For the third day in a row Wednesday, shares of Nabriva Therapeutics (NASDAQ: NBRV), a clinical-stage biotech focused on antibiotics, were moving by double-digits. However, today's move is in the wrong direction. Nabriva's stock fell as much as 10% in early morning trading after the company released the pricing details of its just-announced secondary common stock offering.
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Nabriva announced that it will sell 9.4 million shares of common stock for $8.50. In addition, the underwriters of the deal have been given the option to purchase up to 1.4 million shares more at the offering price. In total, this deal promises to raise as much as $92 million before subtracting fees.
On the downside, if the underwriters fully exercise their option, current shareholders will be diluted by 51%. What's more, Nabriva's stock closed Tuesday's trading session at $9.19 per share. That's quite a bit above the $8.50 deal price, which suggests that the company had to offer investors a sizable discount in order to raise all of the capital that it wanted.
Given the pricing details, it isn't hard to figure out why shares are tumbling today.
Short-term share price movements aside, raising capital right now was clearly the smart move for Nabriva. The company is burning through lots of capital as it works to move its treatment candidates through the pipeline. If it maintains its current spending rate, this stock sale should provide the company with about 18 months of additional runway. That should be plenty of time for investors to get a look at the results of its LEAP 2 clinical trial.
Should interested investors view Wednesday's drop as a buying opportunity? In my view, the answer to that question is "no" since Nabriva is behind Paratek Pharmaceuticals (NASDAQ: PRTK) in the race to bring a new community-acquired bacterial pneumonia antibiotic to market. Right now, Paratek expects to begin its rolling submission to the FDA in December, several months before Nabriva could conceivably do the same for its rival compound, lefamulin. That head start could translate into a commercial advantage for Paratek should both companies manage to win regulatory approval for their CABP antibiotics. For that reason, my plan is to root for Nabriva's success from the sidelines.
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