Why Melinta Therapeutics Shares Are Getting Crushed

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Melinta Therapeutics Inc. (NASDAQ: MLNT) saw its shares plunge on Thursday after the firm announced that it had priced its secondary offering. Essentially, the firm is looking to raise more funds to support its antibiotics portfolio.

On the books, Melinta has $91.48 million in cash and cash equivalents as of its most recently reported quarter. And the cash burn for this company has been very real over the past two quarters. In September, cash and cash equivalents totaled roughly $176 million. It seems obvious why Melinta would be looking to raise funds now.

The company is pricing its 22 million shares at $5 apiece, with an overallotment option for an additional 2.64 million shares. At this price, the entire offering is valued up to $123.2 million.

JPMorgan and Jefferies are acting as joint bookrunners for the offering, while Cantor Fitzgerald is acting as lead manager for the offering.

The firm described its intent for the proceeds from this offering as follows:

Melinta intends to use the net proceeds from the sale of its shares of common stock for general corporate purposes, including to invest in our industry leading portfolio of antibiotics, including potential expansion of our field sales force to drive growth; invest in our supply chain to optimize manufacturing processes and improve cost of goods; fund future milestone obligations primarily related to receipt of approval of Vabomere™ (meropenem and vaborbactam) for European commercialization and payments to The Medicines Company as part of the infectious disease business acquisition; capitalize on potential business development opportunities; and fund working capital.

Excluding Thursday’s move, Melinta had underperformed the broad markets, with its stock down about 68% in the past 52 weeks. In just 2018 alone, the stock was down 60%.

Shares of Melinta were last seen down 14% at $5.35, with a consensus analyst price target of $15.33 and a 52-week trading range of $5.20 to $24.25.

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