Shares in biopharmaceutical company Immunomedics (IMMU) were down sharply on Friday following the announcement of pricing for the upcoming public offering of some 9 million new shares. The decline should come as no surprise given that the public offer represents a more-than 10 percent increase in the size of the company’s float (currently at 83.3 million shares) and a significant dilution of shares.
However, the fact that the market-price of shares descended below the $3.35 a share that the public offering is being priced at could be viewed as the markets showing more pessimism than Immunomedics’ leadership. The news resulted in a prompt sell-off, with shares dropping by more than 20 percent, but, despite opening at $3.35 apiece, they fell as the day moved on, hitting an intraday low of $3.22 and trading at $3.27 as of 2:30 pm ET.
The proceeds of the offering, which should net $30.15 million, are intended for use funding clinical trials for the company’s drug pipeline, including Phase III trials for patients with advanced pancreatic cancer and ongoing Phase II expansion trials for therapies IMMU-130 and IMMU-132.
Small-cap company Immunomedics is focused on developing monoclonal antibodies to treat cancer, autoimmune diseases, and other serious diseases. From the company’s website:
“We have developed a number of advanced proprietary technologies that allow us to create humanized antibodies that can be used either alone in unlabeled or ‘naked’ form, or conjugated with radioactive isotopes, chemotherapeutics, cytokines or toxins, in each case to create highly targeted agents. Using these technologies, we have built a pipeline of therapeutic product candidates that utilize several different mechanisms of action.”
Immunomedics may have turned off some investors with its decision to further dilute shares, but a look at a DuPont Report on the company may give an indication that it’s well-positioned for potential success.
A DuPont system of analysis works by breaking a company’s return on equity (ROE) into three separate components in an effort to better understand what that number might really mean. In the case of Immunomedics, it has an ROE that’s better than industry average. What’s more, this is driven in part by its stronger-than-average net margin, typically a sign of a strong company.
While it can be dangerous to apply too much meaning to these sort of fundamentals while analyzing small biotechs, the strong margins could indicate that Immunomedics could have a strong future if its clinical trials return positive data.