug. If omadacycline can capture even a small fraction of that opportunity, then it could turn into a financial windfall for investors. Since Paratek is still a sub-$500 million business, there's no doubt that the company's stock would soar if the drug gets the green light.
The good news is that investors should have a go/no-go decision in hand before the end of the year. That makes Paratek a great stock for risk-loving biotech investors to keep tabs on.
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