Here are two end of the week movers in biotechnology with a look at what’s moving each and what’s likely to come next. The two companies in focus are Actinium Pharmaceuticals, Inc. (NYSEMKT:ATNM) and IntelliPharmaCeutics Intl Inc (NASDAQ:IPCI).
Actinium is declining into the weekend, with the company taking a hit on the news that it intends to conduct a public offering near term. As per the release detailing the announcement, we know that the offering will consist of shares of common stock and warrants to purchase shares of common stock, but – right now – we don’t know exactly how much will be raised and how many shares will be issued to underpin the capital that the issue brings in.
What we do know, is that the company intends to use the money raised to fund the further development of its pipeline, with a specific focus on three primary development assets – Iomab-B, Actimab-A, Actimab-M. These drugs are in various mid to late stages of development right now and the vast majority of Actinium’s market capitalization is rooted in the market’s perception of their combined potential.
If the company can successfully allocate capital towards taking one or more of these assets to commercialization, it will be targeting a market worth multiples of its current market capitalization.
So why is the company taking a hit on the news of the raise?
Well, it’s all about dilution. When a company issues shares to raise capital, the shares that are sold are added to the outstanding base, which translates to the portion of the company represented by the holdings of current shareholders being reduced. This dilution generally brings with it a market response that shifts share price to reflect the fact that the shares being diluted are representative of a smaller portion of the overall company in question.
That’s exactly what we are seeing here.
Oftentimes, we get a little more clarity as to the magnitude of the raise (and, by proxy, the number of shares being issued) and markets will adjust the share price based on the numbers served up. In this instance, however, we don’t have these numbers yet, so the response is a sort of stock move. There is every chance, therefore, that we will see further action in this one, be it to the upside to adjust for an oversell or to the downside to adjust for and undersell, as the company releases more information related to the issue.
Another big mover this week is IntelliPharmaCeutics. This company is trying to get a drug to market called Rexista. It is designed as a generic abuse and alcohol-deterrent controlled-release oral formulation of oxycodone hydrochloride and it’s indicated for the relief of pain. Data from trials conducted by the company were relatively strong and, on the back of a new drug application (NDA) that is with the US Food and Drug Administration (FDA) right now, markets expected that Rexista should have no problem getting approved as a pain management drug.
What was uncertain was whether the group would pick up and abuse deterrent label, and – market perception was, at least – that this was the primary risks associated with the program.
Recent events, however, suggested that this might not be the case.
This week, Rexista was the subject of an FDA panel review meeting at which industry participants discussed and – ultimately – voted on the drug’s readiness for the market in its current form and under the format of its current application.
And as it turns out, said industry participants aren’t happy with either.
The panel voted 22-1 against recommending approval of the drug, which turned out to be a far harsher outcome than many expected heading into the review meeting. The recommendation was rooted in what the panel viewed as a necessity for further data on both the safety and efficacy of the drug question and, as a result, IntelliPharmaCeutics is having to carry out an additional study to meet, and hopefully overcome, the concerns.
The problem with this is that clinical studies, and especially studies at this late stage of development, require considerable capital outlay. A company at this end of the biotechnology space generally doesn’t have the capital to just conduct a phase 3 at will and, as such, chances are IntelliPharmaCeutics shareholders are going to have to suffer some degree of dilution near term in order to meet the cash requirements of the phase 3 in question.