Larimar Therapeutics saw its shares move lower in premarket activity after the company disclosed an upsized secondary offering. The stock traded down 8.7% to $5.43 before the opening bell following the pricing of a $100 million follow-on transaction.
Late Wednesday the Bala Cynwyd, Pennsylvania-based firm sold 20 million shares at $5.00 each. The offering was expanded from an initial $75 million target and was priced at roughly a 16% discount to the prior market close.
The share sale comes after an eye-catching run in the stock. Larimar surged about 91% over the past week, carrying the price up near its 52-week high of $6.42 and putting the company's market capitalization at approximately $509 million. That rally included a roughly 61% jump on Wednesday, which followed a 31% gain on Tuesday after the U.S. Food and Drug Administration granted breakthrough therapy designation for Larimar's neurological disorder treatment candidate, nomlabofusp.
Management said net proceeds from the offering will be used to advance nomlabofusp's development and to fund working capital and general corporate purposes, including research and development and commercialization expenses.
Available company financial metrics show a current ratio of 4.06 and indicate Larimar holds more cash than debt on its balance sheet, though the company is depleting cash at a rapid pace. A Fair Value assessment included with the financial data suggests the stock is trading slightly above estimated fair value.
Investment banks serving as joint bookrunners on the deal were JP Morgan and Guggenheim, with LifeSci Capital and William Blair also participating in the transaction.
Context and market reaction
Investors reacted to the enlarged share sale with a premarket pullback, even as recent regulatory news had driven a sharp acceleration in the share price earlier in the week. The offering's discount to the prior close and its size relative to the company contributed to immediate selling pressure ahead of the regular session.
What the company will finance
The firm specified that proceeds are earmarked primarily to support the clinical and development work for nomlabofusp, alongside general corporate needs such as R&D and commercialization planning.
Note on data - Financial ratios and the Fair Value commentary referenced above reflect available company-level metrics and valuation indicators.