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AcelRx (ACRX): Shoring up the Balance Sheet by Selling Stock Comes with a Price


ACRX logoShares of drug maker AcelRx Pharmaceuticals (NASDAQ:ACRX) slumped on Thursday, falling 13% as of 10:34 a.m. EDT, following the announcement of a dilutive equity offering.

The biotech firm priced 7,272,727 shares at $2.75 apiece, which was well below the $3.40 per share where the stock had been trading yesterday afternoon. Added to its current 51.32 million shares outstanding, this offering promises to dilute existing shareholders by nearly 13% — coincidentally, about the same amount that the stock is down today.

On the other hand, these new shares won’t just raise the share count but they’ll also raise cash. AcelRx expects the sale of these new shares to help shore up its balance sheet by generating as much as $20 million in new capital. The company intends to use the net proceeds from the offering for general corporate purposes, including funding of early commercialization efforts.

AcelRx has granted the underwriters a 30-day option to purchase up to an aggregate of 1,090,909 additional shares of common stock at the initial public offering price, less the underwriting discounts and commissions.

Analyst Ratings

This biotech firm certainly has the Street divided. Based on 6 analysts polled in the last 12 months, 3 are bullish on AcelRx stock, while 3 remain sidelined. However, the 12-month average price target stands at $4.95, marking a nearly 67% upside from where the stock is currently trading.

Cantor analyst Brandon Folkes recently wrote, “Our positive thesis on ACRX is based on the assumption of Dsuvia gaining approval, expected in November of this year. Since ACRX obtained a CRL in 2017, the company has addressed the FDA’s concerns, and reduced the maximum daily dosage of Dsuvia to 12 doses, from 24. This aligns with the FDA’s goal of reducing opioid usage, and we believe the Agency will have an Adcom for Dsuvia where it can discuss any remaining concers. Ultimately we expect Dsuvia to gain approval from the Agency with a REMS to manage any risk of diversion. We don’t believe the FDA is against approving new opioid medication; however we do expect the Agency to ensure all approvals have been thoroughly reviewed, and provide a benefit to patient care, which we believe Dsuvia, and Zalviso offer.”

Bear in mind that Cantor is also acting as the sole book-running manager for the offering. (To watch Folkes’ track record, click here)