Cleveland BioLabs shares took a beating Friday after the Buffalo-based life sciences company said it would sell $15 million of its stock in a public offering.
Cleveland BioLabs’ shares plunged by 24 percent after the company disclosed plans to sell 7.5 million shares and warrants for $2 apiece in a bid to raise cash to help fund the company’s operations. The shares tumbled by 65 cents to $1.83 Friday, as investors reacted negatively to the stock sale, which will dilute their existing holdings in the company.
But the stock sale also is important source of cash for the company because it does not have a marketable product to generate sales that can fund its operations. The drugs that Cleveland BioLabs is developing still require expensive clinical testing and regulatory approvals before they will be at a point where they can be sold to customers, forcing the company to raise millions from investors to finance its operations.
Cleveland BioLabs on Thursday said it has submitted a new proposal to the Biomedical Advanced Research and Development Authority, or BARDA, to fund the rest of the development program that, if successful, would allow its Entolimod’s anti-radiation sickness drug to gain approval from the Food and Drug Administration.
Company executives believe the drug, if proven to be effective, could be a big seller, initially to governments and military agencies as a way to protect soldiers and civilians who might be exposed to potentially fatal doses of radiation.
The drug has shown promise in earlier-stage tests in limiting the damage from exposure to radiation, but additional animal studies are required to measure its effectiveness and determine the proper dosage.
In June, Cleveland BioLabs said a study on 179 primates found a 75 percent survival rate among those that received a dose of Entolimod 25 hours after being exposed to potentially lethal amount of radiation.
The company also is working to develop drugs that could treat certain types of cancer, but those efforts will take years of further study.
The stock sale includes 7.5 million units, each consisting of a single share of common stock and a warrant to purchase half of a share of common stock at a future date for $3. The stock sale is expected to close on Wednesday, and the offering’s underwriters have the option of selling an additional 1.25 million shares and warrants to purchase another 562,500 shares if there is sufficient demand among investors.