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Here's Why PTC Therapeutics Fell as Much as 11.7% Today

Maxx Chatsko, The Motley Fool

What happened

Shares of PTC Therapeutics (NASDAQ: PTCT) fell nearly 12% today after the company announced the pricing of a share offering. The biopharma will offer up to 7.7 million shares of common stock at a price of $30.20 apiece. The offering will dilute the outstanding share count by approximately 15%, and investors considered the pricing a little low.

If the maximum number of shares find buyers, then PTC Therapeutics will realize gross proceeds of about $233 million. That will bolster the company's relatively comfortable cash position, which stood at $206 million at the end of September 2018.

As of 2:40 p.m. EST, the stock had settled to a 9.6% loss.

A pink declining arrow crashing through the floor of a chart on a chalkboard

Image source: Getty Images.

So what

PTC Therapeutics has three commercial products, with another about to launch. The biopharma's pipeline sports two drug candidates in each of phase 1, phase 2, and phase 3 clinical trials. There's a healthy number of preclinical and discovery-stage assets in the works, too.

All of those sales, marketing, and research and development expenses really add up. While PTC Therapeutics reported a year-over-year increase of 55% in revenue in the first nine months of 2018, the business delivered an operating loss of $70 million in both periods. A portion of that includes noncash expenses, but the company is still dependent on share offerings to fund the scale-up of its maturing business -- thus, the need for a stock offering.

Now what

The recent share offering will be the largest from PTC Therapeutics in the last two years, at least. While the offering stings existing shareholders, the biopharma will be putting the cash to good use: expanding the market presence of its commercial products, launching a new one, and developing a half-dozen other product candidates. If the business continues to grow, then one day it won't need to rely on external financing. Then again, Wall Street is increasingly worried that one of its prized drug assets may soon be obsolete, which might be another reason to bolster the cash position at this time.

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Maxx Chatsko has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.