Tharimmune (NASDAQ: THAR) is one of those little poster boy stocks to see how the funding of development pharma companies works. They had a bit of good news yesterday, passed one of the valuation stages in a development process. So, the stock rose 46% - which is about right. Pass a valuation stage and value increases. At which point, and yes near immediately, they have a massive and massively dilutive stock issue. Which drives the stock price back down 68% and the market’s not even fully open at this point. And yes, that is how development pharma gets financed.
The background: “Tharimmune, Inc., a clinical-stage biotechnology company, engages in the development of therapeutic candidates for rare, inflammatory, and oncologic diseases. The company’s pre-clinical immuno-oncology pipeline includes TH104, a product candidate for the treatment of liver-related and other pruritogenic inflammatory conditions; TH3215 and TH0059 that are product candidates used to treat various solid tumors; and TH1940, which targets programmed cell death protein 1 (PD-1).” OK, that’s all got to be financed somehow.
Until FDA approval there’s no asset there. So, all financing has to be done with shareholder capital. Nothing wrong with that, just the way the sector works.
Tharimmune stock price from Google Finance
No one does finance the development process all the way though. For there are too many failure points. So, pass one of those failure points, succeed at overcoming it, and the stock price will rise. Which is the point at which you then try to issue more stock to pay for overcoming the next failure point. It is though rare to see it being done quite so quickly. Yesterday Tharimmune announced this: “announces positive phase 1 data with TH104, a proprietary transmucosal buccal film which easily adheres to the inside of the mouth. Tharimmune also announced plans on a development timeline for a Phase 2a study in chronic pruritis in primary biliary cholangitis (PBC) patients which will complement the data package the Company expects to discuss with the US FDA and European Regulatory Authorities.” OK, so that’s one of those valuation points and the stock rises 46%.
By teatime - not just a Britishism, really, by mid afternoon on the same day - we get this: “announced the pricing of an underwritten public offering of 10,000,000 shares of common stock (or pre-funded warrants ("Pre-Funded Warrants") in lieu thereof). Each share of common stock (or Pre-Funded Warrant) is being sold at a public offering price of $1.00 per share (inclusive of the Pre-Funded Warrant exercise price) for gross proceeds of $10,000,000,”
Well, OK, as we say, this is how the sector works. Although we would repeat usually not quite this quickly. Also, yesterday Tharimmune had a market capitalisation of $2 million and change. Issuing $10 million of stock at $1 is obviously highly dilutive.
We’ve talked before of Tharimmune when they did their reverse stock split. It’s possible they’re going to have to do another one of those soon enough.