Why Clearside Biomedical Is Up for a Third Straight Day

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What happened

Shares of eye-disease drugmaker Clearside Biomedical (NASDAQ: CLSD) are up 12.7% at 12:06 p.m. EST, bringing its rise for the week to a whopping 41%.

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On Monday, it was positive phase 3 data for suprachoroidal CLS-TA in patients with macular edema associated with non-infectious uveitis.

Yesterday, it was an update that the clinical trial program for suprachoroidal CLS-TA in patients with macular edema associated with retinal vein occlusion (RVO) was progressing and probably some carryover from Monday's news.

And today's news is that the company announced yesterday after the bell that it plans to raise $75 million in a secondary offering.

So what

Secondary offerings often cause shares to go down, not up like they are for Clearside Biomedical, because current shareholders are being diluted with the sale of additional shares. But investors clearly like the idea of Clearside Biomedical selling shares at this inflated stock price, which will result in less dilution.

Companies can often announce plans to raise capital after the close of trading and get the deal done with a price per share of the secondary offering announced before the market opens the next day. But that doesn't seem to have occurred here, which should give investors a little pause that Clearside Biomedical's investment bankers might be having trouble getting the large investors who typically buy secondary offerings to go for a price close to where it closed on Tuesday.

Of course, today's move could have little to do with the announcement of the secondary offering, and could be a short squeeze in which short-sellers have to buy to cover their short positions, causing the share price to increase -- often temporarily since there isn't a fundamental reason for the change in valuation.

Now what

Today's pop is nice, but investors should realize it may be short-lived depending on where the secondary offering prices. Fortunately for long-term investors, Clearside Biomedical has some upcoming catalysts that could change the company's fundamental valuation, with data from the first RVO trial expected toward the end of the year and a potential approval in patients with macular edema associated with non-infectious uveitis next year.

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Brian Orelli and The Motley Fool have no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.