Biomea Fusion (NASDAQ: BMEA) stock is up 99% on the announcement of Phase II trials of the new treatment for Type 2 diabetes. Diabetes - given that we've largely conquered the infectious diseases in the rich world - is on track to be one of the major 21 st century health care problems. There'll be a large market for any effective treatment. Phase II trials are somewhere in the middle of the treatment development process but good results here are necessary to be able to progress further.
This stage of drug or treatment development eats capital. Biomea has trade revenue, in fact revenue, of precisely nothing. Even then it managed to miss the expected earnings per share loss by a mile - minus 86 cents was over by 27 cents. But this is fine, we all know that's just the way things work at this stage of drug development. There is one thing fuirther, the net loss for the year was around the $80 million mark. Cash at hand was some $118 million. There needs to be a fundraise at some point real soon.
Biomea fusion share price from NASDAQ
Lo, and behold, there is that event which can justify a stock issue. Which is exactly what Biomea has just announced this morning. That might take some of the shine off that stock price as the news gets digested. Biomea will issue $125 million of new stock (plus underwriting shoe etc) which will, when added to current cash resources, likely give a two to three year runway for the company. We don;t know the terms or price as yet. About right for this stage of drug development - we don't want to fund right through to approval because any candidate can fail at any stage. Therefore only capital fund up to the next decision and or valuation point.
The specific results from the drug trial are here. They'll not mean much except to experts but just accept that they're good for results at this stage of the process. There's definitely something there that works. There will be more testing, about side effects, but a major hurdle has been overcome.
We never do know how results of these trials are going to pan out - that's why the trials are held of course. But there is one result we can always depend upon. Pharma development eats capital. Therefore any set of good results in the development process will be greeted with a stock price rise and then a capital raise. Good to see that Biomea Fusion isn't letting us down on that part of the story at least.