Corvus Pharma Shares Retreat After 165% Rally on Stock Offering News
The company moved quickly to capitalize on a massive stock surge from positive drug data, pricing an upsized $175 million offering to fund future trials.
Shares of Corvus Pharmaceuticals (NASDAQ: CRVS) experienced a dramatic reversal, pulling back from a triple-digit surge after the company announced a significant capital raise on the heels of positive clinical trial data.
The clinical-stage biopharmaceutical company's stock soared as much as 166% during Tuesday's trading session following promising results from a Phase 1 study of its lead drug candidate, soquelitinib, for treating atopic dermatitis. However, the rally was tempered when Corvus announced its intent to launch a public stock offering after the market close, causing shares to fall approximately 8% in after-hours trading.
Late Wednesday, the company finalized the details, announcing the pricing of an upsized public offering of 7,900,677 shares of common stock at $22.15 per share. According to the press release, Corvus expects to raise gross proceeds of approximately $175 million, an increase from the $150 million initially proposed. The upsize suggests strong demand from institutional investors, even at the elevated price.
The move is a classic example of an opportunistic capital raise, where a company leverages a significant positive movement in its stock price to fortify its balance sheet. Corvus stated the proceeds will be used for general corporate purposes and working capital, with a primary focus on advancing its clinical pipeline.
Specifically, the fresh capital is earmarked to fund a Phase 3 clinical trial for its T-cell lymphoma program and to advance Phase 2 studies of soquelitinib in several indications, including atopic dermatitis, hidradenitis suppurativa, and asthma, according to reports. The financing provides the company with a crucial cash runway to move its lead assets through more advanced and costly stages of development.
The catalyst for the initial stock surge was data showing soquelitinib, a selective ITK inhibitor, demonstrated significant efficacy and was well-tolerated in a Phase 1 trial for moderate-to-severe atopic dermatitis, a common form of eczema. The positive results fueled investor optimism about the drug's potential as a new treatment paradigm for a range of inflammatory diseases.
While the capital raise is strategically sound for the company's long-term prospects, the issuance of new stock is a dilutive event for existing shareholders. By increasing the number of shares outstanding, the offering spreads the company's equity over a larger base, which typically puts short-term pressure on the stock price, as seen in the after-hours pullback.
Prior to these developments, Corvus Pharmaceuticals had a market capitalization of approximately $1.6 billion. The offering will significantly increase its cash position, enabling it to pursue multiple clinical programs simultaneously. Investors will now be closely watching for the initiation of the Phase 3 lymphoma trial and further data from the ongoing Phase 2 studies of soquelitinib across its target indications.