Summary
EDIT and NTLA have now announced secondary equity offerings.
Equity dilutions are very common among pre-clinical biotechs, these are no different.
Is the remaining CRISPR company slated for a dilution of their own?
Investment Thesis:
Investing in small pre-clinical (and clinical) biotech companies is a long play unless you see late clinical trial data coming down the pipeline. Although not desirable for long term holders, primarily due to the decrease in share price and potential future value per share value, equity dilutions have become a key factor for funding small biotech companies. Although we consistently model for dilutions in the small biotechs that we cover, individuals seem to be shocked every time one of these companies actually announces an equity raise. Waiting until the last minute to raise capital may gain favor among shareholders at the time but the cost is ultimately more significant when cash is short. The recent secondary offerings from Intellia Therapeutics (NTLA) and Editas Medicine (EDIT) in the CRISPR-Cas9 gene editing space beg the question – what about the final leg of the trio, CRISPR Therapeutics (CRSP) Herein we look to calm nerves associated with the threat of dilution and suggest that it may not be over. This piece is not an in-depth analysis of the three companies as my pieces often are, it is focused solely on the equity dilutions from NTLA and EDIT which have been announced thus far and the potential for additional announcements in the future.
Financials and Equity Offerings:
We will very briefly look at each company’s financials as it pertains to requiring dilution (i.e. cash balance, cash burn and expectations for spending). This is not a deep analysis by any means and we encourage any reader to do their own research prior to engaging in any position. We will then discuss our thoughts on recent equity offerings.
