Following the Christmas break, shares of BioSante soared more than 27% during Monday's session on volume of 10.57M shares versus an average of 251,478, leaving investors hungry for the company's potential in its upcoming FDA catalysts in early 2011, as highlighted by our previous article
. All seemed well going into the next trading session, that is, until the after-hours session when news of a registered direct offering sparked newly found worries striking fear in the hearts of current and potential shareholders.
To those who follow the biotech industry religiously, this occurrence shouldn't catch anyone off guard, and in most cases does not pose a major roadblock for an undervalued company whose investment purposes should be for the long-haul rather than flipping a few pennies on the dollar. As an immediate example, during the month of December, no less than three highly profiled biotech companies with upcoming catalysts decided to raise cash ahead of these events.
[Related -How to Tell False Hope From Rational Optimism]
- EnteroMedics, on December 9th, announced a public offering of $25.9 million at $1.75 per share, at a time when its price was trading at $2.45 per share. The very next trading day, shares popped way past the offering price and moved to $2.20 on heavy volume. Since then, it has gone on to gain a cool 25% while maintaining a steady uptrend. The company expects to medical device study for its product, Maestro System during 2nd half of 2011.
- Lannett Company, on December 13th, announced a public offering of 5,000,000 shares of its common stock at a price of $5.00 per share. Many expected news of dilution ahead of the pending FDA decision for its flagship product, Morphone Sulfate Oral Solution. Shares dropped initially from its 52-week high peak of $7.00 down to $5.00, yet managed to find solid support and is now rebounding once again with shares now at $5.32 in anticipation of the potential marketability of its product.
- YM BioSciences, on December 14th, announced a public offering of $40 million at $1.60 per share when its price was trading at $1.80 in the previous session. Since then, the shares have gone on to rally to a new 52-week high of $2.55, and are now up 31% as of today's close to $2.32. The company has a slew of phase 1, 2 and 3 clinical trials which should be reported during 1st half of 2011.
[Related -The US Macro Trend Holds Steady To Date Amid Market Turmoil]
It is important to note that in all three of these public offerings, not one of the companies managed to raise funds from institutional investors, rather opting to simply exchange shares on the open market.